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Sunday, 2 October 2016

The end of a freelancer... In spite of the positive sides of having the ultimate freedom of choice in my profession and being responsible for my own future, I have recently chosen for a future as common employee. I haven’t succeeded like I hoped, but learnt a few tough, but valuable lessons.

And now, the end is near;
And so I face the final curtain.

As my steady readers know, it is not my habit to write about myself. I consider my personal life not to be too interesting for my readers and try to look more at the world outside and the economic developments in it instead. Yet, I want to do so today, hoping that my story might help someone with taking a decision on becoming a freelancer in The Netherlands or not. 

I have been a freelancer since the start of 2015, originally for a number of reasons:
  • My former employer in the ICT industry encountered so much economic hardship during the period 2008 – 2014 that the company hardly survived the crisis. In the process the company lost some valuable customer accounts and dismissed/lost half of their (supporting) personnel base. At the time that I left it seemed that the company had no future ahead, even though the company managed to survive in hindsight.

    At that time I wanted to make a fresh start after this hard period and wanted to be part of a growing and successful company again;
  • My brother also was a participant in the new corporation of independent freelancers that I joined and I looked very much forward to rejoining forces with him in what is both his and my profession: senior software tester and quality consultant;
  • I wanted to explore new roads in my profession by being responsible for finding my own assignments and trying to do things differently than when I had a fixed contract with an employer;
  • And last, but not least, I hoped to find a more prosperous future for me and my family.

However, from Monday, 3 October on, 20-odd months after I started my period as a freelance professional, I return to being a common worker under a fixed labour contract. To some ears this might sound like a step back, but I’m glad about it after all.

I’m still not quit sure, whether I just had a stroke of bad luck in my (choice of) assignments at large employers in the financial and commercial services industry or that I ‘had lost my mojo’ as a freelance testing professional. Anyway, the assignments that I had lasted shorter than I anticipated in advance, even though I believed to have done a pretty good job at all of them, while the periods in between those assignments lasted longer and longer.

Even though the market for software testing professionals had improved quite dramatically during 2015 and 2016, it was still very difficult for me to acquire a new assignment. Especially as my rather functional than technical testing knowledge and my only moderate knowledge of testing automation hampered me in finding a new assignment.

Negative ‘cherry on the cake’ was the introduction of the new Dutch law DBA – Deregulering Beoordeling Arbeidsrelaties (i.e. Deregulation of the Review of Labour relations) by the Dutch Ministry of Social Affairs. 

In order to help genuine freelancers and independent professionals to earn an honest income, this law was supposed to filter out the fake freelancers: people who had been forced out of a steady job against their will by their former employers as well as future principals, into an uncertain existence as freelancer with a very limited job security and a rather low hourly fee (or even piece-wages), without further social premiums and insurances being paid for.

This DBA law also had to protect people from the low wage countries inside and outside Europe, who had been treated as ‘working cattle’ sometimes by relentless principals, for which they had to work under very poor labour circumstances and with extremely poor payments, without having the same rights and privileges that Dutch workers enjoy.

The real freelancers – really independent workers, who did so out of their own free will and choice – would remain unharmedand the blatant abuse of cheap labour from inside and outside The Netherlands would be abolished after this law came in effect. At least, that was the idea...

It turned out a little different...

The DBA law was been introduced in the first half of 2016, with a pilot period of roughly one year in which this law would not be enforced by the tax authorities (i.e. during this pilot period only warnings would be administered in case of violations and no penalties). 

Already directly after the introduction, it became clear that there was a radically different point of view between the Mark Rutte Cabinet in The Hague, that introduced the law, and the Dutch Internal Revenue Service which had to enforce this law eventually.

With this new law, a freelance professional (i.e. ZZP’er in Dutch) has to enter into a model contract with his temporary employer, in which both parties agree that the freelancer will not work into a normal, subordinate employer-employee relation.

To the eyes of the Dutch Internal Revenue Service, this genuine freelance working relation means that:
  • The freelancer is not supposed to have fixed working hours, but should be able to choose his working hours himself;
  • The freelancer is not supposed to have fixed, thoroughly described work packages, in which he does not have the freedom to choose his own results, working methods and solutions;
    • Instead the freelancer should be totally responsible for the working methods and the end result of his efforts himself;
  • The freelancer is not supposed to be in a subordinate relation with managers working at his principal, but he should have nearly total freedom in how to do his job.

When not all these conditions are met in a freelance model contract, the Dutch IRS considers the freelance working relation to be a ‘common labour relation in disguise’, which is due for tax and social security payments by the principal (aka the temporary employer). The IRS has to approve such model contracts in advance before they might be used by the freelance professionals in their working relation with their principal.

And perhaps the worst problem of this law – that exists until this very day –  is that a freelancer, even with an approved(!) model contract with his principal in hand, which states that he IS a freelancer and does not have any kind of subordinate relation with his temporary employer, can have his contract being disapproved upon by the IRS after all; for instance after an inspection(?) on the workfloor. This will turn him into a normal employee reciprocally and would leave the principal with a huge bill for overdue social security payments.

This was the killer risk for many current and future principals, as large employers with f.i. more than 1000 freelancers could encounter enormous financial risks for millions of Euros in reciprocal payments of taxes and social security premiums. For a substantial number of companies this risk was actually so big, that they totally abandoned the usage of freelance professionals as temporary workers in their company.

And let's be perfectly clear about it: for most freelance consultants in the ICT industry, as well as in the financial and legal, commercial services industry – probably more than quarter of a million consultants in The Netherlands alone – these freelancing conditions as maintained by the Dutch IRS are in fact a mirage!

There is hardly any freelance consultant working for a common principal:
  • who can decide about his own working hours, without listening to the desires of his principal and/or colleagues;
  • who can decide alone about what he is going to do with respect to his job and how he is going to do it;
  • who does have total freedom to do as he pleases within his working environment;
  • who does not have orders and instructions to follow from some manager at his principal.

This simply does not happen for all these hundreds of thousands of consultants. All these freelancers, as well as their principals know this fact by heart and the Dutch IRS knows that they know.

And in spite of all the soothing and comforting words of State Secretary Eric Wiebes of Tax Affairs, who stated repeatedly that ‘things are not as black as they seem with respect to this law and people should be not afraid and simply go to work and make money’, many companies don’t dare to run the gauntlet regarding freelancers anymore.

Perhaps the worst thing is that nobody in the Mark Rutte Cabinet is actually able to let the IRS choose a less rigid stance, with respect to these freelance conditions and model contracts. The IRS rests with its own point of view and does not give a rat’s behind about all statements coming from officials in The Hague.

Currently, the only way out of this political stalemate, in my humble opion, is that the IRS starts to officially enforce this DBA law, by assessing and – when deemed necessary – penalizing ‘offenders’ of it. 

If then one or more of these offenders start a legal case against the IRS or the government, jurisprudence will emerge that creates clarity for the future about the boundaries and thresholds of the DBA law. However, as things are today, this process will not be started before at least mid-2017. That is much too late for many freelance professionals, who are in an equal situation as I was.

Whatever the reasons have been, I didn’t manage to get new assignments at the times that I needed them badly. Nor did I manage to stay long enough in one assignment to create some necessary cash reserves for the future. And every time when I resided at home for much longer than hoped, without an assignment and without having an outlook towards one, I felt my own doubts increase.

Also I felt the mounting pressure from myself and my family to accept any job from any company where they would hire me for a decent fee. It was an unsustainable situation eventually.

A few months ago, I decided to look for a steady employer again, instead of being a freelancer. And even more special, I decided to give up my life as testing consultant and continue as a testing employee for one, non-ICT employer.
Luckily, I managed to get such a job, which pleases me very much and now I am starting a new phase of my life and working career.

The lessons that I learned during the last twenty months are:
  • The security and ease of mind that a steady job offers are hard to beat by the extra money (in theory) that a career as freelancer promises to yield;
  • Government policies with respect to labour and social affairs are often elaborated so poorly and have such grave, unintended consequences that they can destroy more jobs than they protect, even if they were created with the best intentions;
  • A new assignment can stay out much longer than a freelancer can ignore the fact that he doesn’t earn money during such a jobless period;
  • In the ICT industry you can become a dinosaur in the blink of an eye, without even noticing it, when the world around you changed totally and you failed to notice it and act upon this;
  • Sometimes it is harder to get a temporary assignment as a "one-trick-pony" freelancer than a steady job as a versatile, older worker.
  • If your family feels bad about you being a freelancer, you better quit it, as your family is the most important thing in your life

Will I ever become a freelancer again?! Perhaps... but now is not the right time for that. At least, not for me!

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