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Thursday, 8 September 2011

The freelance professional might be the biggest victim of the next recession, when it comes.

On Tuesday September 6, I wrote an article on the awkward position of freelance professionals in one of the richest villages of The Netherlands.

Now, it is time to pull this story a little bit wider and extend it to freelance professionals all over The Netherlands.

There are 700,000 freelance professionals or ZZP’ers (‘Independent without Personnel’), as they are called in The Netherlands.

People in the building and construction industry, the free professions, the medical world and in the ICT and Consultancy industry that one day, under pressure, decided to make a start-up on their own.

Often lured by the high hourly rates they see on the horizon, and optimistic, very motivated and sometimes unaware of the implications, they took a step that might cost them dearly in the not-too-distant future.

Sometimes people are even pushed into being a freelance professional by an employer that wants to lower its fixed expenses: it dismisses its personnel and hires people back via a freelance contract, with a job-warranty for a certain period. When the period has passed, the people have to find new principals for future jobs. This has happened on numerous occasions in the building-and-construction (B&C) industry.

This is the reason that you see many B&C workers with little vans nowadays, saying they’re: carpenters, mason bricklayers, plumbers, sealant experts and roof slaters and tilers.

When there is a good economic climate, all these professionals are finding new jobs and assignments quite easily, just like the freelancers in other industries. And, just as important, they find assignments against favorable hourly rates.

But now the economic situation for the 3rd and 4th Quarter still looks grim and the near future might not be much better, these freelance professionals run a substantial risk of running out of work:

·     The financial industry – the biggest employer of freelance ICT and Consultancy professionals in The Netherlands – is still under heavy fire of the international financial markets and keeps its ICT cards firmly to its chest. (Temporary) hiring stops for freelancers are common practice nowadays.
·     The medical and caring industry is subject to substantial cutbacks by the Dutch government, in order to slow down the consequences of the aging population.
·     Freelance lawyers and especially marketeers are people that are you can get rid off quite easily in trying times, without harming your day-to-day business.

And even if the freelancers keep their assignments, the hourly rates are often pushed downwards strongly, due to the (very) unbalanced relation between the principal and the assignee in this supply-market.

Only the best professionals with skills that are unequalled by others and that might even make them unique, can maintain virtually writing their own checks. You could call this the Champions League of the freelance workforce.

All others are earning less and sometimes much less. This is a strong deflationary force.

And when freelancers don’t get an assignment for a longer period of time, their problems are mounting:
·     They have no right to Unemployment Benefit, as they are not unemployed.
·     They don’t count in the official unemployment statistics for the same reason and therefore often remain under the radar.
·     They cannot maintain building up pension rights, as they can’t afford this with no source of income.
·     They have a right to a certain form of public welfare, but must first consume their savings before entering the Public Welfare-office.
·     Their costs remain often high: expensive income and labor-inability insurances, expensive leased cars, high tax-bills for VAT (Value Added Tax) and Income taxes.

Many freelancers decide eventually to pull the plug out of their company and look again for a steady job. But in bad economic times, these jobs might be very hard to find, leaving the freelancers in poverty, as a hidden unemployment statistic.

This morning, the Dutch financial newspaper Het Financieele Dagblad writes a story on mass lay-offs in the Dutch building and construction industry (link in Dutch).

Here are the pertinent snips:

Mass lay-offs in Building and Construction industry coming

Contractors in the B&C industry will have massive lay-offs in the coming months. This expectation was expressed by Henk Klein Poelhuis of the federation of contractors AFN on the Dutch Business News Radio-station BNR (

The B&C Industry expects a setback in the 2nd half of 2011. On October 1st, there will come an end to a temporary drop of the VAT. According to Klein Poelhuis, contractors see the number of assignments already diminish towards this date. He expects that 5000 people will lose their jobs.

The temporary drop in the VAT yielded about €2.2 bln and about €0.8 bln will be added before October 1st, expects Klein Poelhuis.

The recent drop in the Conveyance Duty did hardly increase sales, according to Klein Poelhuis. What is left, he thinks, is writing an urgent letter to Finance Secretary of State Frans Weekers.
Concerning the Conveyance Duty: it’s not always nice to be right, but I know I am in this matter.

And concerning the mass lay-offs: these are a shame, but unfortunately necessary in this industry, as it suffers from an unsustainable overproduction.

And hearing from these mass lay-offs, you can figure out what this means for the many freelancers in this industry. Bad news all the way!

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