Rapid rise

At the end of 2022, the Central Office for Statistical research in The Netherlands (CBS) calculated that between the third quarter of 2021 and the same quarter of 2022, the number of self-employed people (aged 15 to 75) grew by 127 thousand to 1.2 million. The increase was largest in the care and welfare professions. In some occupational groups, the increase in the number of self-employed (compared to one year previously) was accompanied by a decline in the number of employees. This was the case, for example, in the care and welfare professions and in the technical and commercial professions. This shift in the labor market has consequences for entrepreneurs and means more and more employees are considering becoming self-employed. But before we get into the consequences, let's first explain what the causes of this trend are.

Causes

Flexibility and autonomy

One of the main reasons for the increase in the number of self employed people in the Netherlands is the search for flexibility and autonomy. The desire for control over one's own working hours and projects is an important motivation to 'go it alone'. As a freelancer, you have the freedom to choose your own clients, set rates and determine your own workplace. This attracts many professionals who want to shape their careers on their own terms.

Digitization

In addition, the rise of digital technologies has made it easier to work independently. Self-employed people can now often work from anywhere thanks to online communication tools and technologies. This has lowered the threshold for starting your own business and made it easier to offer services or products (internationally).

Changing working relationships

Traditional employment relationships are shifting to more temporary and project-based collaborations. Companies are increasingly inclined to hire specialized contractors for specific projects instead of hiring full-time employees. This offers organisations more flexibility and fewer legal and contractual obligations to the people who work for them. Conversely, it allows freelancers to offer their expertise to different companies.

Support for entrepreneurship

The Dutch government has set up initiatives to stimulate entrepreneurship, including simplifying tax rules for self-employed people and offering financing opportunities for entrepreneurs just starting out. This has further fuelled the growth of the self-employed sector.

Although the reasons for the shift to more self-employment mainly stems from the benefits experienced by entrepreneurs and self-employed people, This new trend brings new challenges as well as opportunities.

Consequences

More uncertainty

Although self-employed people experience more autonomy, this often goes hand in hand with less economic security. As a self-employed person, you are not guaranteed a fixed income, pension scheme or social security. This could lead to a discussion about the need for better social protection for self-employed workers and new legislation. Many self-employed people currently lack access to things like health insurance, pension plans and dismissal protection. This lack of facilities could have unpleasant (financial) consequences for many self-employed workers. With health insurance, pension schemes and protection against dismissal through their employer, employees run fewer socio-economic risks. With an increasing number of self-employed people, there is a new challenge to reduce financial uncertainty. The government has proposed certain labour market reforms. For example, there are various measures that you as a self-employed person and entrepreneur may have to address in the future.

Competition

An increase in the number of self-employed workers could lead to more competition within certain sectors, potentially putting pressure on rates and wages. Freelancers often have to remain competitive in terms of price and quality in order to win contracts. Increasing competition requires self-employed people to position themselves more competitively in the market place. As a result, the allowances for self-employed persons may decrease rapidly, which raises the question of whether entrepreneurship for the self-employed will remain sufficiently rewarding and as attractive in the future.

Shifting relationships of authority

Traditionally, most organisations have a top-down hierarchy: The boss is at the top and manages a small group of managers who in turn have a larger group of employees under them. The larger the organisation, the more layers the pyramid has. But in each of these, large or small, authority comes from above. If more self-employed workers start fulfilling tasks of employees, this relationship of authority will shift. As a self-employed person, you work for clients, but you are and always remain your own boss. Employers will shape projects more with dialogue and relationships of authority will become less and less bottom-up. If the demand for freelancers in sectors exceeds the supply, the pyramid may even turn around completely. The client could then be more dependent on the self-employed person than the other way around.

Individualism

Increasing individualism within the labour market is another consequence of the rise in the number of self-employed workers. Whereas in the past people were often employed by the same employer for decades, working relationships are increasingly short-term, project-based and isolated. Loyalty and team cohesion can be compromised. The volatility of project-based work has the risk of undermining involvement with and knowledge of organisations. An increasing pool of self-employed workers in the workplace can also reduce the interconnectedness between colleagues. As an entrepreneur, you are faced with the challenge of keeping the bond with the organisation and each other intact. As a self-employed person, you may have to contend with the fact that the more individualistic nature of your work could lead to isolation. The rise of public workplaces and gatherings for self-employed workers is an example of a solution to the demand for connectedness between self-employed workers.

Want to know more?

Are you considering becoming self-employed? The Chamber of Commerce offers extensive information and support for freelancers starting out. The Tax and Customs Administration provides information about tax matters for self-employed persons. Both webpages are in Dutch. Are you an employer or self-employed person and would you like advice on/support for changes in your company or work? At Moneywood, expertise in the field of tax, legal and strategic matters come together under one roof. Feel free to contact us!