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Earning extra income as a self-employed professional while employed is possible and provides financial breathing room if your business income declines — but pay attention to the agreements with your employer and the tax implications. Consider any non-compete clause, the payroll tax credit, the hours criterion for the entrepreneurial deduction, and the Small Business Scheme (KOR). Below you will find the most important points to consider.
Make good agreements with the employer
If you combine self-employment with salaried employment, please note the following:
- No employer who is also a client. Preferably, do not take up employment with a party that is already your client; this can cause many problems (think of bogus self-employment).
- Clear agreements. Make agreements regarding matters such as business phone calls during working hours and how you structure your working hours.
- Do not include a non-compete or non-solicitation clause if the activities are interconnected — this could hinder your work as a self-employed professional. Instead, have it clearly stated in the employment contract that you are permitted to continue your freelance activities.
Payroll tax credit and income tax
As an employee, you receive a salary and deal with payroll taxes and the payroll tax credit. With that credit, you have two options:
- your employer applies the discount to your salary (so you have more left over each month);
- The discount is offset against your income tax return.
Please note: you can only receive the payroll tax credit from one employer at a time. Your income from employment is not self-employment income — do not have it deposited into your business account. Furthermore, combining wages and profit could result in you moving into a higher tax bracket. TODO_VERIFY: tax brackets and rates change annually — check the current figures with the Tax and Customs Administration.
Pay attention to the hours criterion and the entrepreneur's deduction
If you work more in paid employment, you may spend less time on your business. This can conflict with the hours criterion and the entrepreneur's deduction. To retain your entitlement to the deduction, keep a complete record of your hours: the Tax and Customs Administration will not simply assume this. You must demonstrate that you spend more time on your business than on your paid employment, and that you have spent at least 1,225 hours on your business per calendar year. TODO_VERIFY: the hours criterion, the amount of the self-employment deduction, and other entrepreneurial facilities are adjusted regularly — check the current rules.
The Small Business Scheme for self-employed professionals
If your business generates very little revenue due to your employment, you may be able to make use of the Small Business Scheme (KOR). You would then be exempt from VAT. This can be beneficial if you primarily supply to private individuals, as it increases your profit margin. If you have many business clients, the KOR is usually less attractive. TODO_VERIFY: the revenue limit and conditions of the KOR may change — check the current regulations.
Frequently Asked Questions
Am I allowed to work as an employee as a self-employed person?
Yes. Do ensure you make clear agreements with your employer, consider any non-compete clause, and the tax implications. Preferably avoid an employer who is also your client.
Do I retain my self-employment deduction if I work as an employee?
Only if you meet the hours criterion (in principle, at least 1,225 hours per year for your business) and you spend more time on your business than on your salaried employment. Keep accurate records of your hours.
With which employer do I apply the payroll tax credit?
But with one employer at a time. If they apply the discount, you will have more money left over each month; otherwise, you offset it via your tax return.
Is the Small Business Scheme (KOR) beneficial if I also work as an employee?
Often it is, if your entrepreneurial turnover is low and you mainly supply to private individuals. For many business customers, the KOR is generally less favorable.
Freelancer and employed? Have your contract checked
Combining self-employment and salaried employment can work out well, provided you are aware of the legal and tax considerations. For example, we review your employment contract to prevent it from conflicting with your self-employment activities.
Our employment law are happy to assist you. Schedule a no-obligation intake consultation.
