What is payrolling and how exactly does it work?

You've landed a new job, but as soon as you think about payroll, employment contracts and arranging social security contributions, your spirits sink in. That is where payrolling comes in. This construction takes employer burden and administrative hassle off your hands, while offering legal certainty. What is payrolling and how exactly does it work? In this article, we explain what payrolling is, how it works and when it can be interesting for you as a self-employed person.

What does payrolling mean?

Payrolling is a construction in which an external party (the payroll company) becomes the formal employer of employees or hired professionals. The organisation continues to manage and supervise, but the payroll partner assumes all administrative and legal obligations around labour. Wage payments, payroll taxes, pension, employment contracts, sickness registration and dismissal supervision are all done by the payroll company. In return, a mark-up (payroll factor) is paid on top of the gross salary.

The payrolling process and benefits for self-employed workers

Do you work as a self-employed person but want to benefit from more administrative peace of mind and social securities? Then working through a payroll structure can be a smart choice. The process usually starts when you or a client signs you up with a payroll company. You provide your personal details, discuss your rate and are then offered an employment contract through the payroll partner.
Although legally you become temporarily employed by the payroll company, in practice you retain your independent working methods and clients. You no longer invoice yourself, but register your hours worked. After approval, the payroll partner processes this in the payroll administration, pays the net salary to you, and pays taxes, premiums and holiday pay neatly. Everything is taken care of for you, so you can focus on your work.

What makes payrolling interesting for the self-employed?

Payrolling offers some clear advantages for self-employed people:
- More financial security: You receive a fixed net wage, including holiday pay, often within days of your hours worked. No more discussions about payment deadlines.
- No hassle with administration: The payroll partner takes care of pay slips, remittances, annual statements and pension schemes.
- Access to social benefits: Consider continued sick pay, pension accrual (if applicable) and entitlement to unemployment benefits on contract termination.
- Quick onboarding on new assignments: You can often officially start work within 24 hours, without the need for a Chamber of Commerce registration or VAT records.
- Focus on your profession: You focus on your work, the payroll partner takes care of the legal and administrative side.

Who is it suitable for?

This construction is particularly interesting for self-employed people who work for one client for a long time, want to work temporarily without a Chamber of Commerce, or prefer security to full entrepreneurial risk. Payrolling also offers a low-threshold solution for starters or freelancers in sectors where clients do not want to hire freelancers.

Advantages for employees and freelancers

Those on payroll have the same legal protection as an "ordinary" employee; think holiday hours, social security and pension accrual. For freelancers working under authority through a broker, payroll can offer security without sacrificing their rate. Many professionals appreciate the punctual monthly payments.

Disadvantages and pitfalls of payrolling for self-employed workers

While payrolling can offer zzp'ers a lot of convenience and security, it is important to also consider the potential disadvantages:

- Dependence on the payroll company: You are employed as an employee by the payroll company. If this party goes bankrupt or internal problems arise, this could affect your payments or contract security.

- Lack of clarity about costs and content: Some payroll companies use opaque mark-ups. A low mark-up sounds attractive, but may mean you receive less service or have to do extra administration yourself.

- Limited entrepreneurial freedom: Because you are formally an employee, you lose some of the benefits of being self-employed. For example, you cannot use the self-employed deduction and usually do not build up your own portfolio or CoC history.

- Loss of own positioning: You present yourself as an employee of the payroll company, not as an independent entrepreneur. For clients, this can somewhat cloud your brand or reputation as self-employed.

Key legislation (WAB, Waadi and DBA)

The payroll sector is bound by several laws:
- Labour Market Balance Act (WAB): Since 2020, payroll employees are entitled to the same employment conditions as your own staff, including a good pension scheme.

- Waadi (Wet allocatie arbeidskrachten door intermediairs): Any company that hires out staff must be registered in the Trade Register with the correct SBI code (78). Check this before hiring someone to avoid fines.

- DBA Act (Deregulation of Assessment of Employment Relations): If you hire self-employed people via payroll, it must be clear that the payroll company is the employer. Otherwise, you run the risk of additional taxes for false self-employment.

What should you pay attention to when choosing a payroll partner?

When choosing a payroll company, pay attention to these points:
- Certifications: Does the company have NEN certification and the SNA seal of approval? This means they pay payroll taxes properly.
- Pension scheme: Make sure the pension scheme meets legal requirements, such as StiPP or something similar.
- Transparency: Ask for a clear explanation of costs and a sample invoice.
- Service: Is there a regular contact person? How quickly do they respond to problems?
- Contract forms: See what contracts they offer, from flexible to permanent.
- Compare quotes: Don't always choose the cheapest one, as they may not offer the best service.

Tips for smart use of payrolling

Do you want to enjoy the benefits of payrolling as a self-employed person without completely giving up your entrepreneurial freedom? Then keep the following in mind:

- Use payrolling as a temporary or tactical solution For example, if you are just starting out, temporarily do not have a CoC registration, or with clients who only work with salaried contracts.Pay close attention to the conditions and contract Always read the small print about rate structures, sickness regulations, and notice periods. Ask for a transparent cover factor and clear wage calculations.

- Keep profiling yourself as a professional Even if you work through payrolling, keep building your own brand. Make sure your CV, LinkedIn profile and network continue to highlight your expertise.

- Evaluate your position regularly Ask yourself every year: does this construction still suit my ambitions and clientele? This way, you maintain control over your career and know when it is time to be (again) fully self-employed.

Payrolling can be a smart intermediate step for self-employed people seeking security without all the burdens of running their own business. By choosing consciously and making good arrangements, you will get the most out of this construction without giving up your freedom completely.