Payrolling under Dutch employment law
Payrolling is a form of employment arrangement in which a third-party payroll company (payrollwerkgever) formally employs workers recruited by a client business (opdrachtgever), taking on the administrative and legal obligations of being the employer. Unlike temporary agency work, the payroll employer does not play a role in recruiting, selecting, or allocating the workers to the client - the client business does this itself and then contracts a payroll company solely to handle the employment relationship.
Since 1 January 2020, the Balanced Labour Market Act (Wet arbeidsmarkt in balans, WAB) has significantly tightened the rules on payrolling. The WAB introduced a statutory definition of payrolling and removed the ability to use the uitzendbeding (agency clause) in payroll arrangements. This means that payrolled workers receive the same dismissal protection as regular employees from the outset of the employment relationship.
Equal treatment obligation under Dutch employment law
One of the most important consequences of the WAB changes is the obligation on payroll employers to provide payrolled workers with equal employment conditions as comparable employees of the client business. This covers pay, working hours, annual leave, and other core terms - the same inlenersbeloning principle that applies to agency workers. The client business must inform the payroll employer of the applicable conditions at the client.
Payrolled workers are also entitled to an adequate pension scheme. The WAB required the Minister of Social Affairs to set minimum pension standards for payrolled employees; these have been phased in progressively since 2021. Employers who use payrolling arrangements should review their pension and conditions obligations carefully.
Practical considerations under Dutch law
Despite the tighter rules, payrolling remains a commercially attractive arrangement for businesses that wish to outsource HR administration. However, the cost advantage has diminished since the WAB, as payrolled workers now cost more in terms of pension contributions and equal conditions. Client businesses should also be aware that the distinction between payrolling and disguised direct employment (schijnzelfstandigheid) can be scrutinised by the Dutch Tax and Customs Administration (Belastingdienst).
The Supreme Court had previously rejected the argument that payroll companies should be excluded from the agency work exceptions in Article 7:690 of the Dutch Civil Code on the ground that payroll firms lack an allocative function on the labour market. However, the WAB of 2020 ended that debate by introducing a separate statutory definition and regime for payrolling, which requires the same working conditions as those at the client business (inlenersbeloning, Article 8a of the Allocation of Employees by Intermediaries Act). The number of workers employed via payroll companies grew from approximately 150,000 in 2009 to approximately 300,000 in 2018, reflecting the commercial appeal of this model for both private and semi-public employers seeking to reduce administrative and legal obligations.