Labor relations and compensation

This article is about labor relations and the ways you can pay or reward different types of people who collaborate on your initiative or project. Is that through an invoice, a paycheck or a volunteer statement? That largely has to do with the type of employment relationship agreed upon and whether the person being hired qualifies as an entrepreneur for tax purposes. Hiring other people will always affect the funding of your initiative or project and it will be reflected in the records as well. In writing this text, we used input we received from Floor Ruyters, production house De Nieuwe Oost.

What kind of working relationships are there?

Before you can determine how someone can be paid, it is important to determine what form of employment relationship is involved. There are several possibilities which you will find briefly explained below.

The employment contract, or employment relationship

This is also known as employment. It involves an employer hiring an employee. They have drawn up an employment agreement or contract. This describes exactly what the terms of this employment are. Among other things, it describes the salary, the work, the duration of the contract and other agreed-upon decisions. As a client, you can read about what is involved in hiring staff on the Chamber of Commerce website.

Contracting of work

This is an agreement in which a person performs work for a certain price for a client.

An assignment agreement

Here, the person who accepts an order for a particular service or performance from a client performs it entirely independently.

Types of employment.

Only if an employment relationship is an employment relationship do you have to withhold and pay payroll taxes. The law recognizes two types of employment relationships:

Genuine employment

This has the characteristic that there is a relationship of authority between the employer and the employee, the latter works personally and the former pays a wage for it. There is a relationship of authority if you, as the client, have the right to specify the ways in which work is to be done, at what times, what requirements the work completed must meet, and how the employee deals with clients. There has been more clarity on authority relationships since Jan. 1, 2019. You can read about that in the appendix on Handbook of Payroll Taxes.

Fictitious employment

This occurs when, as the word says, there is no real employment. Regarding withholding and paying payroll taxes, there are no differences. Some examples are:

• Apprentices and trainees. Arrangements are made through an internship agreement.
• Temporary Workers
• Opting-in. This means that the client and the contractor together choose to declare that the employment relationship is a fictitious employment relationship. By doing so, payroll tax, national insurance contributions and health insurance law contributions are withheld from the income.

Other labor relations

There are still some specific forms of employment relationships and exceptions, which also occur in the cultural sector. For example, if you are an artist and have income, there are three possibilities.

Employment

Then, as described, you are employed by a company or institution, you have an employment contract and receive a salary, usually per month. You file an income tax return and payroll taxes are withheld from your salary.

You are an entrepreneur

You perform your work as an independent contractor. That is what you are for the tax authorities if you meet certain conditions. If so, you can work with, for example, a model agreement to record the arrangements between you and the client. This also demonstrates your employment relationship, which is important within the framework of the Deregulation of Assessment of Employment Relations Act (Wet DBA). If you want to get paid, you do this by sending an invoice. In it you include the VAT if you, as an entrepreneur, are also liable for VAT.

No employment and no entrepreneur

It may happen that there is no employment and you are not self-employed. Then you report your income as 'result from other work' when you file your income tax return. If you only receive an expense allowance, you report this as income. Should the client still withhold payroll taxes, you can declare this when you file your income tax return.

No employment for payroll tax and employee insurance purposes

In the cases below, the employment relationships are not employment for the purposes of payroll tax and employee insurance.

• If you are a volunteer and work according to the volunteer regulations and have completed a volunteer agreement.
• Individuals working through a contract or model agreement.

Method of payment

If you are paying someone who does not work for you as an entrepreneur and is not in (fictitious) employment with you then you can use an IB47 Form from the Tax Office. Besides that the person can choose to send a receipt. If you make use of the artist arrangement, then you use a gage declaration. That is a kind of invoice for private persons with some requirements. It can be for example the following cases:

• Payments to authors, speakers and participants in medical trials
• Employees for whom fictitious employment does not apply because they do not meet all the conditions.
  

If, from your expertise, you yourself have knowledge that would fit this topic, or if you see opportunities to improve this text, we look forward to receiving your message at info@cultuuracademy.nl.