With the Dutch tax authorities (Belastingdienst) cracking down on the exploitation of freelancers from the beginning of this year, many self-employed people have steered towards working through employment agencies. Due to this, costs in the public sectors such as healthcare, education and childcare are expected to rise by almost 40 percent.

Freelancers in the Netherlands increasingly turn to agencies

According to a report by ABN AMRO, more ZZP’ers (self-employed people) in the Netherlands have started to work through employment agencies since the Employment Relationships Deregulation Act (DBA Act), which prevents “false self-employment”, was enforced at the beginning of the year. Many freelancers also quit self-employment in 2024 ahead of the new checks. 

Based on figures from Statistics Netherlands (CBS), the Dutch bank estimates that organisations in healthcare, education and childcare have been making use of freelancers quite extensively, with around 255.000 ZZP’ers employed in these sectors compared to 37.000 temporary workers. With more workers making the switch to staffing agencies, this could mean higher costs in the sectors that previously used freelancers so often.

Hiring through staffing agencies is more expensive

The reason hiring freelancers is so popular among healthcare, education and childcare organisations is because they are exempt from VAT. Employment agencies, however, are not and are required to charge 21 percent VAT.

This puts institutions in public sectors in a sticky position as they now have to pay VAT to hire temporary workers, but cannot charge it to their customers themselves. "Organisations face substantial extra costs when they hire freelancers through agencies, due to the VAT and agency margins," ABN AMRO economist Mario Bersem told De Telegraaf. "In total, this makes hiring a temporary worker in healthcare, childcare, or education 39 percent more expensive."

Economists warn rising costs could worsen staff shortages

Very few employees in the three public sectors are temporary workers, mainly because of the disadvantage of the extra costs due to VAT. The percentage of the working population who are employed as temporary workers in healthcare (1,4 percent) childcare (1,5 percent) and education (1,7 percent) is lower than the overall average of 4 percent. This could worsen the staffing shortages in hospitals, schools and childcare centres as prices rise and there are fewer freelancers. 

Berserm suggests that the government in the Netherlands apply a VAT exemption for temporary staff working through agencies in these sectors, stating that it would disrupt the labour market less despite the 300 million euros in lost income that the government would usually get from VAT. “It would also help to keep healthcare, childcare and education accessible and affordable,” wrote Berserm. “After all, the government wants healthcare personnel, whether via hospitals, primary care or employment agencies, to remain sufficiently available and affordable.”