Employer of record in Europe: hiring guide and checks

Key takeaways

An employer of record (EOR) is a third party that legally employs the worker while your company manages the day-to-day work. The agreement still needs to set out the administrative scope and the responsibilities each party keeps.
Start with the real working relationship before selecting a hiring route. In Great Britain, employment-rights status follows the reality of the relationship rather than the contract label; a contractor arrangement needs facts that support genuine independence.
Identify where the person will work and whether the role involves travel, posting or work in more than one country. In the EU, social-security duties generally follow the country of work, while postings and multi-country patterns need a separate assessment.
Treat Europe as a collection of country decisions. A proposed EOR model may need local authorisation or a different operating structure; German employee-leasing rules and UK sponsorship requirements show why provider coverage alone is not enough.
Compare an EOR with direct foreign-employer registration and a local entity before you commit. EU guidance identifies registration as a route to investigate when hiring in another EU country, with local labour, social-security and tax duties still to address.
Request a worker- and country-specific cost build, including employer charges, benefits, service fees, deposits and exit terms. Whole-economy labour-cost averages can provide context, but they are not an EOR quote or a statutory employer rate.

What an employer of record does in Europe

Ogletree Deakins describes an employer of record as a third party that legally employs a worker while the client company manages the day-to-day work. It can be a route for employing someone in another country, but it does not create a standard set of duties for every European role. The agreement, the worker’s location and the local model determine how the arrangement works.

The legal employer and the client company

In the usual EOR model, the EOR legally employs the worker on the client company’s behalf. The client company still directs the work day to day. Before employment begins, all three parties need to know who does what.

The legal-employer role alone does not answer every operational question. Ask which entity will sign the employment contract, who will supervise the role, where the person will work, and which party will handle worker questions. The answers belong in the agreement and require a review for the country and role involved.

How employment setup and ongoing administration work

In the same Ogletree Deakins discussion, payroll, tax withholding and benefits administration are described as common EOR functions. The exact service scope varies, so treat those functions as items to confirm in the proposed agreement rather than an assumed package.

Get the practical handoffs in writing: the employing entity, the employment terms, the information the client must provide, the worker-support contact, the records each party keeps and the process for a change in circumstances. Otherwise, a task can sit between the client and the EOR when the worker needs an answer.

What an EOR does not settle automatically

An EOR does not decide whether the role is properly structured as employment or whether a contractor relationship would reflect the real work. In Great Britain, employment-rights status follows the actual relationship rather than its contract label.

It also does not remove location-based checks. EU social-security duties generally follow the country where the employee works, while temporary postings and work in more than one country can change the assessment. Germany may require an employee-leasing permission when the arrangement falls within its rules; UK sponsorship depends on the sponsor, the role and the actual responsibility for the work.

Other questions remain specific to the facts: a client’s tax exposure from cross-border work, the allocation of employee-data roles, intellectual-property terms, and what happens if the provider changes or the company later sets up its own entity. Use the EOR agreement as the starting point for those decisions, then test it against the relevant country and role.

Decide whether the role needs employment

Choose the working relationship before you compare EOR services. The job’s day-to-day reality determines which facts must be checked; a contract label alone does not settle the question.

Employee or independent contractor?

For Great Britain employment-rights purposes, status follows the reality of the working relationship. Substantial control over workload, regular work and a requirement to provide services personally are among the factors that point toward employee status. They are indicators, not a one-question test, and tax status uses a separate system.

Start with a factual picture of the role: who directs the work, whether the person is expected to work regularly, whether someone else can perform it, and how much independence they have in practice. Then apply the rules of the country where the person will work. An EOR can support an employment route once you have made that assessment; it cannot make the classification decision for you.

When a contractor arrangement is a genuine alternative

A contractor relationship calls for evidence that the person operates independently. Great Britain guidance identifies significant freedom over the work, the possibility of profit or loss, and the ability to work with and negotiate with different clients as indicators of self-employment.

Economic dependence deserves its own look. Eurofound’s EU27 survey used authority over hiring or dismissal, more than one client and control over business decisions to classify economically dependent solo self-employment. Under that analytic definition, the group represented 9% of solo self-employed respondents and 1.3% of the overall workforce in 2021. The figures describe that survey and definition; they do not classify a particular hire.

If the role instead looks integrated into your business and controlled like regular employment, examine an employment route before drafting a contractor agreement. Record the facts that support the chosen model so that the country-specific review has something concrete to test.

Locate the work before choosing a hiring route

Start with where the person will actually work, then map any travel, temporary assignments and cross-border pattern. That sequence gives you the country facts needed to assess employment, social security, immigration and the available hiring routes.

Six-step hiring-route check: classify the relationship, locate the work, check mobility, test the local model, confirm work permission, then compare routes and request proof. — An editorial decision sequence based on EU, German and UK examples. Each country and role still needs its own review. UK employment-status guidance · Your Europe social-security guidance · German Employee Leasing Act · UK sponsor guidance · Your Europe employer-registration guidance

A worker in one EU country

For an employee who works in one EU country, EU guidance says the employer generally registers with and pays into the social-security institution in that country, even if the business is based elsewhere. That makes the worker’s real work location an early decision input, not a detail to fill in after choosing a provider.

Record the country where the person will perform the role, the employing entity being considered and any planned change in location. You can then assess the local employment, social-security and tax duties for that arrangement. The EU rule provides a starting point for coordination; it does not settle every national requirement.

Work across borders, posting and social security

EU social-security coordination normally applies the legislation of one country at a time, usually the country where the employee works. A role with regular travel or work in several countries needs its own assessment rather than an assumption based on the employer’s location.

A temporary posting can be an exception to the ordinary work-country approach. The EU’s posting guidance describes an A1 certificate from the home-country social-security authority as evidence of home-country cover where the posting conditions are met. Before the arrangement starts, map the dates, countries and expected work pattern so that you can determine whether a posting or multi-country case applies.

Immigration and the right to work

Immigration must be checked alongside the employment model. In the UK, a sponsor or employer must carry out a right-to-work check before the person starts work. For contract-based work, the sponsor must also have full responsibility for the worker’s duties, functions and outputs.

The same UK guidance restricts sponsorship where a worker is hired out to fill a third party’s ongoing routine role, with a separate exception described for time-limited services or projects. Do not promise a start date from a provider’s general coverage claim. Confirm the candidate’s permission, the sponsor, the role and the client’s day-to-day involvement for the specific UK arrangement; other countries need their own immigration review.

Check whether the proposed EOR model works locally

Before relying on an EOR, identify the entity that will employ the person, how the client will direct the work, and which country rules apply to that model. A provider’s broad coverage statement does not answer those questions for a particular role.

Employing entity, partner and required authorisation

Ask for the name of the legal employer or local partner, the proposed employment and assignment structure, and the documents that support it in the worker’s country. Those details let you assess the actual arrangement rather than a service label.

EU rules leave national requirements on registration, licensing, certification, guarantees and monitoring in place for covered temporary-agency work. That does not mean every EOR arrangement falls within those rules. It does mean that country-specific authorisation can matter when the arrangement has the characteristics of agency work.

Request the relevant proof before employment begins, then compare it with the role’s supervision, work location and duration. If the provider uses a partner, obtain the same clarity for that entity rather than assuming the provider’s name identifies the employer.

Germany: when employee leasing rules may apply

Germany’s Employee Leasing Act requires permission where an employer supplies workers to a hirer as employee leasing. The statute points to integration into the hirer’s organisation and direction by the hirer as features of the covered arrangement. Whether a proposed EOR structure falls within that rule depends on its facts.

Where employee leasing applies, the standard limit for the same worker at the same hirer is 18 consecutive months, subject to statutory collective-agreement variations. Germany’s Federal Employment Agency also states that businesses generally need the relevant permission before lending workers begins. Ask for the identity of the employing entity, the applicable permission and an explanation of how the planned assignment fits the model.

So it’s hardly possible to lend employees in Germany for an unlimited period of time.
— Dr. Martin Römermann, Ogletree Deakins shareholder in Berlin

The 18-month rule is not a limit for every German EOR arrangement. Use it as a reason to test the actual employment and assignment structure before relying on a long-term plan.

United Kingdom: agency work and sponsorship are separate tests

In Great Britain, covered agency workers have day-one access to hirer facilities and vacancy information. After 12 qualifying calendar weeks in the same role with the same hirer, covered workers qualify for equal treatment in basic pay and working conditions. These rules apply when the arrangement falls within the agency-worker scope; they are not a general description of every EOR arrangement.

Sponsorship is a separate UK question. Under sponsor guidance for contract-based work, the sponsor must have full responsibility for the worker’s duties, functions and outputs. The guidance also restricts sponsorship where the worker is hired out to fill a third party’s ongoing routine role, while describing a time-limited service or project exception.

Check the agency-work facts and the sponsorship facts separately. The client’s direction of the work, the worker’s role and the sponsor’s responsibility can affect each assessment, so a provider’s ability to employ someone does not itself establish that a particular sponsorship arrangement will qualify.

Compare EOR with the other ways to hire

Compare the routes using the same facts: the country of work, the role, the expected duration, the degree of control and the duties your company can take on.

Route	What to verify before choosing it
EOR	The legal employer, local operating model, authorisation where applicable, and the agreement’s division of duties.
Direct employment through foreign-employer registration	Whether registration is available for the specific country and what local labour, social-security and tax duties remain.
Local entity or branch	The employing structure, ongoing obligations and need for a lasting local presence.
Independent contractor	Whether the real relationship supports independence under the worker’s country rules.

Direct employment through foreign employer registration

EU guidance tells employers hiring in another EU country to register with the local authorities as an employer. That makes direct employment through foreign-employer registration a route to investigate alongside an EOR and a local entity. Registration does not complete the decision: local labour, social-security and tax obligations still require review.

It is a common misconception that an organization must have a local entity in order to employ someone directly.
— Dr. Ulrike Conradi and Roger James, Ogletree Deakins employment-law partners in Berlin and London, respectively

The UK provides a narrow illustration of why the operating structure matters. HMRC says a foreign employer without sufficient UK presence can voluntarily operate PAYE; where the worker is sent to a UK entity, that entity must operate PAYE unless the foreign employer does so voluntarily. This is a UK PAYE point, not a complete answer on UK employment or National Insurance.

A local entity or branch

A local entity or branch deserves a country-specific comparison with direct registration and an EOR. Consider who will employ the worker, who will carry the ongoing employment duties, how long the role is expected to continue, and whether the company needs a lasting local operating presence.

Use the same work-location and mobility facts for each route. Setting up an entity or branch does not remove the need to review the worker’s country, the employment model and the applicable local obligations. A local adviser can test the implications for the specific country and structure before you commit.

An independent contractor relationship

A contractor relationship is an alternative only when it reflects the real work. If the role is controlled and integrated like regular employment, assess an employment route first. If the person operates with genuine independence, a contractor model may fit the facts better than an EOR arrangement.

This is a classification decision, not a paperwork choice. Keep the evidence of independence and apply the rules of the country where the person works. The same review should occur before comparing contractor administration services with employment routes.

PEO, payroll and HR software are different services

PEO, payroll and HR software labels do not establish a fixed legal-employer role across countries. Define the service from the proposed contract: identify the employing entity, the administrative tasks included, the obligations that remain with your company and the country scope.

Ask each provider or adviser the same questions about employment responsibility, registration, payroll administration, benefits, worker support, records and exit steps. Choose the model that fits the actual role and the responsibilities your company is prepared to hold.

Map who does what under the EOR agreement

Use the agreement to create a written responsibility map before the worker starts. An EOR commonly acts as legal employer while the client company manages day-to-day work, but the precise division of duties depends on the contract and the country.

Employment contract, day-to-day direction and worker support

Name the entity that will sign the employment contract and identify the person or team that will direct the work each day. The EOR’s legal-employer role and the client’s operational role are distinct, so the agreement should make the handoff clear to the worker as well as to both organisations.

Set out who answers questions about the employment terms, changes in role or location, leave, performance concerns and day-to-day work. A simple responsibility map prevents the worker from being passed between the client and the EOR when something changes.

Payroll, contributions, benefits and records

EOR services commonly include payroll, tax withholding and benefits administration, but the agreement needs to state exactly what is included. List the payroll cycle, required client inputs, benefit administration, statutory contributions, records, approvals and the contact responsible for each step.

For covered agency work in Great Britain, the hirer should provide the temporary-work agency with current terms and conditions so the agency can apply the relevant 12-week equal-treatment rules. That is a specific Great Britain example of why the client’s information duties belong in the agreement; it is not a Europe-wide allocation rule.

Claims, termination and remaining client responsibilities

Write down the process for a worker complaint, a dispute, a change in work pattern, a proposed termination and a move to another provider or your own entity. The agreement should name the decision-maker, the information each party supplies, the country-specific advice needed and the worker communication path.

Keep a separate list of responsibilities that remain with the client company, including the facts it controls about the role, the work location, daily direction and any changes to them. Those facts can affect the local employment model even when another entity is the legal employer.

Do not treat the responsibility map as a substitute for country review. The contract can allocate tasks between the parties, while local rules and the facts of the role determine which duties and outcomes apply.

Build the full employment budget

Build the budget around a named worker, country and employment plan. Gross pay is only one part of the picture: employer charges, benefits, the EOR service terms and the eventual exit can all affect the amount and the timing of cost.

Gross pay, employer charges and benefits

Ask for a country- and worker-specific cost build that separates gross pay, employer charges and benefits. You need the assumptions behind each line, including the work location, employment terms and any benefit choices, so that the figure can be reviewed when the role or country changes.

Eurostat describes non-wage costs as a share of total hourly labour cost, mainly employer social contributions plus labour taxes minus subsidies. That measure can give context for a country, but it does not replace the terms and cost components for a specific employee.

EOR service fee, deposits and exit costs

Ogletree Deakins notes that EOR services may charge a monthly fee per employee. Ask for the service fee and the complete commercial terms in the actual proposal, including any deposit, benefits administration, notice, termination and exit items that apply to the planned arrangement.

Request the terms in a format that separates recurring amounts from one-off or contingent costs. Then check what must happen if the worker changes country, the employment terms change, the relationship ends or you move the worker to another provider or your own entity. A broad monthly figure cannot answer those questions on its own.

Why country averages are not a worker quote

Eurostat’s 2025 whole-economy figures show how far published non-wage shares of total hourly labour cost can vary: 32.3% in France and 31.7% in Sweden, compared with 5.8% in Malta, 5.5% in Lithuania and 4.8% in Romania. They are published country-level context, not EOR fees, statutory employer rates or a quote for an individual worker.

Bar chart of Eurostat 2025 non-wage shares of total hourly labour costs: France 32.3%, Sweden 31.7%, Malta 5.8%, Lithuania 5.5%, and Romania 4.8%. — Whole-economy Eurostat averages for five EU countries. These are not EOR fees, statutory employer rates or a quote for a worker. Eurostat, Wages and labour costs

The spread makes a single Europe-wide cost assumption unreliable. Request a worker-specific budget using the actual country, employment terms, benefits and provider contract; the chart cannot estimate an EOR charge.

Review the offer and employee experience

Review the worker-facing terms before the employment starts. The EOR arrangement may change who employs the person, but the offer still needs clear terms, a local point of contact and an agreed process for changes or an eventual exit.

Contract, working time, leave and statutory benefits

Check that the employment contract identifies the legal employer, the role, the work location, pay, working time, leave, benefits and the process for changes. The worker should be able to see which organisation handles each question and how to raise an issue.

EU working-time rules set a 48-hour average weekly maximum and at least four weeks of annual paid leave. National rules and collective agreements can be more favourable, so do not turn those EU-level rules into a uniform European offer. Review the terms for the specific country and role.

For covered agency work in Great Britain, workers have day-one access to hirer facilities and vacancy information. After 12 qualifying calendar weeks in the same role with the same hirer, they qualify for equal treatment in basic pay and working conditions. Confirm whether the arrangement falls within that scope before applying those rules.

Local support, payslips and issue resolution

Give the worker a clear support route from the first day. The offer and agreement should state who answers questions about employment terms, benefits, working time, leave, payslips and changes to personal or work information.

Ask the EOR to show the worker communication path, the local support contact and the escalation process for an unresolved issue. Make the client company’s role clear too, particularly where it controls day-to-day work or must provide information for the EOR to administer the employment terms.

Notice, dismissal and continuity of service

Agree the process for a proposed termination, a resignation, a change in employment terms or a move to another provider before the arrangement begins. The country, worker, role and agreement determine the relevant notice, dismissal and continuity questions, so do not rely on a standard Europe-wide answer.

EU rules provide that rights and obligations under an employment contract pass to a new employer when there is a qualifying transfer of undertaking. A change of EOR provider has not been shown to qualify on that basis by itself. Test the actual transaction and national implementation before presenting a move as a seamless transfer.

Put the worker communication, required consents, document handoff and responsibilities for each stage into the transition plan. That gives the employee a clear path while the company checks the country-specific consequences.

Plan the start date and the eventual exit

Treat both the start and the exit as country- and contract-specific workstreams. A realistic plan lists the conditions that must be met before the worker starts and the steps that would apply if the employment later moves or ends.

Offer-to-start dependencies

Build the start plan from the actual worker, country, role and employing model. Confirm the employing entity, employment terms, work location, required country checks and the responsibilities each party has before the first working day.

In the UK, a sponsor or employer must complete a right-to-work check before employment starts. A sponsorship arrangement also needs the right sponsor, role and responsibility structure. Keep those checks as start-date dependencies rather than treating a provider’s general coverage as a promised start time.

Give the worker a clear sequence for receiving and reviewing the offer, providing the required information, understanding the local support route and confirming the start date. The agreement should identify what happens if any dependency changes before the person begins work.

Changing providers or moving to your own entity

Plan a provider switch or move to your own entity before you need it. Map the proposed new employer, the worker’s current terms, the country-specific questions, the communications and the documents each party must handle. Discuss the plan with the worker early enough to address any required consent or change to the employment relationship.

EU rules pass employment-contract rights and obligations to a new employer when there is a qualifying transfer of undertaking. A provider switch alone has not been shown to qualify. Whether a particular move preserves continuity, requires consent or triggers termination depends on the transaction and national implementation.

Do not describe the transition as automatic. Test the facts and the agreement, then document the steps for the worker, current employer, new employer and client company before the change takes effect.

Screen risks that an EOR contract cannot remove

An EOR agreement allocates parts of the employment arrangement; it does not decide every consequence of where and how the person works. Screen the company’s tax position, the work outputs and the employee-data flows alongside the employment model.

Corporate presence and tax exposure from the role

Cross-border home-office work can raise a fact-sensitive permanent-establishment question. The OECD’s 2025 Model Tax Convention commentary discusses the issue through the facts and circumstances of the work pattern; it does not decide a client company’s tax position in a particular country.

Record the role, work location, home-office pattern, authority and expected activity before treating the EOR structure as a complete answer. Take country-specific tax advice on those facts and revisit the assessment if the worker’s location or responsibilities change.

Intellectual property, confidentiality and employee data

Identify what work product the employee will create, which confidentiality obligations apply and how rights will be addressed in the relevant agreements. The EOR contract, employment contract and client arrangements should be read together so that the intended protections are clear for the role and country.

Map the employee-data flows separately. Under GDPR guidance, the controller determines the purposes and means of processing, while a processor acts on the controller’s behalf. Those roles depend on the actual processing activity, not on the EOR label.

List the systems and parties that handle employee data, the purpose for each use and the relevant controller or processor role. Review the arrangement when the client, EOR or another provider changes the data flow or its purpose.

Ask a provider for country-level proof

Turn a provider’s coverage claim into documents and specific answers for the worker’s country, role and work pattern. Ask before signing or committing to a start date, then keep the answers with the proposed agreement.

Who will employ the worker, and under which model?

Ask the provider to name the legal employer and any local partner that will employ the worker. Request a plain description of the employment and assignment model, the country where the employee will work, and how the client company will direct the role day to day.

For a UK role that needs sponsorship, ask who will sponsor the worker and how that sponsor has full responsibility for the duties, functions and outputs. Test the role against the restriction on hiring out a worker to fill a third party’s ongoing routine role. These are facts to establish for the actual arrangement, not assumptions drawn from a provider’s regional coverage.

What authorisation and documents can it show?

Ask which country-specific registrations, permissions or other authorisations apply to the proposed model and request the relevant documents for the employing entity. EU rules preserve national registration, licensing, certification, guarantee and monitoring requirements for covered agency work, so a single regional claim does not answer every country question.

In Germany, where employee leasing applies, the employing business generally needs an AÜG permission before lending workers begins. Request the permission, identify the entity it covers and compare the planned supervision, integration and duration with the proposed model. The 18-month standard limit can also apply where the employee-leasing rules apply, subject to statutory collective-agreement variations.

Which duties, costs and exit steps are written into the contract?

Ask the provider to show where the agreement assigns responsibility for the employment contract, day-to-day direction, payroll administration, tax withholding, benefits, records, worker support and the information the client must provide. The service scope should be written rather than assumed from the EOR label.

Request a worker- and country-specific cost build, including the service fee and the terms for deposits, benefits, notice, termination and exit. Get the proposed process for a change of location, a provider switch or a move to your own entity, with the party responsible for each step.

Keep a written record of the answers and the supporting documents. It gives the company a basis for checking the country-specific model, and it makes changes easier to spot before they affect the worker.

Frequently asked questions

Can a foreign company hire in Europe without its own entity?

Yes, direct foreign-employer registration is a route to investigate in an EU country. EU guidance says an employer hiring in another EU country needs to register with local authorities. That registration does not settle the local labour, social-security and tax duties for the role, so compare it with an EOR and a local entity using the worker’s country and work pattern.

Is an employer of record legal in Germany?

The answer depends on the proposed structure. German employee-leasing rules require permission where an employer supplies workers to a hirer and the arrangement has the characteristics set out in the law, including integration into the hirer’s organisation and direction by the hirer. Request the employing entity’s documents and assess the actual assignment before relying on an EOR model.

Where employee leasing applies, the standard limit for the same worker at the same hirer is 18 consecutive months, subject to statutory collective-agreement variations. That limit does not apply to every EOR arrangement.

Can an EOR sponsor a visa in the United Kingdom?

Possibly, but the sponsor and role must meet the UK rules. For contract-based work, the sponsor must have full responsibility for the worker’s duties, functions and outputs. UK guidance also restricts sponsorship where a worker is hired out to fill a third party’s ongoing routine role, subject to a time-limited service or project exception.

Confirm the candidate’s right to work, the sponsoring entity and the role before promising a start date. A provider’s general UK coverage does not decide a particular sponsorship case.

How much does an EOR cost in Germany?

Get a worker- and contract-specific quote. EOR services may charge a monthly fee per employee, while the total arrangement can also depend on employer charges, benefits, deposits, notice and exit terms. Ask the provider to separate each item and state the assumptions behind it.

Eurostat’s whole-economy labour-cost data can provide country context, but it is not an EOR fee, a statutory employer rate or a quote for a particular worker.

Can a company move an EOR employee to its own entity?

It may be possible, but it is not an automatic transfer. EU rules pass employment-contract rights and obligations to a new employer when there is a qualifying transfer of undertaking. A change from an EOR to your own entity has not been shown to qualify solely because the employing provider changes.

Test the proposed move against the country’s rules and the agreements, then plan the worker communication, required consents, documents and transition steps.

Does an EOR replace payroll software or a PEO?

Do not decide that from the label alone. The legal-employer role, payroll administration, benefits, registration and client responsibilities depend on the proposed contract and country. Compare the actual service scope, named employing entity and duties that remain with your company before choosing among an EOR, payroll software or a PEO.