Drafting a loan-and-borrow agreement: what belongs in it

Drafting a secondment and loan agreement involves conclusively establishing the triangle of lender, seconding intermediary, and end borrower: who makes the workforce available, who lends on, who provides direction and supervision, and how risks run through the chain. Unlike a standard secondment agreement, here you must ensure Waadi registration at every link, distribute chain liability for wages, and include explicit consent for secondment. Without these additional clauses, a problem at one link can easily spill over to another.

The short answer

1. Three parties: name lender, onward lending intermediary, and end borrower.
2. Permission to onward lending: stipulate that the lender permits onward lending.
3. Waadi per link: a registration statement from each provider.
4. Chain exemptions: divide liability for wages and payroll taxes.
5. Borrower remuneration: ensure correct job classification throughout the entire chain.

Drafting a loan-and-borrow agreement: what belongs in it

The core resembles a standard secondment agreement, but with an extra layer for the intermediary. These clauses must not be omitted.

• Parties and the chain. Name all three parties and map out the chain: who borrows from whom and who actually deploys the resources.
• Consent for onward lending. Stipulate that the lender expressly consents to onward lending to a third party. Without such consent, the intermediary breaches its contract with the lender.
• Management and supervision. Stipulate that the end hirer exercises daily control, not the intermediary.
• Rate and margin. Regulate the rate between each link and the payment terms, including the G-account deposit.

Arranging chain liability

This is where the major difference lies compared to a standard secondment. Because there are three parties, liability must be correct throughout the entire chain.

• Waadi registration per link. Include a statement from both the lender and the onward-lending intermediary confirming that they are registered (Art. 7a Waadi), with a right of periodic inspection.
• Chain liability for wages. Under the Sham Employment Arrangements Act (Art. 7:616a et seq. of the Dutch Civil Code), every link in the chain can be held liable in the event of underpayment. Have each party indemnify the next for the correct payment of wages.
• Hirer's liability. The end hirer can be held liable for payroll taxes and VAT pursuant to Art. 34 of the Collection Act 1990. Regulate G-account deposits at every level where possible.
• Hirer's remuneration. Ensure that the correct job classification and remuneration in accordance with Art. 8 Waadi is applied and passed on throughout the entire chain.

Cross-border travel and the WagwEU

If foreign secondment runs through the chain, the WagwEU applies, with a notification obligation and minimum working conditions. Designate in the agreement who is responsible for the notification and who guarantees that the working conditions are correct. This is especially important in a chain, because otherwise the obligation falls away between the links and no one feels responsible. A clear assignment prevents fines and disputes.

A practical example

An IT secondment agency hires a specialist from a small agency and subleases them to an end client that temporarily requires extra capacity. The sub-lending agreement states that the agency permits the sub-lending, that both the agency and the secondment agency are registered under the Waadi Act, and that the end client retains management and supervision. Each link in the chain indemnifies the next against underpayment, and the end client deposits a portion of the invoice into the secondment agency's escrow account. When the specialist later filed a supplementary wage claim, the indemnifications ensured that the risk fell back on the party that made the error, not on the end client.

Honest recommendation

If it concerns a short chain involving known, registered parties and a single assignment, you can get quite far without a lawyer using a sound basic contract and a check of the Waadi registrations. However, as soon as the chain becomes longer, involves foreign secondment, or you yourself, as an intermediary, face risk in both directions, legal review is advisable. In particular, have the permission for onward lending, the chain indemnities, and the allocation of hirer's liability checked. These are the points where an onward lending arrangement can go wrong. A watertight contract costs less than a tax assessment or wage claim shifted to you through the chain.

Want to read more? View the secondment loan agreement, and delve into what a secondment loan agreement is and having one drafted.

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