What is the difference between payroll and payrolling?
What is the difference between payroll and payrolling?
These definitions are a frequent subject of confusion. This is why we have summarised the main differences for you below.
What is payrolling?
What is payroll?
Benefits and disadvantages
The payrolling construction is more flexible than a regular employment contract, in particular for temporary workers; however, the Balanced Labour Market Act has reduced this flexibility. It is easier for both parties to terminate the employment. This may be an advantage or a disadvantage. Employees often perceive the decision of employers to hire them via a payrolling company as a sign of distrust. And it is so important to build a bond with the employees based on trust and appreciation. As the formal employer, you are in the driver’s seat and you can independently determine which primary and secondary employee benefits to offer your employees.
Can foreign companies with personnel in the Netherlands choose between payrolling and having an internal payroll?
Payroll, via Interfisc this is an option for foreign companies
Interfisc offers foreign companies an option to enter into an employment contract with their employees whether or not they have a branch in the Netherlands. They can also get insurance against all the afore-mentioned risks and perform the full employer role, while Interfisc performs all the administrative work. In addition to the regular salary administration and insurance, Interfisc offers a solution for the legally required sick leave management role. Foreign companies must perform this role for their employees in the Netherlands.
Other accounting firms offer a solution for some employer obligations, such as salary administration, but most do not offer any insurance or absence management. However, these key elements offer the employer the certainty of full compliance with Dutch legislation and regulations, limiting the employer’s financial risks.
Which financial employer risks and insurance does this concern?
Financial risks during work mainly concern sick leave and accidents. Employers with personnel in the Netherlands are deemed to be a ‘dutiful employer’ even if not located in the Netherlands. The definition of ‘dutiful employer’ (good employment practices) is set out in law. Among others, this dictates that the employer must make a maximum effort to prevent or limit any financial loss, other loss, injuries or damage for its employees. This legislation also sets out the employer’s obligation to provide a suitable insurance policy covering any such losses, injuries or damage for its employees after an accident.
Please find below some information about some risks for which Interfisc can offer solutions – also to employers not established in the Netherlands.
- Continued payment of wages to employees on sick leave for two years
Employers with personnel in the Netherlands risk having to continue payment of wages to employees on sick leave for at least two years. This is NOT funded by the Dutch government.
Dutch companies may take out direct insurance to cover this risk. However, most Dutch insurers will not provide any insurance policies to companies not established in the Netherlands or foreign employers with personnel in the Netherlands. - Costs due to accidents:
Also, employers are having to cover the cost of accidents involving employees in the context of ‘good employment practices’ to an increasing extent. Even if such accidents initially do not seem to be directly work-related. This can even happen if the employer did not have any option to take measures to prevent the accident. This is another risk that is generally impossible for a foreign employer to insure. - Retirement pension
Furthermore, a foreign employer is not able to offer its employees in the Netherlands an employer-employee pension scheme. This is a tax-efficient way to accrue a retirement pension in the Netherlands. About 90% of employees in the Netherlands makes use of this facility. Of course, not being able to offer this would definitely be a disadvantage if you want to make a competitive offer to candidates.
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Since 1972, Interfisc has offered international HR & Payroll solutions in the Netherlands, Belgium, Germany, France, the United Kingdom, and Italy. We do this from our offices in the Netherlands and Belgium, and with an international team of around 45 committed and caring employees.
- Thorough knowledge of local rules on employment law, social security, taxes, employee benefits and health & safety
- We keep you informed of changes in local legislation, supplemented with practical solutions
- One point of contact for all your questions
- Expert in cross border payroll solutions since 1972
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