Payrolling allows companies to outsource the administrative and legal obligations of employment to a third-party payroll organization. It provides companies with a flexible and low-risk way to manage their workforce while ensuring employees are paid on time and receive appropriate benefits.
The original company (the client) selects the employees who will be deployed via payrolling.
The payroll organization formally hires the employee. In other words, the employee has an employment contract with the payroll organization, not with the original company.
The payroll organization takes care of salary payments, administration of leave days, pension payments, medical expenses and all other matters that come with being an employer.
The original company pays a rate to the payroll organization, which usually consists of the employee's payroll costs plus a percentage for the payroll organization's services.
The Balanced Labour Market Act (WAB) has been in force since 2020. This law entitles payroll employees to the same terms of employment as permanent employees within the company, including pension accrual. The payroll organisation must therefore also provide an adequate pension for the employees who work through them.
Payrolling makes it easier for companies to flexibly structure their workforce without being locked into long-term employment contracts.
Because the payroll company assumes formal employment, the original company is relieved of financial risks such as continued payment of wages in the event of illness and risks of employment law conflicts.
Outsourcing administrative tasks can save time and costs, especially for small and medium-sized businesses.
The payroll organization takes over all administrative tasks, allowing the employer to devote more time and resources to its core activities.
While payrolling can be cost-effective by reducing risk and administrative burden, it can ultimately be more expensive than a direct appointment, due to the fee charged by the payroll organization.
Payroll-based employees sometimes feel less connected to the company they work for because the payroll company is their official employer.
For employees, terms of employment may differ from regular employees, depending on the agreements with the payroll organization.
| Aspect | Payrolling | Freelance |
|---|---|---|
| Employer | Payroll company | None (self-employed) |
| Income | Fixed salary via payroll | Dependent on assignments |
| Responsibilities | Payroll company takes legal responsibility | Freelancer is responsible for his or her own |
| Social security | Yes, arranged through payroll company | No, must be arranged by the freelancer himself |
| Flexibility | Some flexibility, but often in an employed model | Full flexibility and independence |
Payrolling and freelance work each offer unique benefits, depending on the wishes of the employee or self-employed person and the nature of the work. Companies looking for flexibility without the employer risk can benefit from payrolling, while individuals who like to work autonomously and choose their own assignments benefit from freelance work. Both options require regulatory knowledge to stay within the frameworks and take full advantage of the opportunities they offer.
