The Hague’s small business agenda

Sole traders operate in the no-man’s-land between fully fledged businesses and traditional employees. Their needs have so far been largely overlooked by the government. PHILIP HOFMAN reports how that is rapidly changing.

Until recently, the voice of solo-entrepreneurs (zzp’ers), was not being heard in The Hague on important issues such as access to pensions, incapacity insurance, and the reduction of government red tape. Over the past twelve years however, one man businesses have steadily become more organised. Back in 1999, Holland’s largest labour union, the FNV, founded the country’s first association for self-employed workers without personnel - FNV Zelfstandigen. At the time, it was remarkable for a union so strongly associated with salarymen, to advocate the interests of entrepreneurs. It claims to have 14,000 members today. In 2002 the Platform Zelfstandig Ondernemers (PZO), joined the fray. It has it roots in the small business community, and boasts of having 20,000 fully paid-up members. Another grass-roots organisation is ZZP Nederland, which says it represents the interests of 16,000 sole traders.

Fifty-thousand organised zzp’ers on a total of well over 700,000 may be modest beginnings, but the three lobby organisations have succeeded in cementing the view that zzp’ers are both hard workers, who provide much needed flexibility to the Dutch economy, and underdogs who need a level playing field to co-exist with regular employees and larger businesses. Political parties on the scent of a largely unserved group of voters, have started advocating the interests of the growing ranks of solo-entrepreneurs. Traditionally, the liberal party (VVD) is the party of choice for the self-employed, but more recently the labour party (PvdA) has embraced zzp’ers as well. Others, such as D66 and the SP have also jumped on the bandwagon, albeit with very different ideas. The Socialist Party (SP) for instance, is in favour of making participation in an incapacity benefit scheme compulsory for all, while the parties with liberal economic ideas focus more on reducing administrative burdens and opening up government tenders to one-man businesses. Solid proof that zzp’ers have strengthened their political influence came in the spring of 2010, when two of their representatives landed seats on the influential Sociaal Economische Raad (SER), the government’s most senior independent counsel on social and economic policy. At the request of the previous government the SER published a report with policy recommendations aimed at zzp’ers last autumn. In March, the Minister for Employment and Social Affairs Henk Kamp (VVD) responded to the report with a letter to Parliament.

Arbitrary demands
A central issue addressed by the SER report, is the absence of a consistent definition of zzp’ers in dealings with the government. This is not just a formality. For instance, zzp’ers have to meet some arbitrary demands, like a minimum number of working hours devoted to their business, and at least three seperate clients, to earn a so-called VAR statement from the tax authorities. This document protects their clients against retrospective government claims for social premiums. The government can consider people who work for just one principal, particularly a former employer, to have entered into a pseudo-employment contract, subject to premiums which employers have to cough up. To rule out future claims, many companies will only outsource work to a zzp’er if he or she produces the VAR document. Zzp lobby groups say the VAR requirements discriminate against part-time entrepreneurs, as they struggle to meet the working hour criterion and against one-man-businesses who work for just one or two clients. What defines a business, zzp representatives say, is whether one carries business risk. The SER agrees. It advises the government to adopt a clear definition of zzp workers as soon as possible. Everyone who pays income tax as a business, and does not employ staff, can be considered a zzp’er, the SER says. And striving to have more than one client would suffice for the VAR business status, if the SER had its way. Minister Kamp agrees only with the first part of the SER advice, which proposes defining zzp’ers as those who pay income tax for businesses. He seems unwilling however, to axe the unpopular secondary demands attached to the unpopular VAR statement. The Minister vowed to inform Parliament on his definitive position by this autumn.

Bad risks
The SER advice to the government touches a range of other issues. Arguably the most pressing: many zzp’ers are not insured for incapacity for work and the vast majority say they do not save enough for their pensions, according to a survey by FNV Zelfstandigen. The SER wants to improve access to private and government incapacity insurance by lengthening enrolment periods for employees who become self-employed. Private insurance companies have already acted on the advice, by increasing the term within which new entrepreneurs can join from three months to 15 months after starting their business. The Minister has ruled out doing something similar for government-run incapacity insurance open to entrepreneurs. He warns it would attract too many “bad risks”, which would drive up payouts and make the system unaffordable to compulsory insured workers (employees), whose premiums cross-subsidise the payouts for voluntary participants (zzp’ers). On pensions however, the Minister agrees with the SER on extending the term where-in zzp’ers can continue to save tax-free in their former employers’ pension fund - from three to ten years. Generally speaking, Minister Kamp shies away from spending tax money on aiding zzp’ers, stressing the self-employed should stand (and retire) on their own two feet.

Top 10 zzp issues, according to FNV Zelfstandigen
  1. VAR: the number of clients is irrelevant for business-status
  2. Make working hour criterion for tax-credits pro-rated
  3. Different conditions for home office tax-offset
  4. Specific zzp ruling for private use of company car
  5. Make public tenders accessible for zzp’ers
  6. Longer renewal interval for VAR-statement
  7. Reduced VAT-tariff for wider range of services
  8. Interest paid on pre-paid taxes
  9. Accessible and affordable incapacity insurance
  10. Promote better payment behaviour