EXPLAINED: The Employment Relationships Deregulation Act (DBA Act)

Is your team aware of the Employment Relationships Deregulation Act (aka the DBA Act) coming into law in the Netherlands this year? This is a new law intended to minimise instances of businesses employing freelancers or contractors in place of an employee. Currently, the act is in the transition period – meaning 2025 is the year businesses have to ensure they are compliant before this law is actually enacted. Failure to comply with the act by the end of the 2025 transition period could result in substantial fines, legal challenges, and reputational damage for businesses.

In this article, we are going to outline the fundamentals of the DBA At and provide a basic overview of what businesses in the Netherlands need to know to ensure they are compliant. We cover the following topics:

• Key highlights and provisions
• Enforcement timeline
• Implications for businesses
• Suggestions for businesses

Since every business operates under unique circumstances, do not hesitate to contact us for personalized guidance and support.

Key highlights of the DBA Act

The purpose of the Employment Relationships Deregulation Act (DBA) is to ensure that freelance (ZZP’ers) employment is not used instead of actual employment. This is known as “false self-employment” by the Dutch tax administration.

False self-employment is viewed as a form of tax evasion – given that ZZP’ers can receive additional tax benefits for the purpose of entrepreneurship. Businesses also do not have to pay payroll and pension tax on freelancers who work for their business.

The definition of false self-employment is when “someone carries out an assignment as a self-employed person (usually a ZZP’er) but is actually an employee.”

There are several criteria which the Dutch tax administration looks for to indicate ‘genuine’ self-employment. Keep in mind that the absence of any one of these criterion does not necessarily indicate false self-employment, however we are expecting there to be clearer rules as to what constitutes as self-employment in the near future. These criteria include:

• Contractual flexibility and negotiation terms
• Specifically defined project scope (normally short-term projects)
• Autonomy over working hours and working place
• Absence of supervision by business’ (ie., the self-employed person’s ‘client’) employees
• Autonomy to use own tools and/or technology

Enforcement timeline

The introduction of this Act demonstrates that the Dutch authorities will be taking the enforcement any instances of false ‘self-employment’ more seriously. 2025 represents a ‘transition period’ which is a period where businesses and freelancers may operate as they are without penalty – with the expectation they are preparing themselves to be fully compliant in 2026.

The first version of this Act was introduced in 2016; however, it took several years of iteration due to criticism that the Act was not strict enough to meaningfully curb worker misclassification.

This year, 2025, is the transition period for DBA Act; where businesses and freelancers are expected to prepare themselves for compliance. During this year, no penalties will be issued for the violation of this Act specifically, however it will be enforced. During this period, audits may be conducted with the expectation to complete post-assessments of the working relationship.

Starting in 2026, businesses and freelancers found in non-compliance with this Act will be subject to penalties and fines. Both the business and the freelancer have shared responsibility ensuring compliance.

Implications for businesses

Both the business, as well as the freelancer, share responsibility for compliance with the DBA Act. There are potential financial consequences of non-compliance, including repayment of unjustified tax benefits, and the business may be liable for payroll taxes and pensions in addition to any fines incurred.

Further, freelancers in violation risk reclassification from contractor to employee, leading to additional costly and time-consuming obligations: such as employment contracts.

To the consequences of non-compliance of DBA Act, there are several tools available to help businesses and freelancers’ evaluate the validity of their working relationship. We expect there to be explicit rules announced very soon around such a relationship. The Dutch tax administration has also created a web module and questionnaire to help assess the relationship.

For more complicated and specific situations, we always advise speaking to an expert or working with a partner to identify an alternative, compliant solution. Speaking of which…

Suggestions for DBA Act compliance

Working contractors and freelancers are just one solution businesses use to achieve their short-term goals and projects. In the event the details of the DBA Act throw a wrench into your business’ operations, there are plenty of alternative solutions to consider so you can still achieve what you need:

Payroll services can be utilized to hire a specific freelancer or contractor to your team (or ours, if preferred). This solution is great if you realize that you need to the freelancer or contractor to develop a relationship closer to an employee. A payroll solution will help alleviate some of the legal and administrative responsibilities also typically handled by freelancers and contractors.

Short-term, Flexible (or project-based) contracts will typically be the most straightforward solution for many businesses working with freelancers or contractors in the Netherlands. We expect that many businesses will simply need to review the terms of their agreements to clearly demonstrate the freelancer’s entrepreneurship and flexibility. Whenever there is uncertainty around employment or working agreements, it is always prudent to work with an expert.

Secondment arrangements are also worth calling out as a potential solution. Depending on the skillset you need, you can work with a business who can “loan” an employee for a temporary to long-term period. This is a great solution for businesses who are unable to hire for operationally-significant tasks and also cannot predict when they are able to hire somebody in-house to perform those tasks. For example, Octagon Professionals loans HR specialists and administrators to businesses who lack their own. We have also been known to loan other skillsets when needed, such as IT.

Ensure you are compliant before 2026

If your business regularly works with contracts and/or freelancers, it is important to ensure your relationship does not fall under the category of “false self-employment.” Take this year to evaluate your situation, and possibly, develop an alternative solution. We at Octagon Professionals are experts in the field of employment with a proven track record supporting international businesses achieve their employment goals in the Netherlands. Send us a message today with your challenge, and together we will find a solution that works for you.