Beware that as of January 1st, 2020, payroll construction will take away the main advantages you chose it for in the first place
If you have ever used the payroll construction, you are familiar with numerous advantages it brings.
Payroll provides an opportunity to rely on a lighter employment regime and a completely different employment structure, which many employers perceive to be more beneficial than a regular employment. By engaging a third party (payroll employer), you delegate all responsibilities, risks and obligations pertaining to new employees to an amazing all-in-one service that takes care of everything. So far, it was a payroll employer that took care of hiring, dismissal, reintegration, sick leave and other payments, leaving you in charge of management. Obviously, such delegation of the majority of obligations when it comes to employees, provides convenience and flexibility, and is extremely appealing to many companies in the Netherlands.
As of January 1st, 2020, however, payroll construction in The Netherlands in its usual sense will cease to exist: the lighter employment law regime that applies to temporary employment will no longer be applicable to payrolling.
The Dutch government introduces major changes in employment law through WAB (Balanced Labor Market Act) that will drastically change payroll conditions and will make them less advantageous to use.
The reason behind government’s initiative is to encourage employers all over the Netherlands to hire their employees on the permanent basis, rather than use temporary, on-call or payroll employees. This is aimed at changing the unequal position employees are put in, and provide them with a greater protection and certainty. However, while this change has a noble purpose, it will place a heavy burden on employers that rely on payroll construction to maintain their businesses, and may eventually discourage them from using payroll at all.
Let’s take a brief look at changes and consequences WAB will have on you as an employer.
You will be obliged to grant to all your payroll employees same rights that you grant to your other employees.
Starting from January 1st, 2020, all your payroll employees will be put in an equal or comparable to your ‘own’ employees position. This means that they will have a claim to obtain the same primary and secondary employment conditions which you provide to those employees you hired directly. The wage and hours that the employee works per week should be adjusted accordingly (these are primary employment conditions); in regards to the secondary employment conditions, this may include holiday entitlements, bonuses, and even providing your employee with a company car, laptop, a travel allowance, training at your expense and etc. Whatever you are offering your current employees, you will be required by law to offer to your payroll employees as well.
You might not be able to use the same payroll employee for as long as you used to.
Due to the WAB, it will no longer be possible for payroll companies to employ their employees temporarily six times in a row. Payroll employees will become entitled to obtain a permanent contract from a payroll agency after a maximum of three temporary contracts in three years (instead of a current rule of a maximum of six temporary contracts). This way, if payroll employees are not offered a permanent contract with the agency, it will mean that you will be able to use the same payroll employee for a shorter period of time.
It will become more expensive to use payroll construction.
All these measures are likely going to cause higher rates that payroll companies are going to charge for their employees and that employers will therefore have to deal with higher costs if they want to use the payroll construction. Currently the prices you pay per your payroll employee consist of the agreed gross salary and additional payments (holiday pay, sick leave, pension premium and etc.). WAB will impose higher maintenance costs on payroll employees, such as paying a higher unemployment insurance premium and providing an ‘adequate’ pension. Due to these additional expenses, costs you are paying to payroll companies are going to significantly increase.
Despite of these drastic changes, Dutch government claims that it does not intend to preclude employers from using payroll construction, and believes that it should still remain possible, especially to help small and starting entrepreneurs to take good care of their staff. Payroll companies will remain responsible for hiring, reintegration, payroll administration, and other duties, while you need to make sure you have incorporated all changes required by the new law before it comes into force.
It may seem that January 1st, 2020, is far away and you have enough time, however, it is misleading. You need to already start thinking of measures to protect your business from undesirable impact, as adjusting to the new law may not be as easy as you would think.
Among options you can consider are going off payroll completely, arranging for a new way of hiring staff or even hiring yourself, but you certainly should not leave these matters until the last moment. We recommend consulting with a specialist before you make this decision.
If you have questions on how to timely prepare your business, how to make this transition as smooth as possible, and avoid negative consequences of the law, do not hesitate to contact ACG International. We offer a fast and individualized consultation with our labor law specialist to discuss your issue and possible solutions. Make sure to take advantage of our free 15 minute consultation. We can be reached via info@acginter.com or by telephone via 020-800.64.00.
