The Balanced Labour Market Act (Wet Arbeidsmarkt in Balans, “WAB”) will enter into force on 1 January 2020. This new Act provides a package of measures in the fields of flexible labour, dismissal law and the Unemployment Insurance Act (Werkloosheidswet, “WW”), with the goal of improving the balance between flexible and permanent employment agreements. In the coming period, we will be discussing the main changes in several news reports. This week: payroll.
Payroll
In most cases, payrolling is a construction in which the user undertaking (or material employer) has recruited and selected the employee itself (or has outsourced this to a third party), but in which the employee is formally employed by the payroll firm. The user undertaking is the material employer and exercises management and supervision. The payroll firm is only obliged to pay wages and to take care of the payroll administration and the financial settlement of the employment agreement. This way, no ‘employer's contributions’ are borne by the material employer. The introduction of the WAB is intended to regulate payrolling in the Dutch Civil Code (“DCC”) and in the Waadi (Placement of Personnel by Intermediaries Act (Wet allocatie arbeidskrachten door intermediairs)) in such a way that the mitigated dismissal regime for temporary workers will no longer apply.
WAB
The WAB contains the following important changes for payrolling:
i. Introduction definition of payroll agreement
With the introduction of the WAB, a definition of the payroll agreement is set out in Section 7:962 DCC. The payroll agreement is defined as a secondment agreement in which the contract for services between the employer and the third party was not concluded for the purpose of bringing together supply and demand on the labour market, and in which the party assigning the worker can only assign the worker to another party with the permission of the third party.
ii. Equal employment conditions
Companies engaging in payrolling will be obliged to offer the same salary and benefits – except for pensions – to the payroll employees assigned by them as employees have who are directly employed by the client. This is achieved by means of an amendment to the Waadi, setting out an equal treatment rule that obliges the payroll firm to apply the same employment conditions. Deviations from this rule to the disadvantage of the employee are not possible.
iii. Special provisions of secondment agreement do not apply
With regard to payroll employees, the introduction of the WAB will make it impossible to use the special rules relating to the secondment agreement. As a result, for payroll employees, as well as for the employees directly employed by the client, the sequence system will be applicable at once. In addition, it will no longer be possible to include a secondment clause, or to invoke the longer exclusion from the obligation to continue paying wages.
iv. Pension
Under the WAB, payroll employees are entitled to an ‘adequate pension scheme’. The employer can achieve this by allowing payroll employees to participate in the pension scheme of the user undertaking where they work, or the payroll firm can set up its own pension scheme. In the latter case, the payroll firm must meet certain conditions:
- There is no waiting time or threshold period. This means that the employee accrues pension from the first working day;
- The pension scheme must provide for a surviving dependants’ pension;
- The premium paid for the pension must be at least equal to the standard premium
In order to give employers the opportunity to structure their pension scheme properly, this scheme will only come into effect on 1 January 2021.
Please Note! Existing contracts after 1 January 2020
Temporary employment agreements entered into with payroll employees prior to the entry into force of the WAB will be subject to transitional law with regard to the sequence system. Until the temporary agreement expires, the rules for temporary agreements that applied before the entry into force of the WAB will continue to apply. The new rules will apply to payroll agreements that commence after 1 January 2020.
Do you have any questions about the above changes or other changes? Please do not hesitate to contact us.
