Dutch Chain Law

Where a contractor is employed by a third party, the Material Employer / End Client can be held liable under the Placement of Personnel by Intermediaries Act (Waadi Act, hereinafter referred as "chain law") by the UWV for the employment related social security contributions and by the tax authorities for the wage tax, turnover tax ("VAT") and the national insurance contribution. When contractors are not employed in a compliant way, the End Client can be held liable for the unpaid taxes and social security premiums. The appointment of liability can also apply regarding the tax and collection interest (so long as imputable). Naturally the tax authorities and the UWV should first seek to recover their claims as far as possible from the Formal Employer.

As you can imagine, Dutch clients put compliance requirements in their contracts with Formal Employers and will also state in their contracts that all tax and social security premiums will be passed onto the Formal Employer in case they are faced with additional tax and social premiums. This means that the chain law should be regarded as a real exposure if the solution cannot be regarded compliant after all.

Everyone is exposed under chain law as long as they are in the chain between (and including) the Formal Employer and the Material Employer (End Client).