The consequences of WAB for payrolling

The Wet arbeidsmarkt in balans (WAB or Balanced Labour Market Act) had come into effect on 1st January 2020. The act has many consequences for payrolling. We go through them for you here.

Primary measures affecting payrolling

Up until this year, temporary work agency and payroll contracts were equal in terms of legal status. The definition of the temporary work agency contract remains the same, but the payroll contract is being given its own definition within the legislation. According to the definition, payrolling only applies when 1) the payroll employer is not performing any allocation function in the market, which means that the payroll employer does not engage in the recruitment and selection of the payroll employee and 2) the worker is made available to the client exclusively.

Same legal status as hirer’s employees
With the introduction of an independent legislative act on the payroll contract, payroll workers will receive the same legal status and employment conditions as workers employed by the hiring organisation. As such, the legal provision for successive temporary contracts – a maximum of three temporary contracts in three years – applies.

Temporary work agency CAO no longer applicable to payrolling
The CAO (collective labour agreement) for temporary work agencies will cease to apply for payroll companies. This means that the agency clause and exclusion of the duty to continue paying salary on the ground of illness, can no longer be evoked in the case of payrolling.

Payrolling in sector 45
Furthermore, as of 1st January 2020, all temporary work firms will be classified in sector 52. Specialist temporary work firms can now still be classified in the industry sector they specialise in. Payroll companies are to be classified in sector 45. It is anticipated that, from 2020, a higher Sickness Benefit and Return to Work Scheme for the Partially Disabled (WGA) premium will apply in both sectors 45 and 52.

Higher pension requirements
In addition, the legislation includes mandatory pension requirements for payroll companies. Given the complexity of the pension rules, these requirements will only be introduced one year after the WAB, on 1st January 2021. These new pension requirements will mean that the existing StiPP-pension will no longer be sufficient.

Other measures affecting payrolling

Besides the above, there are a number of other measures in the WAB that are applicable to all organisations in the Netherlands, including payroll companies.

Right to (decreased) severance pay
Under the WAB, all employees will be entitled to severance pay from their first day. The severance pay will, however, diminish for longer contracts. This is to narrow the gap between flex work and permanent work. The government hopes that this will make it more appealing for employers to offer employees permanent contracts.

Higher WW premium
In addition to the right to severance pay that is effective from day 1, a higher WW (unemployment insurance) premium applies for temporary workers. Both measures make flex work more expensive. The WW premium becomes cheaper if employers offer an employee a permanent contract.

Transitional provisions
Although the payrolling rules in the WAB enter into force immediately on 1st January 2020, there is a transitional period in place for the legal position of temporary work agency contracts entered into before 1st January 2020 and that extend beyond that date. The flexible, temporary work agency rules and hirer’s remuneration may no longer be applied to any subsequent employment relationship that falls under payrolling.

Questions?

Do you have questions about the WAB? Get in touch with Robert Robert van Asch. Robert is a payroll specialist at HeadFirst Group, of which Staffing MS is a part. With over thirty years’ experience in the accountancy trade, Robert and his team take care of payrolling and salary administration on behalf of our clients.