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Payrolling Company versus Temporary Employment Agency in the Netherlands

Since the WAB Act (The Balanced Labour Market Act / Wet arbeidsmarkt in balans) came into force on 1st January 2020 it has changed the landscape for companies utilising temporary labour within the Netherlands. It has meant that there are now two distinctions of payment model when paying a temporary employee, Payrolling Company and Temporary Employment Agency.

What is a Payrolling Company?

A Payrolling Company is a company that specifically provides outsourced payroll services as a legal employer for another entity completing the recruitment of the individual – usually the client or recruitment business. In line with the WAB, a Payrolling Company has certain requirements and restrictions upon it when providing such support to the supply chain. 

  • A Payrolling Company can only apply the normal contract chain rule in the Netherlands. This is a maximum of three contracts or when a chain of contracts do not exceed three years total duration. For example, if three contracts were issued for a duration of 6 months each, this would be the limit. Only after a break of 6 months or more between contracts, the chain is broken and you can then again start back from zero.
  • A Payrolling Company must adopt all comparable pay elements in line with the client Collective Labour Agreement (CAO) under the Waadi Act Clause 8A, as well as the clients specific pension scheme. Additional remuneration would also need to be considered such as stock options and further benefits offered to the clients permanent workers.
  • A Payrolling Company cannot terminate with immediate effect and is required to give adequate notice as stipulated within the clients CAO.

What is a Temporary Employment Agency?

A Temporary Employment Agency is a company with involvement within the recruitment process and non-exclusivity for their employee. It allows temporary employees to secure multiple assignments with differing end clients, giving freedom to its employees akin to the very nature of the temporary labour market.

  • A Temporary Employment Agency can employ individuals for up to 5.5 years.
  • A Temporary Employment Agency can adopt the ABU (Chapter 3, Article 16) or NBBU CAO stipulating the required comparable elements that need to be adopted from the end clients collective agreement. There are far less requirements in comparison to a ‘Payrolling Company’ and consist of the items such as the required taxable salary, holiday entitlement, expenses benefits and overtime payments. However, it does not include the client pension scheme, stock options, or further benefits offered to the clients permanent workers (opposed to a Payrolling Company).
  • Under the ABU/NBBU CAO a temporary employment agency has far more flexibility. During the first 78 worked weeks (18 months) no chain rule is applicable regarding the number of contract extensions, however, it is good practice to try and issue minimal extensions. The chain rule is only applicable in phase 3 (this phase starts after 1.5 years of continuous employment) and following this you then have the flexibility of a maximum of 6 contracts to cover a maximum duration of 4 years in total.
  • A Temporary Employment Agency utilises the ‘temporary agency clause’ meaning termination can be immediate within the first 18 months giving further flexibility to clients.

Should you have any questions regarding the different categorisations and how these differences work in practice, please feel free to give one of our specialist team members a call on 0044 1582 37 99 66 or email

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