Contract for services

A contract for services is a contract agreeing that one party will carry out certain activities for the benefit of another party. The legislation explicitly states that the activities concerned must not be carried out on the basis of an employment contract and must not involve the making of a tangible construction, the safekeeping of property, the publication of a work or the transportation of persons or goods. The reason for this is that there are specific arrangements governing these situations. Lawyers refer to these as special agreements and they contain specific provisions, some of which cannot be varied.

The classic example of a contract for services is the engagement of the services of an accountant, lawyer or notary.

The situation is less straightforward when one engages the services of a sole trader (or “zzp’er” as they are known in the Netherlands) who does not have many customers. If someone carries out work for someone else and the situation satisfies the definition of an employment contract, then an employment contract exists! It won’t make any difference if the contract is clearly labelled as a contract for services.

Employment contracts impose a great many compulsory obligations on employers, intended to protect employees. For that reason, the difference between a sole trader and an employee can have great significance, in legal terms and sometimes also in financial terms. For example, the basic rule is that a contract for services can be terminated at any time. If you don’t want that, you need to explicitly agree this and that is only permitted if the customer is a business. Customers who are consumers have extra protection.

The situation with an employment contract is that, in order to protect employees, the agreement can only be terminated in a limited number of ways. This means that in practice it is much more expensive to say farewell to an employee than to a contractor. This is the reason that courts do not hesitate in concluding that an agreement calling itself a contract for services is actually an employment contract. And if the court decides that an agreement is an employment contract then you will have to treat it as such.

A significant difference between the two types of contract is that with an employment contract there is a relationship of authority between an employer and an employee, whereas with a contract for services the customer is only entitled to give suggestions about the way the task should be carried out and the contractor then carries it out independently by whatever means he decides. In practice, this difference is not always clear. If the person contracting to carry out the work has several customers, it is less likely that an employment contract will be held to exist. However, in order to protect employees the legislation describes a number of factors deemed to constitute evidence of an employment contract: where these are present, a court will be quick to regard an agreement as an employment contract rather than a contract for services. All the more reason for employers who work with sole traders to exercise caution.