Payrolling has been a growing form of employment over the last few years. Payroll employees are recruited and hired by a company, but all matters relating to legal employment, such as payment of salary, pension and taxes are outsourced to a payroll company. This form of employment has become increasingly popular because of the flexibility it offers companies, as the risk and costs in case of termination of work or illness of the employee is taken over by the payroll company. Employment experts have long debated on the question whether payrolling should be qualified as employment or as temporary agency work. In its ruling of November 2016 on Care4Care/StiPP, the Dutch Supreme Court ended this uncertainty and qualified payrolling as a form of temporary agency work. This means that payroll employees can be obliged to participate in the StiPP pension fund and the collective bargaining agreement for temporary workers (ABU-cao) can apply to payroll employees.

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Less dismissal protection

Payroll companies fall under the dismissal rules that apply to temporary agency work, which are generally more flexible than the dismissal rules for regular employees. As a type of temporary agency worker, a payroll employee has less protection in the case of a chain of contracts, and has less protection against dismissal, than a regular employee. As a result, a payroll employee can be employed on temporary contracts for a maximum of 5.5 years and the employment contract with the payroll company can end automatically if the employment with the client terminates. In addition, the payroll company does not have to notify the payroll employee on whether or not the temporary employment contract will be extended.

New legislative proposal

In November 2017, members of parliament submitted a legislative proposal to exclude payrolling from the applicability of the "flexible" dismissal regime for temporary agency workers. The proposal also entails that payroll employees are entitled to the same terms of employment as regular employees, including payment, hours, fringe benefits, and pension. These measures are meant to prevent unfair use of payrolling, which is used to compete on employment conditions.

Click here to read the legislative proposal:

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