Over the years, I have done my share of writing about
the freelancers on the Dutch labour market.
In the past, labour contracts in The Netherlands were
often ‘contracts for life, carved out in marble’. This was a good thing in times
of economic prosperity as it bonded employers and employees together and spurred loyalty. However, excess workers with their ironclad contracts could
turn into an almost lethal millstone for companies, when things became rough financially.
That is why freelancers,
as a flexible shell of temporary labour, definitely added some desperately
needed dynamics and pizazz to the traditionally very static Dutch labour market. Especially in tough economic times, the freelancers
were the frontrunners of the labour market; they acted as a quick response
squad at times when extra hands were already needed, but companies were still reluctant to offer
people fixed labour contracts.
In these cases, the freelancers were a true blessing
for all parties: companies had their badly needed flexible labour force to add to their contracted workers and the
freelancers earned a more than decent remuneration for their hard labour.
During the last ten years, however, freelancers – or ZZP’ers
as they are called in Dutch (i.e. independent workers without personnel) – lost
much of their ‘sex appeal’.
From a desperately needed and well-rewarded flexible
labour force, freelancing turned more and more into a ‘nice ‘n sleazy’ way for companies to ditch personnel
with fixed contracts.
This happened especially in the building industry, transport
& distribution, healthcare, education, facilitary services and (to a lesser
degree) the ICT industry. Many 'expensive' or excess workers with favourable fixed
contracts were ‘fired and hired back at gunpoint’ as freelancers, with a
contract for one assignment or for a restricted period alone. Everybody happy,
right?! Wrong!
Here is a snippet from a
two months old article:
In
many service industries, companies did only the unavoidable projects and
changes. Further they ‘kept open the shop’ and hoped that they would survive
the crisis.
As
a consequence, there has been a substantially dropping demand for both manual
labourers and highly skilled knowledge workers; especially in industries, like
building & construction, transport and distribution, telecommunication, ICT
services, commercial services, financial services and facilitary services.
At
the same time, there has been a large influx of workers from the European and
global low wage countries (f.i. Poland, Spain, Portugal, the Baltic states,
Romania, Bulgaria, Ukraine and India).
These were people, who were willing to work very hard for a fraction of
the price that a Dutch worker or freelancer charged.
Especially
when the working skills of the foreign worker were as good as those of his more
expensive Dutch competitor, the foreign worker often got the job. This was not
only true for low qualified, hands on-jobs, but also for the highly qualified
knowledge jobs.
These
two factors have put enormous pressure on the remuneration fees for especially
the many freelancers in The Netherlands.
Both
their awkward negotiating position against large principals and the strongly
diminished number of available assignments, as well as their need for a
constant flow of work and income, makes that freelancers have been quickly
giving in on their remuneration demands.
The pressure on the tariffs of freelancers has indeed been
enormous, during the last few years. Many
freelancers are now working for remuneration fees, for which they would not
have opened their eyes just ten years ago. These ‘not so free’ lancers are tied
with hands and feet to their temporary principals – often their ex-employers –
afraid as they are to lose their jobs and thus their only source of income.
They earn just enough money to live from in the present, but they can’t save a
penny for a rainy day.
The only thing to keep these freelancers alive is the
national ‘independents allowance’: a subsidy, which is administered through the
Dutch income tax system. This way, the independent freelancers have to make much less tax and social security payments than employed workers with a fixed
contract.
The result of this independent's allowance has been that
normal workers have been clearly discriminated, in comparison with freelancers,
who were actually not free at all: normal workers had to pay more taxes, more
pension money and much more social security money than these freelancers. You
could call this unfair competition and many (large) companies have used and perhaps abused
this situation.
This was the reason for Cabinet Rutte II to do
something about this. De Volkskrant:
The
Internal Revenue Service wants to make an end to pseudo freelancing.
Freelancers in healthcare and education will not receive tax benefits anymore,
as they work in fact under a situation of ‘conceiled employment’. Also the ICT
industry, transport & distribution and the building industry will get under
more heavy scrutiny by the IRS.
The
cabinet wants to deal with the over-the-top flexibilization at the Dutch labour
market, partially because it loses hundreds of millions in missed tax payments.
Tens of thousands of freelancers will lose their permit to work as an independent. Instead
they must enter into a contract with their principal, which should pay social
security premiums and taxes; just like a genuine employer. Especially in
healthcare only a small minority of the current freelancers can remain
independent.
A
deal has been made in the Second Chamber of Parliament, that freelancers in
healthcare are not allowed anymore to work through mediation agencies.
Many of
these agencies work as an actual employer: they not only bring supply and
demand together, but they also create working schedules and arrange payments for their freelancers.
In
order to dismantle this working method, already 20% of freelancers in
healthcare has been refused an 'independent’s permit' by the internal revenue service. Without this so-called
VAR-declaration, a freelancer cannot work as an entrepreneur. According to disappointed freelancer’s
organizations, the contracts ‘are not exactly flooding the streets, while
freelancers already go through a rough time’.
Robin Fransman is a former executive of the Holland
Financial Centre (an internationally oriented lobby club for the Dutch financial industry), regular
economic blogger and one of the savviest economists on Twitter. Fransman wrote a
blazing discourse against these freelancers or ‘Zelfstandigen Zonder Poen’
(ZZP), as he sarcastically called them (i.e. ‘independents without cash’; untranslatable lingual
joke).
Here are a few snips of this
must-read article by Robin Fransman:
Finally
the cabinet does something about the destructive force of pseudo freelancers.
In some industries, freelancers will be forbidden and the VAR-declaration (i.e.
independent’s permit) will not be handed out so easily anymore. And if you have
one after all, you will be checked. If you don’t meet the obligations of this declaration, your
principal – aka your employer – can expect an after-tax.
Freelancers
undermine the Dutch labour institutions. They undermine the Dutch pension
system, the labour unions, the collective labour agreements and the position of
employees with fixed contracts.
They earlier make usage of national social security and
welfare safety nets, as they don’t become part of the regular employee’s social security systems. And last, but not least, they suppress the wages. In other words: these freelancers are the 21st
century equivalent of the ‘piece-rates’ workers from the 19th century.
To
make things worse, the national government subsidized these freelancers with additional tax benefits.
These freelancers pay €5,000 - €12,000 less in taxes than a normal employee.
And they actually don’t receive this money themselves, as they use it to reduce
their tariffs, enabling the principal, excuse me… employer, to cash this money.
Indeed, the freelancers are not insured against sickness, labour disabilities or
unemployment and they don’t pay pension fees. However, in the case of normal
workers, the premiums for these wage components are paid out of the disposable loan
components. As a freelancer, you should as a consequence also incorporate these premiums in your
tariff range. So please get the heck out with this subsidy for fake-entrepreneurs.
It
are indeed the employers which reap the financial harvest of the superflex
labour. And do you know who suffer most from the freelancers? The freelancers
themselves! The total income of all freelancers combined dropped by 27%, since 2008.
And there is more: as the number of
freelancers increased, the income per freelancer actually dropped by 33%, to a level of
1998. This drop can almost be fully accounted to the declined tariffs.
Although Robin Fransman has been slightly over the top in
this article at some occasions, the tendency of it is spot on.
This development, in which employers squeeze their
freelancers and temporary contractors out for the last penny, has been going on
since the crisis started in 2008. Unfortunately, it did not finish yet. It is
a dangerous development, as it leads to a race-to-the-bottom with respect to tariffs and
regular income. This is bad for employees, as well as employers eventually:
Many
ZZP-workers (especially in B&C, Transport and the ICT-industry) hear the
heavy breathing from tens of thousands of workers from the East-European and
Oriental low-wage countries, like Poland, Romania, Bulgaria and India. People
that will do the same job for a fraction of the hourly rate that Dutch workers
require.
When
it is not possible for employers to pay these lower wages in a legal fashion,
due to collective labour agreements (CAO’s) and minimum wage-constraints in
their industry, some companies do this even illegally, by evading the
CAO-agreements and minimum wage through opaque business-constructions.
The
result is that domestic and foreign workers from the low-wage countries are
both entangled in a race-to-the-bottom for tariffs and income. This race leaves
especially the domestic workers in an awkward financial position, with an
income that is too little to structurally live from with a family in The
Netherlands. Companies, which often suffer from an awkward financial situation
themselves, can not help, but doing this in order to survive.
When
these freelance workers run out of a job eventually, they neither have a right
to unemployment benefits, nor are their reserves sufficient to live from for a
number of months. Poverty looms in such a situation.
Therefore I consider it a good thing that, from now on,
the VAR-declarations will only be handed out to real freelancers and not to the pseudo freelancers, who have been mentioned in this article.
Initially, it is of course a bad development for many
cash-strapped freelancers. I symphatize with them very much, as they often did not have a real choice in the past.
However, this development might help companies to realize that
their freelancers need a decent income too, from which their families can live and they can save a penny for a rainy day. The current times, in which suppliers and freelancers are
put under enormous financial pressure by so-called procurement departments at
their principals, should be over as soon as possible.
This would make this change by Cabinet Rutte II a
blessing in disguise…
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