Fake-Self Employed contractors – a well known issue in Belgium, but what’s in it today and how to avoid possible fines?
Sophie Maes, partner at Claeys & Engels, joined us to clarify the current rules and to highlight the recent changes that will go in practice as of 1 January 2013.
All the members who attended the seminar were either self-employed contractors or have one or more self employed contractors working for them. But one thing they all had in common, was to know whether they were at risk or not.
Sophie started with stating why so many companies hire self-employed contractors in stead of hiring them on an employee status.
Firstly because of social security fees, which form a very big chunk of employee charges in Belgium. As the person is not an employee, the company doesn’t have to pay the fees and the applicable fees are much lower for the self-employed contractor.
And secondly, because self-employed contractors offer a lot of flexibility to the companies as they’re not subject to the employee rules.
But the big treat is that the Belgian government sees those self-employed contractors as fake self-employed contractors, because their relationship between the company and the hired self-employed have too many employee relationship characteristics.
There are currently only 4 rules that define if a relationship between a contractor and a company is fake or not – see page 9 of the presentation.
But these are the theoretical rules, what does that mean in practice?
Sophie listed a lot of do’s and don’ts in her presentation, such as never say “you must” to a contractor, but “as agreed”, but what I learned is that it comes down to being self-employed in the first reason, having a certain freedom to manage your own work within the framework agreed between both parties. You deliver the work according to agreed standards and on the agreed time. How you get the work done is not the companies problem, but the self-employed contractor’s issue.
So working with a self-employed contractor must be seen as a commercial service contract, terms and conditions must be specified in the contract and that’s it, no further hassle for the company, it’s all up to the contractor to deliver the service as agreed.
A lot of questions came from the attendees on specific cases, their own or regarding the contractors they currently hire, and especially on management companies and acting as a secretary general in non-profits. A very tricky and often misinterpreted area.
Funnily enough, all the above was not new, these are the current rules… So then what will change as of January 2013?
The Belgian Government has issued some new rules, they will currently only be applicable to 4 sectors, but it is very likely that others will follow because of future political agreements or sector demand.
If you are a self-employed contractor in construction, transport, cleaning or security, please be warned. Nine new criteria have been drafted – see page 15 of the presentation – and the threat is that if 5 of these rules apply to your situation, you will be labelled as a fake-self employed contractor by the Belgian Government. Basically these rules have somewhat already been applied in case-law as interpretations of the current rules, but now they have been put on paper and this might seriously complicate things in future case-law. This is all new, so nobody knows or can predict how this will evolve or being ruled in new case law, we’ll have to wait another 2 years to find out. As the discussion went on more questions were asked, it seems – also again – that secretary generals of non-profits in the 4 related sectors could possibly face big trouble in the future, especially if they invoice from their management company. Sophie agreed to clarify this further and will write up an article for the November issue of the Tax, Finance an Legal News letter.
In the mean time you can make sure you’re if you ask for a temporarily ruling that will be valid for 3 years and reviewed after.
I hereby like to thank Sophie for this very interesting and revealing presentation as I’m sure all those present agree that it was most useful. I think all went home with at least one thing to do before the year end!
If you missed the presentation, you can find the presented data here.
I hope you found this interesting and that I can welcome you again very soon for another demystifying presentation on the chamber platform.
Topic of the discussion: One more step in the fight against so-called “fake self-employed status” – Amendment of the Belgian Act
Speaker: Sophie Maes, Partner – Claeys & Engels
Thursday, 26 October 2012