Hiring someone in another EU country sounds straightforward — same trading bloc, free movement of workers, no visas. But the moment you put someone on payroll in Germany, Portugal, or Poland, you're dealing with that country's employment law, tax system, and social security rules. Not yours. Theirs.
This guide covers what you actually need to know before making your first (or next) EU remote hire — without the legal textbook version.
Why the EU is not one employment market
The EU gives workers the right to live and work across member states, but it does not harmonise employment law. Each country sets its own rules on:
- Minimum wage (Germany: €12.41/hour in 2024; Bulgaria: €477/month)
- Statutory leave (Austria gives workers 25–30 days; some states give 20)
- Notice periods (Netherlands can require up to 4 months for long-tenured employees)
- Termination rules (France and Spain make dismissal expensive and procedurally complex)
- Social security contribution rates (employer contributions range from ~15% in Estonia to over 30% in France)
If you hire a developer in the Netherlands the same way you hire one in Estonia, you will get it wrong in at least one of those countries.
The core question: employee or contractor?
Before anything else, decide whether you're hiring an employee or engaging a contractor. This isn't just a commercial decision — it's a legal one, and most EU countries have strict rules about misclassification.
A contractor arrangement works when the person:
- Sets their own hours and methods
- Works for multiple clients
- Uses their own equipment
- Invoices you as a business entity
If you're telling someone when to work, what to work on, and they're working exclusively for you — most EU regulators will treat that as employment, regardless of what your contract says. France, Spain, and Belgium are particularly aggressive about this. Fines and back-taxes for misclassification can run into tens of thousands of euros.
For a legitimate employment relationship, you need to put the person on payroll — which means establishing a legal presence in their country, or using an Employer of Record (EOR).
How to actually hire an employee in an EU country
You have three practical options:
1. Set up a local entity
You register a legal entity (a subsidiary or branch) in the country where your employee is based. That entity becomes the employer of record locally.
Pros: Full control, works well if you're hiring 3+ people in one country, no middleman markup.
Cons: Expensive to set up (€2,000–€10,000+ depending on country and legal fees), takes 4–12 weeks, and you're now responsible for ongoing local compliance — payroll filings, annual accounts, local tax returns.
For one hire in one country, this almost never makes financial sense.
2. Use an Employer of Record (EOR)
An EOR is a company that employs your worker on your behalf, in their country. You manage the person day-to-day; the EOR handles local contracts, payroll, benefits, and compliance.
Pros: Fast (often 1–2 weeks to get someone started), no entity setup, covers you legally.
Cons: Costs typically run €500–€800/month per employee on top of salary, or around 15–20% of gross salary. At scale, this adds up fast.
Well-known EOR providers include Deel, Remote, and Rippling. They cover most EU countries and are worth it for 1–3 hires in scattered locations.
3. Engage a genuine contractor
If the work genuinely fits a contractor relationship, this is the simplest path. You pay invoices, they handle their own taxes. No entity, no EOR, no payroll.
Just be honest about whether this actually fits the working relationship. If it doesn't, the savings aren't worth the risk.
Country-by-country: things to watch for
You don't need to memorise every EU employment code, but a few countries come up most often for remote hiring and have notable quirks:
Germany: Works councils (Betriebsrat) can influence working conditions if you have 5+ employees locally. Written employment contracts are standard. Dismissal protection kicks in after 6 months.
France: Among the most employee-protective regimes in the EU. Collective bargaining agreements (CCNs) apply to most sectors and can override your contract on issues like pay and hours. Termination requires a formal procedure.
Netherlands: Employers must offer permanent contracts after 3 fixed-term renewals within 3 years. 8% holiday allowance is mandatory on top of base salary — budget for it.
Portugal: Increasingly popular for remote hires due to lower costs and good talent pool. NHR tax regime (now the IFICI regime after 2024 changes) can attract skilled workers. Notice periods and severance are codified by law.
Poland and Romania: Lower employer costs, strong engineering talent, growing remote-work ecosystems. Social security contributions are lower than Western Europe — factor this into your total cost modelling.
What does it actually cost?
Here's a rough example: you hire a software engineer in the Netherlands at €60,000 gross salary.
- Employer social security contributions: ~€8,500/year (roughly 14%)
- Mandatory holiday allowance (8%): €4,800/year
- EOR fee if applicable: ~€7,200/year (€600/month)
- Laptop, onboarding, equipment: €1,500 one-off
Total first-year cost: approximately €82,000 for a €60k salary. That's a 37% employment cost uplift before any benefits or tools.
For contrast, the same hire in Poland at a market rate of €35,000 gross:
- Employer social security: ~€6,300/year (around 18%)
- EOR fee: ~€7,200/year
- First-year total: ~€50,000
These numbers are estimates, but they illustrate why location matters as much as salary when you're modelling headcount costs.
Contracts and compliance basics
Whatever path you take, your employment contract needs to comply with local law — not just your home country's. Key things to get right:
Written statement of particulars: Most EU countries require a written contract or employment statement before or on the first day of work. Under the EU Transparent and Predictable Working Conditions Directive (2022), employers must provide specific information in writing within the first day or week of employment.
Probationary periods: These vary. In Spain, probation can be up to 6 months for qualified workers. In Germany, it's typically 6 months. In some countries, there are limits on what you can do during probation.
Working time: The EU Working Time Directive caps working time at 48 hours/week averaged over a reference period, with minimum rest periods. Some countries apply stricter rules.
Data protection: GDPR applies to how you handle employee data. Make sure your HR processes, payroll systems, and any tools you use for recruitment handle personal data lawfully.
Practical steps before you make the hire
- Decide the country first, then the role. Talent costs and employer costs vary enormously. Know your budget including on-costs before you post.
- Choose your hiring structure (entity, EOR, or contractor) based on the nature of the work and your volume of hires in that country.
- Get a local-law employment contract reviewed. Even if you use an EOR (who will provide this), understand what you're signing.
- Check sector-specific collective agreements. In France, Germany, Italy, and Spain especially, these can mandate terms above your contract.
- Build the full cost model before you offer. Salary is not the cost. Use a tool like Penroll to build your hiring plan with realistic on-cost assumptions before you go to offer.
- Document the working relationship clearly. Especially if you're using a contractor structure — clear scope, invoicing cadence, and evidence of independence.
Common mistakes founders make
Treating a full-time contractor like an employee. If someone works 9–5 for you, five days a week, follows your processes, and does nothing else — they're probably an employee in the eyes of local law.
Not budgeting for employer contributions. Founders often look at gross salary and forget to add 15–30% on top for social security. This breaks headcount budgets.
Assuming the same contract works across borders. A contract written under English or Irish law does not protect you if your employee is in France. Use local-law contracts.
Waiting too long to get legal advice. A 30-minute call with a local employment lawyer before you hire costs €150–€300. Getting it wrong can cost 20x that in back-taxes and penalties.
Where Penroll fits
Penroll helps small business founders move faster on hiring without getting buried in process. If you're building out a job post for a remote EU role — defining the scope, salary range, and requirements clearly before you go to market — generate a job post in Penroll to get a structured, ready-to-publish draft in minutes. Penroll won't replace your employment lawyer for cross-border compliance, but it'll make sure the hiring side of the process doesn't slow you down.