Provision of external payroll accounting services to an employer

Does the activity of external payroll processing for an employer constitute a payment service under PSD2, if it consists of receiving funds for wages and related deductions (taxes, health and social insurance) in the payroll processor’s payment account from the employer, and transferring these to employees, tax authorities, insurance companies etc.? Would the answer change depending on whether the payroll processor  maintains an account separately for each employer?

The positive definition of payment services is set out in Annex 1 of PSD2. In general, if a third party intermediates a cashless transfer of funds between the payer and the payee, it is considered a payment service. Article 3 of PSD2 exempts certain types of intermediated transfers of funds from payment service regulation. The activity of payroll processors, which consists of receiving funds from employers, i.e. into a payment account held by the payroll processor, and transferring these funds to the accounts of the respective employees as well as of the recipients of payroll deductions, has the characteristics of the provision of payment services, unless an exemption from the application of PSD2 applies.  Due to the narrow scope of the above-mentioned activity, which clearly is not a general way of making payments generating risks that PSD2 is addressing, it seems that it should be exempted from PSD2 application. However, Article 3 of PSD2 does not contain any specific exemption for payroll processing.  The limited network or commercial agent exemptions do not seem to be applicable, as both exclude only payments related to the purchase or sale of goods or the provision or use of services. Neither wages nor deductions (tax, health and social insurance) can be considered payments for a service or a good. According to Directive 2006/123/EC on services in the internal market, “ 'service' means any self-employed economic activity, normally provided for remuneration, as referred to in Article 50 of the Treat y”. Recital  87 of this Directive further provides: " The main characteristic of an employment relationship within the meaning of Article 39 of the Treaty is that a person provides services to another person for a certain period of time on the latter's instructions and receives remuneration for those services. Any activity carried out by a person outside a relationship of subordination must be regarded as a self-employed activity within the meaning of Articles 43 and 49 of the Treaty".  Wages cannot be considered payments for services provided by employees to their employer. As far as tax contributions and health and social insurance is concerned, there is no consideration being provided against these payments, these are legal obligations, not services being bought by employees from the state or insurance companies. Even if the employment relationship could be considered a service, the commercial agent exemption under Article 3(b) PSD2 could apply, as a payroll processor is not authorised via an agreement to negotiate or conclude the sale or purchase of services in the second case, as they were not involved in negotiating the employment contract in any way. Remaining exemptions do not seem to be applicable either. External payroll processing therefore seem to constitute a payment service requiring authorisation under PSD2.  On the other hand, if the payroll processor is only given access to employer’s payment account, and initiates transfers from this account directly to accounts of employees, tax authorities etc., and never holds any employer’s funds himself (i.e. „w ithout … entering at any time into possession of the funds to be transferred “ as per Art. 3(j) of PSD2), this does not constitute provision of payment services.