As we enter 2025, updates to labor law bring important changes that companies must address to ensure compliance and optimize their operations. Below is a practical guide to help organizations understand and implement these updates effectively.
Chapter 1 - Stricter Enforcement on Worker Misclassification
What’s Changing?
- Starting January 1, 2025, the enforcement moratorium under the Employment Relationships Deregulation Act (Wet DBA) ends.
- The Dutch Tax Authority will resume retroactive payroll tax corrections and social security contributions for misclassified workers.
- The Dutch Tax Authority will adopt a ‘’soft landing” approach in 2025:
- No retroactive corrections will be made before January 1, 2025, unless there’s evidence of malicious intent or a previously given instruction.
- No punitive fines will be imposed in 2025 for the qualification of employment relationships.
- Penalties will start in 2026. The Dutch Tax Authority will implement a phase-in model until 2030, after which full corrective obligations and retroactive assessments can be imposed for up to five years.
- In addition, model agreements (modelovereenkomsten) are no longer evaluated and approved by the Dutch Tax Authorities. Existing agreements remain valid until their expiration but must be adhered to strictly. All current approved model agreements will generally be honored until the end of 2029. However, approval of a model agreement may be withdrawn during this period in case of non-compliance with laws and regulations, or if new court rulings or legislation render it invalid.
Impact on Companies:
- Increased scrutiny of freelancer and contractor relationships may lead to reclassification as employees.
- This could result in unexpected payroll tax liabilities and operational adjustments.
Recommended Actions:
- Conduct internal reviews of all freelance and contractor agreements.
- Use tools like checklists for classification criteria to assess levels of control, dependence, and integration.
- Clearly document the independence of workers through well-defined contracts.
Example:
A marketing firm engaging graphic designers as freelancers but requiring strict schedules and providing equipment may face reclassification. To reduce risk, they should document that freelancers set their own hours and provide their own tools.
An IT consultancy regularly engages software developers as freelancers for various projects. If these developers work exclusively for the firm, use company equipment, and follow strict company guidelines, they might be reclassified as employees. To reduce risk, the firm should document that freelancers use their own equipment and have autonomy in how they complete projects.
Chapter 2 - CO2 Reporting Obligations
What’s Changing?
- Companies with one hundred or more employees must report 2024 Co2 emissions from commuting and business travel by June 30, 2025 covering data of the second half of 2024 or the entire year. From 2026 onward, this reporting becomes an annual requirement.
Impact on Companies:
- Businesses need systems to track employee work related travel emissions including vehicle- and fuel type. This may require operational changes and investments in monitoring tools. Failure to comply may result in penalties or reputational damage.
Recommended Actions:
- Use emissions tracking software or create a centralized data collection system for travel logs and fuel usage. Your payroll administrator may also be able to assist with this.
- Assign a dedicated team or individual to oversee reporting compliance.
Chapter 3 - Minimum Wage Increase
What’s Changing?
- The minimum hourly wage for employees aged 21+ will increase to EUR 14.06 on January 1, 2025.
- This adjustment reflects a 2.78% increase compared to the rate as of July 1, 2024, and is part of the government’s regular biannual indexation process.
Chapter 4 - Remote Work Allowance Update
The tax-free allowance for remote work increases from €2.35 to a maximum of €2.40 per day in 2025.
Chapter 5 - Legislative Proposals to Monitor
Several upcoming changes may significantly impact employment practices:
- Worker Classification Reform: A presumption of employment for workers earning less than €33/hour.
- Ban on Zero-Hour Contracts: Employers may need to offer some on-call employees minimum-hour guarantees, reducing flexibility. Exceptions for students will be in place.
- Non-Compete Clause Restrictions: Employers must justify non-compete clauses and provide compensation.
- Chain regulation: Fixed term contracts are converted into a permanent employment contract by operation of law in case more than three fixed term contract succeed each other or the duration of fixed term contract exceeds three years. It is proposed to increase the waiting period for the establishment of a new chain from six months to five years to prevent misuse.
Additional Updates
- State Pension Age: Remains at 67 until 2027 and will increase to 67 years and three months as of 2028.
- Maximum Transition allowance: Employees meeting the relevant requirements are entitled to a statutory severance payment, the so called transition allowance (transitievergoeding), in case their employment agreement is terminated at the initiative of the employer. The amount of the transition allowance depends among other things on the number of service years, and the salary. The severance amounts roughly 1/3th of a month's fixed salary (including fixed salary components such as a holiday allowance, and the average bonus calculated on the basis of the last 3 years) for each (pro rata) year of service.
- As of 1 January 2025 the cap to the transition allowance increased from EUR 94.000 to EUR 98,000 or if higher, one year’s salary consisting of fixed and variable components.
Chapter 6 - Collaborating for Success in 2025 Additional Updates
How companies can prepare:
- Audit Worker Arrangements: Use classification checklists to ensure freelancers and contractors meet the correct criteria.
- Update Contracts: Create tailored agreements using contract management tools.
- Implement Tracking Systems: Leverage software to monitor CO2 emissions and overtime hours.
- Plan Budgets: Use financial planning tools to accommodate wage increases and allowances.
- Stay Informed: Monitor legislative developments to anticipate future compliance needs.
Proactive planning and collaboration will ensure a smooth transition into 2025. If assistance or tailored solutions are needed, feel free to reach out to discuss how we can support your organization in navigating these updates. Together, we can turn these changes into opportunities for growth and success.
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