Contract for services

Work is increasingly being carried out by self-employed people without staff, known as freelancers. These people can be deployed flexibly in times of shortage and are not bound by an employment contract. This can have enormous advantages for both the organisation and the freelancer. The organisation can temporarily take on extra work, have specialist, clearly defined assignments carried out, and the collaboration can be terminated without any difficult situations arising. The self-employed person, on the other hand, has a lot of freedom and often earns a higher hourly rate than if they were employed. This collaboration is formalised by means of a contract for services between the client (the company) and the contractor (the self-employed person).

What are the main differences between a contract for services and an employment contract?

The most characteristic difference with an employment contract is that a contractor is not “employed by” his client. This means that there is no relationship of authority. Although both types of contract relate to the performance of work, there are fundamental differences:

Authority relationship: An employment contract involves an authority relationship; the employer determines how and when the work is performed. In a contract for services, the contractor has freedom in the performance of the work. The contractor must be free to perform the assignment at his own discretion and responsibility and is not under the authority of a manager.
Personal labour: An employee performs the work personally. A contractor may, if agreed, have the work performed by someone else. He may therefore also agree to be replaced by someone else.
Wage payment: Employees receive wages, including holiday pay and continued payment in the event of illness. Contractors send invoices for the work performed and are not entitled to continued payment in the event of illness or holiday pay.

Contractors often have multiple clients and provide their own tools and instruments to perform their work. They also bear the risk of unemployment and incapacity for work themselves and pay their own income tax and social security contributions. Unlike employees, self-employed persons do not enjoy protection against dismissal.

It is important to choose the right type of contract, as this has legal and tax implications.

Obligations of the client and contractor

Is there a contract for services? If so, both parties have various obligations after signing the contract. Among other things, the client is obliged to pay reasonable compensation for the contractor’s work. The contractor, in turn, undertakes to perform the work properly and thoroughly. Regardless of this, both parties have an obligation to inform themselves properly about the difference between an employment contract and a contract for services. As of 1 January 2025, the Tax and Customs Administration will once again be able to enforce rules on bogus self-employment and retroactively claim missed payroll taxes from parties or impose fines.

What rules apply when a client terminates a contract for services?

According to Section 7:408(1) of the Dutch Civil Code, a client may terminate a contract for services at any time, even if the contract is for a fixed term. However, the termination must be in accordance with the agreements made between the parties. Agreed notice periods or other termination conditions must be respected. If the contract is terminated irregularly, the terminating party may be liable to pay compensation. Unless the client is a private individual.

The contractor cannot simply stop working, unless this has been agreed. If one of the parties fails to fulfil its obligations, this constitutes a breach of contract and the agreement can be terminated by registered letter giving notice of default to the other party.

It is advisable to make clear agreements in the agreement about the conditions for termination, in order to avoid misunderstandings and possible disputes.

What are the consequences of irregular termination of a contract for services?

Irregular termination, for example without observing an agreed notice period, may result in liability for damages. The aggrieved party may then claim compensation, which may consist of lost income or costs incurred.

To prevent such situations, it is important to include clear provisions in the agreement regarding termination and any penalty clauses in the event of non-compliance with the agreements.

Why is it important to have a contract for services legally reviewed?

A legally reviewed contract for services helps to:

Create clarity: Clear agreements about work, remuneration and termination prevent misunderstandings.
Limit risks: A well-drafted agreement can prevent disputes and liability claims.

It is therefore advisable to have a contract for services reviewed by a solicitor before it is signed.

Fruytier Lawyers in Business can advise you on the right form of cooperation. Would you like to have a contract for services drawn up, or are you unsure whether you should offer an employment contract or a contract for services? Please contact one of our specialists.

Authors: Employment law solicitors Judy Sliepen and Myrddin van Westendorp