The debate over freelancing versus traditional employment is as old as time—and just as endless. While it’s a fascinating discussion, here we’ll zoom in on a different angle: the financial side of transitioning from employment to freelancing, whether as a self-employed professional (ZZP) or via a payroll agency. Let’s dive in.
Employment: more than meets the eye
A common misconception is that being an employee is straightforward: you’ve got your gross salary in the contract, an additional 8% holiday allowance (vakantiegeld), and maybe a few perks like bonuses, a company car, or a laptop. Surely, that’s the full cost your employer spends on you, right? Not quite.
Behind the scenes, employers have a long list of additional costs, which typically include:
- Your gross salary, consisting of net pay plus income tax (loonheffing).
- Mandatory holiday allowance, usually 8% of your annual salary, paid monthly or as a lump sum.
- Bonuses and perks, like 13th-month salaries, lease cars, or professional development budgets.
However, that’s just the start. Employers in the Netherlands are also required to pay a host of additional social contributions, such as:
- Unemployment insurance (werkloosheidswet, WW).
- Sickness insurance (ziektewet, ZW).
- Mandatory employer health insurance (ZWV), which supplements your private health insurance.
- Disability insurance (arbeidsongeschiktheidsverzekering).
- Other contributions to public funds.
These add-ons typically increase the employer’s cost per employee by 20–40%, depending on the salary level and industry. So, your gross salary is just the tip of the iceberg when it comes to what your employer spends on you.
Freelancing: a shift in responsibility
When you switch to freelancing—whether as a sole proprietor (ZZP/EMZ) or through a payroll agency—the responsibility for many of these costs shifts to you.
ZZP vs. EMZ: What’s the difference?
ZZP (Zelfstandige Zonder Personeel): This is a commercial term meaning “self-employed without personnel.” The legal business structure can vary, ranging from a sole proprietorship (EMZ) to a limited liability company (BV).
EMZ (Eenmanszaak): A legal term for a sole proprietorship. In everyday use, both terms are often interchangeable. Fun fact: despite the “without personnel” part, ZZP-ers can hire employees!
Switching to freelancing can be both exciting and daunting. While it opens up possibilities for greater flexibility and control over your work, it also comes with significant changes in financial responsibilities. For many, these differences mark the start of a steep learning curve.
…as a sole proprietor
When working as a ZZP or EMZ, you’ll need to take care of several things that an employer usually handles for employees:
- Insurance: Freelancers must insure themselves against unemployment, disability (arbeidsongeschiktheid), and professional liability (beroepsaansprakelijkheid).
- Social contributions: As a freelancer, you won’t have automatic contributions to social funds, which means no state-provided safety net in cases of burnout, illness, or inability to work.
- Taxes and reporting: Freelancers are responsible for managing their own taxes and bookkeeping, which adds both cost and complexity.
- Loss of the 30% ruling: If you still have the 30% ruling as an expat, you’ll lose it upon switching to freelancing.
Final thoughts
Freelancing offers an unparalleled level of independence and flexibility, but it also requires careful planning and a strong sense of financial responsibility. From understanding tax obligations to managing insurance and savings, freelancers take on many of the risks previously absorbed by employers.