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Payroll & Payroll

We are often contacted to assist with the payroling of a company, however, there do exist two types of payrolling in the Netherlands. One that we can assist with and one that we cannot assist with.

What types of payrolling apply in the Netherlands?

The most common type is the ‘salarisverwerking’. Processing the salary in the bookkeeping. The less common one is ‘payrolling’. Here the employee is employed by the payrolling company and works at the site of the ultimate client. Unfortunately the English translation of both services is payrolling, even though these two types of payrolling cannot be compared with each other.

Salarisverwerking

The payrolling in the sence of salarisverwerking applies when an employer has hired an employee and need to pay this employee. Rather straight forward processing. We can do this for companies that actually have an office in the Netherlands and we can do that for companies that do not have an office in the Netherlands, but do have employees working in the Netherlands.

The latter is the case when the company hired a sales person for a region (the Netherlands, Northern Europe) but has not physical presence in the Netherlands. Or the employer provides employees to choice their location in the world, as they are in the online business. This employee could have chosen for the Netherlands.

payrolling and payrolling orange tax

Main rule employment income and tax

Employment income is taxed in the country where the employment actually is being executed. That implies you can be employed by any company in the world. If the employment is done in the Netherlands, Dutch tax and social premiums are due over this income.

Payrolling

Payrolling in the sence that the employee is employed by the payrolling company and works at the site of the ultimate client is a high risk business. The risk for the payrolling company is the employee becoming ill. The payment of the salary needs to be continued for a maximum period of two years, whereas the employee is not working on the site, hence not earning income for the payrolling company to pay for the salary costs.

When does this type of payrolling occur? The moment the employee is not hired directly by the company for whom this person is going to work. There are many agencies in the world that bring the demand and the supply of work labour together. The agency will remain in between can take a percentage of the deal. The ultimate client prefers this situation as the risk of the employment is for the agency.

Anti exploitation legislation

Payrolling as mentioned here above has risks for the employee as well. Appearently in the Netherlands employees have been exploited by the agencies that hired them. Exploited in the sense that the accommodation provided by the agency and the food etc was more expensive than the income earned. This is referred to as exploitation. Hence anti exploitation legislation has come in to action.

This legislation demands payrolling companies to be registered correctly with the Chambers of Commerce, so the Dutch Government can identify them. Plus the ABU collective labour agreements needs to be applied for when the salary is being processed. This collective labour agreement implies that among things a pension is arranged for.

The penalty for not complying with the anti exploitation regulations are EUR 12.000 per employee for first time the fault has been discovered, up to a maximum penalty of EUR 36.000 per employee. This to put the matter into perspective.

Most ultimate clients are very much aware of this legislation and the implication that this has on the business in case it is set up incorrect. These companies cannot be in the news with a headline that contains the word fraud, hence the requirement set now is that the payrolling company needs to be a certified payrolling company. The ultimate client can assume that if the payroling company is certified, anti exploitation legislation is executed accordingly.

EUR 20.000 income per month versus exploitation

Clients might find it strange that they are under the anti exploitation legislation when they have the opinion that their EUR 20.000 monthly gross income hardly can be allocated as exploitation. Maybe exploitation of the client, but not of the employee. It is not this type of employees that need the protection, but the strawberry picking or tomato picking employees that needs protection.

The legislation never the less has been made such that these white color workers need to apply as well. If you go into detail of the executing of this legislation that is not a bad result. Employees can be too creative, in the sense that no tax or social premiums are being paid. This legislation prevents also that type of incorrect payrolling.

Orange Tax Services

We can process the payroll for your company where you have hired the employees. We cannot process the payroll for employee you wish we taken on our payroll while they work for you. However, we can provide you with contact details of companies that can assist you.

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