“Under my umbrella” are the well-known lyrics of a song, and the meaning of the song is similar to what is offered by payroll umbrella services. When you choose to use umbrella services, you are sheltered from all the rain which consists of employment contracts, tax issues, take-home amounts, and all other mandatory requirements like employer costs, work permits, sickness risk, and so forth.
The contracting industry has been radically transformed in just a few years. More flexibility for the employee and the hirer now have to be combined with the benefits of the standard employment arrangement of the past. Payrolling—or the so-called payroll umbrella services—are the solution.
Why an umbrella company?
Sometimes a company cannot hire someone directly, sometimes the hirer does not qualify for hiring a foreign employee, and sometimes the company is not yet registered as an entity in the Netherlands—this is where the payroll umbrella services come in.
In cases like these, the employee can be employed by the umbrella company.
An umbrella company is a company that acts as an employer to employees, not just for unregistered companies, recruitment agencies, and start-up companies, but also for existing companies.
The umbrella company enters into a contract with the employer, and has the legal obligation to pay the employee the take-home amount as well as to organize and pay the social premiums and taxes for the employee. In return, the employer (or the end client) pays these amounts—plus a fee—to the umbrella company.
The biggest differences
The same obligations as usual—for instance insurance to cover various risks—apply to the employer. Thanks to their size, however, payroll companies can often negotiate attractive rates .
What greatly contributes to the efficiency of our services is the fact that all administrative issues are set up for the hirer, so that—as soon as you have a candidate—he or she can start immediately without waiting for matters such as employment contracts or insurance arrangements.
By using umbrella payroll services, you can combine the freedom you have as an
employee with the knowledge that you have a stable job and income.
Is this really a legal way to employ people?
Yes, it certainly is. The tax authority determines the employer’s sector, and payroll companies have their own category. Benefits/obligations are determined per sector, as are social premiums.
Thanks to the fact that the regulations provide for a Collective Labor Agreement (NBBU) and a pension arrangement (STIPP) for all employees who are employed by a payroll company, these employees enjoy the same protection as other employees.
In the Netherlands, an employer can offer an employee up to three short-term contracts of fixed duration over a period of, in total, 24 months. After this, the fourth contract in a row becomes one for an indefinite period of time.
In some cases, for example project-based employment contracts, it is helpful if
an employer has the option of offering multiple contracts for short-term work.
A payroll company can provide that option.
As the NBBU labor agreement applies, the payroll company can offer multiple contracts by week, month, or year; for example, during the first 78 weeks, contractors can arrange a series of employment contracts for a day or week. This helps the employer avoid unnecessary risk should a project be successfully completed earlier than had been estimated, and makes it possible for the employee to work on this project as well as new ones.
As the CLA NBBU applies, additional rules and legislation are mandatory.
This includes the NBBU pension scheme. If you are employed for more than 26 weeks (Stage I), an employer is responsible for part of the pension contribution. After 78 weeks (Stage II), the employer portion increases and an employee portion is created as well.
More information on the pension scheme can be found at www.stippensioen.nl/your-pension-with-stipp.
Holiday allowance and vacation days
Every employee in the Netherlands has the right to a minimum of 8% holiday allowance. The allowance is calculated over the gross salary. This can be paid as a one-time payment—usually in May—or monthly.
While you are working, you are also entitled to paid vacation days. As the CLA NBBU applies, the payroll company pays for 24 days per year.
Same employer possibilities
Some candidates meet the criteria for the 30% ruling. And even though the payroll company is not the physical employer, the payroll company can apply for it and organize all related tax issues on behalf of the employee/contractor.
If an employee is coming to the Netherlands for the first time, this involves considerable administrative duties, some of which are the responsibility of the employer and some of which are the responsibility of the employee. Fortunately, umbrella services can take care of any necessary immigration obligations and can also assist the candidate to make sure he or she is ready to start working for the employer.
This area of Dutch employment law is new to many people. We at Payingit International are accustomed to people hearing about payroll services and responding “Really? REALLY??” Yes, really! These arrangements benefit both hirers and employees. Please get in touch if you have any questions.