Payroll Employee is Entitled to the Same Terms and Conditions of Employment. But in What Way?

A payroll employee was entitled to the same terms and conditions of employment as those applicable in the hirer’s company. According to the Sub-district Court, the question of whether the terms of employment were actually the same should be answered by comparing the entire package of the employment conditions and not for each employment condition separately.

For a number of municipalities, an organization, consisting of a group of companies, implemented the Work and Social Assistance Act (WWB) and the Participation Act.
The group had a separate legal entity that employed the supervisors, the managers and the staff members. This legal entity seconded them to one of the working companies that belonged to the group. In these working companies, people perform work, thus getting the opportunity to integrate into working life under the Work and Social Assistance Act or under the Participation Act.
As a result of the introduction of the Balanced Labour Market Act from 1 January 2020, the CLA for Municipalities became applicable for supervisors, managers and staff members. That is why by CLA a transitional arrangement was made in which it was stipulated that employees should not loose out economically and that it should be based on a comparison of the old and the new annual salary, including all additional remuneration components.
One of the employees who worked as an operator believed that he was less well-off by the transition and claimed that the Sub-district Court should rule that the rights and obligations as they applied until 1 January 2020, would remain unchanged after 1 January 2020.

First and foremost, the Sub-district Court stated that, as of 1 January 2020, the rules that apply to payroll employees also apply to secondment within a group, and thus also applied in this case. This implies that an employee whom the employer makes available to a third party, which was the hirer in this case, is entitled to the same employment conditions as those that apply to the hirer's own employees. If the hirer does not have employees in equal or equivalent positions, a seconded employee is entitled to the employment conditions which are common in the hirer’s sector or branch.
The actual question is whether comparison of the terms of employment should take place on the basis of the package of employment benefits as a whole, or on the basis of each employment condition separately.
When the Balanced Labour Market Act was developed, the legislator had not covered this question.
The Sub-district Court also stated that it had not been the legislator’s intention to favour the payroll employee over employees who are directly employed by the hirer, but to give them the same employment conditions. That is why the Sub-district Court believed that the complete package of employment conditions should be compared. A comparison per separate employment condition would lead to the fact that always the most favourable employment condition would apply (the so-called “cherry picking”), as a result of which the payroll employee would be better off than the regular employee.

When the employee was transferred, the employee’s gross salary was reduced, and the reduced part of the salary was converted into an personal choice budget. With this individual choice budget, not only the holiday allowance and the end-of-year bonus were compensated, but also the difference in salary was. Since the employee could choose to have the personal choice budget monthly paid out, the Sub-district Court did not believe it was a disadvantage. According to the Sub-district Court, the reduction in the number of leave hours was no deterioration ether, because it had been included in the new salary and because, if desired, leave days can be purchased with this salary.

Then the Sub-district Court compared a number of employment conditions that were not included in the annual salary comparison. According to the Sub-district Court, a budget of EUR 250 per year (one-off in 2019) for vitality is by no means worse than a contribution to the health insurance premium as of 2020.
Continued payment of 50% instead of 100% during short-term care leave is sufficiently compensated by continued payment of 50% instead of 0% during long-term care leave. Continued payment of wages during illness of 100% in the first year of illness and 70% in the second year of illness is no better than continued payment of wages for 100% in the first half of the year, 90% in the second half of the year, 75% in the second year of illness and 70% in the third year of illness to which the employee is entitled in the new situation.
Loss of the right to continued payment of wages during parental leave would cause a deterioration, but the Sub-district Court did not believe that this would still be of importance for the employee.
Reimbursement of travel costs for public transport, on the other hand, is an improvement compared to the old arrangement since a tax exchange of commuting kilometres is no longer taxable as of 1 January 2020.
The training budget of EUR 500 per year under the old scheme was no better than funding the training costs from the personal choice budget and full reimbursement of the necessary training for existing positions in the new scheme.
And finally, according to the Sub-district Court, exchanging the annual net payment of an amount of EUR 250 is no worse than making use of the remaining part of the free space within the working expenses scheme by exchanging an annually varying amount of between EUR 100 and EUR 300.
Since in the end, at the final count, the employment conditions as a whole had not deteriorated, the Sub-district Court rejected the employee's claims.

conditions can be. Separately comparing individual terms of employment can already be complicated. One may, for example, discuss whether the old scheme with regard to continued payment of wages during illness could not be more favourable than the new one, because short-term illness is simply much more common than long-term illness, so that an employee may have more interest in higher sick pay during an earlier period than in a higher and longer continued sick pay in a subsequent period.
Comparing packages, however, is even far more complicated because it requires comparison of usually quite inequal schemes. And the importance of a certain scheme (for example continued payment during parental leave, reimbursement of study costs, reimbursement of commuting expenses) may considerably differ per employee. And the question then is whether these individual interests should be taken into account.
Even though the legislator had not addressed this issue, it seems a correct decision of the Sub-district Court that the legislator’s intention not to discriminate between payroll employees and other employees underlines the necessity to compare the complete package of employment conditions. As a result, the practice of pay-rolling, i.e. primarily employers and employees and, if they cannot reach an agreement, also judges, will always raise difficult questions when comparing employment conditions as a whole.

It should be noted, however, that the Supreme Court, when it compared employment conditions from the individual employment contract with employment conditions under the CLA, has ruled that a comparison should be made separately for each employment condition.