Just because one employment model works great in one country does not mean that it will work in the next. The idea of having an independent sales rep is often an unknown concept in most countries. Especially the countries with strong pro-employee labor laws.
Let’s take the example of Belgium. Imagine that you plan to hire someone and you thing it will be easier to have the candidate working as a self-employed sales agent. Working with a sales agent seems a lot less complicated compared to employment, where you must figure out all the peculiarities of Belgium labor laws. But here’s the catch: you are likely to run into the trap of employee misclassification (‘schijnzelfstandige’).
This might work both ways. Either the employee goes directly to the labor authorities to report employee misclassification or the labor authorities investigate the relation themselves. If the labor authorities determine that it is a case of employee misclassification then the employer must pay social security taxes (+/- 35%) and employee contributions (13,07%).
In addition, one should pay interest on the total amount (7%) and on top of that there is a fine of 10%. We are not talking about the contributions of one month. The claims of the labor authorities can extend to three years (seven years in case of fraud). Additionally, there will be the additional costs of criminal prosecution and administrative fines.
There is a strong incentive for the ‘employee’ to report employee misclassification, especially when the relation with the ‘employer’ goes sour. An ‘ex-employee’ can claim benefits such as severance payments, holidays accrual and a 13th month over the duration of the contract. The ‘employee’ can also claim a refund of all the contributions made during the period of ‘self-employment’.
There are four tips to prevent employee misclassification in Belgium
The consequences of an employee misclassification ruling in Belgium are severe. However, there are certain ways to prevent this.
# Specify the nature of the work
Most Belgium industries start with the notion that parties are free to describe their own work relation. If one agrees to be self-employed then this will be the basic principle, unless it is proven that there is a case of employee misclassification. So always state in the title of the contract that it entails cooperation on a self-employed basis.
# Don’t specify the labor conditions
Specifying the assignments given to the self-employed contractor is a no go. Do not give the impression that this is an employer-employee relation. Try to avoid making agreements on the number of hours worked and the amount of vacation that is allowed in a year. The less you work with a fixed compensation, the better.
Do not mention in your contract that the contractor is not allowed to work for competitors. It is possible to have a non-compete clause but this will raise alarm bells at labor authorities. If you do decide to have a non-compete clause make sure it is limited in time, territory and activity.
# Use an Employer of Record Organization in Belgium
The above-mentioned measures can make it less likely to be charged with employee misclassification. However, if you want to cover the risk completely, then it is possible to use the services of an Employer of Record Organization in Belgium. Acumen International offers fully compliant global employment solutions in more than 150 countries. Our Global Employer of Record solutions have helped manufacturing companies start selling their products in the global marketplace without having to worry about compliance issues, in particular permanent employee / sales rep misclassification. Manufacturers are now free to focus on the ways to increase sales and get higher revenues.