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By Jan Dop, LL.M.
Russell Advocaten B.V.
Amsterdam, Netherlands

The Supreme Court of the Netherlands has recently ruled that secondment and payrolling are to be considered as temporary employment contracts. This means seconders and payroll employers are allowed to apply a more flexible dismissal regime to temporary employment contracts.

No Allocation Function Required for Temporary Employment Contract

A temporary employment contract is an employment contract where the employee is made available by the employer, in the context of his business activities, to third parties to perform work under the latters’ supervision. It has been unclear for quite some time whether only contracts by “classic” temporary employment agencies were covered by this definition or whether employment contracts by more recent triangle relations, such as seconders and payroll employers could also be considered as temporary employment contracts.

The Dutch Supreme Court has recently determined that the work to be performed for a third party does not have to be temporary for the existence of a temporary employment contract.  Pursuant to the Supreme Court, it is not required that the employer fulfils a so-called “allocation function”. For the existence of a temporary employment contract it is therefore not necessary that the employer deals with linking demand and supply of (temporary) work, as “classic” temporary employment agencies do. As a result, secondment and payrolling are also covered by the definition of temporary employment contracts.

Practical Consequences

As a consequence, seconders and payroll employers can make use of the more flexible dismissal regime that applies to temporary employment contracts, including:

  • Permanent employment contracts will be concluded at a later stage, as the regulation regarding successive fixed-term contracts will start after 26 weeks (this might even be increased to 78 weeks by a collective agreement).

  • Under the temporary employment contract it can be agreed upon that the contract shall be terminated automatically when the posting to the third party ends on request of the third party.

  • The obligation to continue to pay wages can be ruled out for the first 26 weeks of the employment contract.

That fact that secondment and payrolling can be considered as temporary employment contracts also means that they will be potentially covered by the (legally binding) ABU collective agreement and the mandatory StiPP pension scheme of the temporary employment industry.

Pursuant to the Supreme Court, it is up to the employer to impose limits to avoid potential negative implications in practice. However, the Supreme Court emphasizes that judges do have the right to suspend the more flexible dismissal scheme for seconders and payroll employers on the basis of reasonableness and fairness.

In short, it seems to have become more attractive to employers to make use of secondment and payrolling for their flexible staff. However, it is perfectly possible that this will be limited by the legislator in the future, or, in individual cases, by a court.

Would you like to get more information on the possibilities of secondment and payrolling? Or do you have any other questions about other forms of flexible employment relationships?  Please contact Russell Advocaten.