In January, we will publish a series of four articles discussing three self-employed alternatives. This blog focuses on secondment.
How does secondment work?
In secondment, an employee is temporarily deployed to you (the hirer) via a lender. The hirer remains the employee's official employer and takes care of payment of wages, payment of contributions and taxes and fringe benefits. You agree with the hirer on the price you pay for this. Often this is a fixed rate that includes wage costs as well as a mark-up for overhead and profit. The duration of the secondment can vary from a few months to several years, depending on the agreements.
Although secondment often takes place through a secondment agency, it is not necessarily so. For instance, secondment also offers interesting opportunities for cooperation with other companies. With organisations within the same industry, for instance, you can recruit employees with a view to joint deployment. You can also support each other temporarily by lending staff (back and forth) for peak workloads, temporary replacements or when you need specific expertise.
Benefits of secondment for clients
Secondment offers several advantages that make this form of contracting attractive for you as a hirer:
- No risk of dispute over false self-employment
The employee is employed by the hirer. The labour relations between the posted worker, the lender and the hirer are so clear that confusion about the mutual relationships is unlikely to arise. The clearer the relationships, the less reason for the Tax Authorities to ask questions or investigate. - Flexibility with continuity
A seconded employee can start working for you immediately and remain available for the agreed period. Your contract with the lender can often be easily adjusted when your needs change. You can also start a shared flexpool with your partners to lend staff flexibly at peak workloads or specific projects. - Positioning on the labour market
By making smart use of secondment, you can appeal to a wider group of workers. Workers who need varying and flexible work. Think, for example, of former self-employed people who can use secondment to work for multiple clients. - Quick access to expertise
Secondment agencies often have a pool of professionals with varying specialisations, which means you can quickly have the right knowledge available. Or you can share your expertise with others. - Relieve you of administrative worries
If you hire employees through a secondment agency or other lender, as a client you do not have to deal with payroll, social security contributions or labour law obligations. This is taken care of by the hirer.
Points of attention in secondment
When working with secondment agreements, there are also some points to consider:
- Hirer's liability
If the secondment agency fails to pay payroll taxes to the Tax Authorities, you as the principal can be held liable for these unpaid taxes. The same applies to the VAT due on the posting. If the user company does not remit this VAT, the user company can be held liable for it. You can reduce this risk by using a g account. This is a special bank account into which part of the invoice amount is deposited so that it can be transferred directly to the Tax Authorities. Subject to the right conditions, this deposit acts as a safeguard.
For VAT purposes, it is also stipulated that secondment falls under the VAT reverse charge mechanism in certain situations. This scheme aims to place the remittance and deduction of VAT with the same taxable person. This reduces the risk that deductions are claimed but no VAT is remitted. - Taxed with VAT
Secondment of personnel is basically subject to VAT. For organisations performing VAT-taxed services, the VAT due on secondment is deductible. Within VAT-exempt sectors, think of healthcare, education or the financial sector, this VAT constitutes a cost item. Under certain conditions, it is also possible to enter into a secondment agreement without calculating VAT. - Investing in convenience and quality
With secondment, the costs are often slightly higher than when you enter into an employment contract yourself or contract a self-employed person. This is because the hourly rate includes recruitment, selection, training and administration. On the other hand, it saves you a lot of time and effort, does not involve any risks (of false self-employment) and you can immediately count on a qualified employee who is fully employable.
Conclusion
Secondment offers a fully-fledged alternative for organisations that want to avoid risks associated with self-employment and, at the same time, need flexibility and expertise. It relieves them of legal and administrative worries and offers more certainty regarding the employment relationship. Particularly in the VAT-exempt sectors, the aspect of cost-increasing VAT is a major concern.
Do you have questions about secondment or are you curious to know what is possible? Feel free to contact us. We are happy to think along with you - in opportunities as well as solutions.
