What is Payrolling?
Payrolling is a Dutch employment model in which a payroll company legally employs workers who have been recruited and are directed by a client organisation. The payroll company issues the employment contract, runs wages, remits wage tax to the Belastingdienst, and carries statutory employer duties, while the client supervises day-to-day work. Unlike temporary staffing, the payroll company does not perform the allocation function, meaning it does not search for or match candidates to the role.
The legal distinction matters. Since the Wet arbeidsmarkt in balans (WAB) took effect on 1 January 2020, Article 7:692 of the Dutch Civil Code defines a payroll contract as one where the worker is placed exclusively at the client's disposal, and the placement did not arise from candidate allocation by the payroll provider. This definition drives equal-pay, pension, and premium obligations that differ from agency work.
How does Payrolling work?
The structure involves three parties: the client, the payroll company, and the worker. The client sources and selects the candidate, then refers them to the payroll company, which signs the Dutch employment contract. A services agreement between client and payroll company governs commercial terms, rates, and liability.
The payroll company files wage tax with the Belastingdienst, pays social insurance contributions through UWV, issues compliant payslips, and administers holiday pay, sick leave, and transition payments. Under the WAB, payroll workers must receive at least the same primary and secondary employment conditions as comparable direct hires at the client, including salary, bonuses, leave, and expense arrangements. Since 1 January 2021, an adequate pension scheme is mandatory.
For clients without a Dutch entity, Octagon's Employer of Record services cover the same functional need while also sponsoring visas and handling international onboarding. See EOR hidden costs for a full cost comparison.
Who does Payrolling apply to?
Payrolling suits Dutch organisations that want to outsource administrative employer duties while retaining full operational control over the worker. Common users include companies with fluctuating headcount, municipalities and public bodies that use payroll to simplify contracts for project staff, and growing businesses that prefer to delegate payroll compliance rather than build an internal HR function.
Foreign companies hiring in the Netherlands also use payroll-style arrangements, typically delivered through an Employer of Record. For organisations weighing entity setup versus outsourced employment, EOR vs entity in the Netherlands walks through the trade-offs.
When does Payrolling not apply?
Payrolling is not appropriate when the service provider performs genuine candidate allocation. In that case, the arrangement is legally temporary agency work, and the ABU or NBBU collective agreement applies instead, with different premium and phase rules. It is also unsuitable where the worker is a genuine independent contractor under the Wet VBAR framework, since contractors cannot be placed on an employment payroll without triggering reclassification risk.
Payrolling also does not fit when the client needs only payroll administration without employer-of-record legal responsibility. In that scenario, a salary administration service, where the client remains the legal employer, is the correct model. Finally, for highly skilled migrant sponsorship without a Dutch entity, an Employer of Record with IND-recognised sponsor status is the compliant path rather than a standard payroll construction.