Small business owners earn less than freelancers as profits fall in the Netherlands

Small-business owners in the Netherlands earn less than freelancers without employees. This is true even though they take on greater financial risk. A separate national survey shows that profits are declining. It also shows that a growing share of owners now live below the social safety threshold.

Entrepreneurs who run small firms earn less than independent freelancers. This is despite higher exposure to financial risk. That risk includes upfront investment costs, employee wages, and exposure to market volatility. The exact size of the income gap is not specified. There is also no detailed explanation of the causes. These include possible differences in taxation, overhead costs, or market position.

A recurring national panel study covers companies with up to 50 employees. It shows that the small-business sector has experienced three consecutive years of declining net profit margins. Many businesses say they cannot fully pass rising costs on to customers. Others can only do so after delays.

Financial pressure is also affecting personal incomes. The study finds that one-quarter of small-business owners now earn less than the national welfare threshold. This is an increase from 18 percent previously. In retail and hospitality, the situation is worse. One in three business owners in those sectors falls below the social minimum.

Rising labor costs and reduced tax benefits are identified as key drivers. Revenues are increasing, but costs are rising faster. This reduces overall profitability across the sector.

Lex van Teeffelen, a researcher at a Dutch university of applied sciences, described the situation as alarming. He said, “That is particularly worrying. Wages have really increased sharply over the past two years, and tax benefits have been reduced. Revenues are increasing, but costs are rising much faster. This is a signal that costs, taxes, or social charges are getting out of hand.”

He also pointed to policy changes. These include higher corporate taxes and reductions in tax deductions for self-employed individuals and small businesses. Van Teeffelen added, “You could say that The Hague is driving small entrepreneurs to the brink.”