The WAB entered into force on January 1st, 2020. Until 2019, temporary agency work and payrolling were legally considered the same concept and both benefited from certain deviations of Dutch labour law applicable to regular employment agreements, allowing for more flexibility. With the entering into force of the WAB, the payroll agreement has been given its own definition. According to this definition, payrolling occurs only if:
1) the payroll employer does not perform an allocation function on the labour market, which basically means that the payroll employer is not concerned with the recruitment and selection of the payroll employee; and 2) the payroll employee can only be assigned elsewhere with the permission of the organization that hired him (exclusivity).
The same legal position as employees of hirer
With the arrival of the WAB, payroll employees will be entitled to the same terms and conditions of employment as employees who are employed by the hiring organization: this does not only include an entitlement to the same fixed and variable salary, but for instance also to the same holiday, training and leave scheme applicable within the hiring organization. It also leads to applicability of the legal chain scheme for successive fixed-term contracts with a maximum of three temporary contracts in three years. The flexibility that temporary agency work provided in that respect no longer applies to payrolling.
Temporary agency clause for payrolling expires
The collective labour agreement for temporary employment agencies no longer applies to payroll agreements. As a result, payrolling can no longer invoke the temporary agency clause and the exclusion from the continued payment of wages in the event of illness (limited exceptions apply).
Higher pension requirements
In addition, mandatory pension requirements are set for payroll companies. Payroll employees are entitled to receive an ‘adequate’ pension. It is not exactly clear yet what is considered ‘adequate’, but the current StiPP (Pension Fund for Personnel Services)-pension is no longer sufficient. Due to the complexity of the pension rules, these requirements only enter into force on January 1st, 2021.
Furthermore, all temporary employment agencies are placed in sector 52 from 1 January 2020 whereas they used to be able to be classified in the sector of their specialism. The payroll companies are placed in sector 45. As of 2020, a higher sickness insurance premium and WGA (Return to Work Regulations) contribution apply in both sectors 45 and 52.
Other consequences of the WAB for payrolling
In addition to the above points, there are a number of measures from the WAB that apply to all organizations in the Netherlands, including payroll companies. Under the WAB, all employees will be entitled to a transition allowance from day 1. Furthermore, a higher unemployment insurance premium is set for temporary workers. Both measures tend to make flexible work more expensive.