In light of the recent occurrences in the world of Payrolling we wanted to write an article about our view of the business.
The news of suspension of payment and the subsequent bankruptcy of the broker TCP has prompted many negative reactions from contractors and freelance workers across the country.
TCP had announced to its contract partners that June payments would be indefinitely delayed until a solution had been found for its cash flow problems apparently caused by the sudden withdrawal of their credit facility.
The news came as a shock for the contracting partners, since there were no previous indications of payment issues.
Those affected by the inability of payment were contractors working for one of the biggest Dutch companies, ING bank.
The bank was forced to react to the situation once the news has reached the press.
ING had handled the issue as best it could, by working closely with TCP and simultaneously trying to find alternatives in case TCP would not be able to get the business back up.
The latter has unfortunately happened and the company was declared bankrupt on 2nd September 2019.
As a result, ING had decided to move all contractors previously running through TCP to other broker companies and make all outstanding payments to the affected contract partners. In some cases it would mean double payment of the invoices, since the bank had already transferred the funds to TCP who was unable to distribute these to the creditors as a result of the cash flow issues.
Independent contractors working for ING were affected the most by the above situation because their invoices, routed through TCP, had not been paid on time and many are still waiting for payment from the newly assigned brokers.
The reactions in the (social) media have been strongly negative, with most blaming the payroll company structure for creating this type of situation and payment delay. Contractors are of the opinion that if they have had a direct contract with the client, the payment issues would never have occurred in the first place.
A missing or delayed payment can cause many subsequent issues for independent businesses and self-employed contractors because it instantly affects their own cash flow.
In a way, the independent contractors are correct in arguing that direct contracts with the end client would be more beneficial for them, since working through a payroll company has no added benefits for a self-employed contractor and can in cases even be undermining to their self-employed status.
Whether direct end client contracts would truly eliminate the risks of non-payment and delays is a different matter.
In the end, no company, however big or small, is completely safe from cash flow problems.
As a payroll company, we have been affected by delayed payments and bankruptcies of broker companies. A situation no-one wants to find themselves in.
However we have always been able to shield our payrolled contractors from all consequences of such situations by placing them under our employment contract from day one of their assignment with any end client in the Netherlands.
Under Dutch labour legislation, every employer has the obligation to pay their staff wages in a timely manner, disregarding whether the employer has been paid for their seconded personnel by the end client or not.
In reality, this means advancing wages to all payrolled contractors, therefore making sure they are never out of pocket and taking the risk of delayed/suspended payments from the end client entirely onto ourselves.
Our assessment and opinion of the present situation can be summarised as: Contracting self-employed consultants through payroll companies has not added benefits to either party, however payroll companies are greatly beneficial and risk-mitigating for all employed contractors, so should not be dismissed entirely. Just used smartly.