How do employers determine which country’s employment law applies to international workers?
The employment law that applies to an international worker is usually the law the parties choose in the contract, but that choice cannot remove the mandatory protections of the country where the person habitually works. Where no clause exists, courts look to the place of work, the hiring location and the closest connection. Employers should treat contract wording as a starting point, not a safeguard.
Getting this wrong can carry real costs, from unenforceable clauses to retroactive tax and social security liabilities. The sections below set out how choice of law, default tests, posted and remote work, social security and compliance practice fit together, using employment law basics that apply across most European jurisdictions.
Can an employment contract choose its own governing law?
Yes, an employment contract can name a governing law, and courts in most European jurisdictions will generally respect that choice. However, the choice cannot deprive the employee of mandatory protections under the law that would apply without the clause, usually the law of the country where the employee habitually works.
Within the EU, this principle comes from the Rome I Regulation, which also applies in the Netherlands. A clause selecting, for example, English law for an employee who works day to day in Amsterdam can remain valid. Yet Dutch mandatory rules on dismissal protection, minimum wage, holiday entitlement and working conditions still apply where they are more favourable to the employee.
Employers often misread this rule. They assume that selecting the law of their home country shields them from local obligations. In practice, the clause mainly fills gaps. It generally does not override local rules on termination, notice periods or working time.
A choice of law clause is still worth including. It gives certainty on contractual interpretation and on matters that are not mandatory. It should simply be drafted with the workplace jurisdiction in mind, not against it.
What factors decide the applicable law without a clause?
Without a governing law clause, the applicable law is generally that of the country where the employee habitually carries out their work. If that cannot be identified, the law of the country where the engaging business is located applies, unless the contract is more closely connected to another country.
Courts and authorities typically weigh the following factors:
- Habitual place of work: where the employee spends most of their working time, even if they travel temporarily.
- Base of operations: where the employee starts and ends assignments, receives instructions and organises tasks.
- Location of the engaging establishment: relevant when work is spread across several countries.
- Closest connection: the language of the contract, the currency of payment, the place of tax residence and the location of management.
The closest connection test acts as a safety valve. If the facts point clearly to a different country than the first rules suggest, that country’s law prevails. This is why a single signed contract rarely settles the question on its own. The actual working pattern often matters more than the paperwork.
How does employment law work for posted and remote workers?
Posted workers generally remain covered by the law of their home country, but the host country’s core protections still apply. Remote workers are treated differently: the country where they physically work often becomes the habitual place of work, which can bring its mandatory employment rules into play.
Posted workers
Under the EU Posting of Workers Directive, an employee temporarily sent to another member state keeps their home country contract. The host country’s hard core rules still apply, including minimum pay, maximum working hours, rest periods, paid leave and health and safety standards. Posting is temporary by definition, and long assignments can shift the applicable regime.
Remote workers
Remote work creates the less obvious risk. An employee who relocates and works from home in another country can acquire the protection of that country’s mandatory law, even if the employer has no presence there. Employers may also risk creating a taxable presence, known as a permanent establishment, in some situations. Policies that allow remote work abroad should therefore be approved case by case, with legal and tax review before the employee moves.
Does social security follow employment law or a different rule?
Social security follows its own rules, separate from employment law. Within the EU, EEA and Switzerland, an employee is normally insured in one country only, usually where they work. Posted workers can remain in their home system for a limited period if they hold an A1 certificate.
This separation catches many employers out. A contract governed by one country’s law can sit alongside social security contributions payable in another. The A1 certificate, issued by the home country’s authority, confirms which system applies and helps protect both employer and employee from double contributions.
Multi-country workers are a special case. Someone who works in two or more member states may be insured in their country of residence if they carry out a substantial part of their activity there. For workers moving between the EU and non-EU states, bilateral social security treaties can determine the outcome, and some countries have none. Employers should confirm the position before the first working day, because retroactive correction can be costly and administratively demanding.
How can employers stay compliant when hiring abroad?
Employers can stay compliant by deciding the legal structure before hiring, mapping the employee’s actual working pattern to the applicable law, and documenting tax and social security positions in advance. The main options are a local entity, a posting arrangement or an Employer of Record. The right choice differs depending on whether the business is hiring a new local employee or relocating an existing one, since relocation also raises questions about the existing contract, tax residence and social security history.
A practical checklist helps:
- Identify where the employee will habitually work, and how often that may change.
- Check the mandatory employment rules of that country, including notice, dismissal protection and working time.
- Confirm social security obligations and obtain the relevant certificates.
- Assess tax exposure, including payroll withholding and permanent establishment risk.
- Align the contract language, governing law clause and employee handbook with these findings.
- Review the arrangement whenever the employee’s location or role changes.
Where a business has no local entity, a legal employer can bridge the gap. An Employer of Record in the Netherlands employs the worker under Dutch law and handles payroll, taxes and social premiums, so the client can start work without incorporating first.
How Blue Lynx can help
Blue Lynx supports employers that want to hire in the Netherlands without building a local entity or HR function first. Its Employer of Record service makes Blue Lynx the legal employer under Dutch law, with compliant contracts, payroll, tax deductions and social premiums managed on the client’s behalf. The service is specific to the Netherlands.
For companies that also need to find the right people, the recruitment service covers sourcing, screening and shortlisting, backed by a No Cure, No Pay policy. Flexible needs can be met through contracting. Blue Lynx is NEN 4400-1 certified and fully GDPR compliant, which matters when handling employee data across borders.
If your organisation is weighing where an international hire should be employed, speak with the team at Blue Lynx. Contact Blue Lynx to discuss a compliant structure for your next hire in the Netherlands.
Frequently Asked Questions
How do I get started if I want to hire an employee in another country for the first time?
Start by confirming where the person will habitually work, then check that country’s mandatory employment rules, social security obligations and tax exposure before issuing a contract. Next, choose a structure: a local entity, a posting arrangement or an Employer of Record. Getting a short legal and tax review before the offer is signed is far cheaper than correcting problems after the first payroll run.
What happens if my contract's governing law clause conflicts with local mandatory rules?
The mandatory local rules will generally prevail wherever they are more favourable to the employee, while the rest of the clause usually remains valid. The result is often a hybrid: the chosen law governs interpretation and non-mandatory matters, and local law governs areas such as dismissal protection, minimum pay and holiday. To avoid surprises, have the contract reviewed by a lawyer in the workplace jurisdiction and draft it around those local minimums.
What should I do if an employee asks to work remotely from another country for a few months?
Do not approve it informally. Review the likely employment law impact, social security position and tax consequences, including permanent establishment risk, before the employee leaves. Set clear limits in writing, such as the maximum number of days, the approved country and who bears any extra costs, and revisit the arrangement if the stay is extended.
How long can a posted worker stay abroad before the applicable rules change?
Posting is meant to be temporary, and the host country’s protections increase as the assignment lengthens. Under the EU posting rules, longer postings can bring a wider set of host country employment conditions into play, and A1 certificates for social security only cover a limited period. Track assignment end dates from the outset and plan an extension or a local contract well before the limits are reached.
What are the most common mistakes employers make with cross-border employment contracts?
The most frequent errors are assuming a home-country governing law clause overrides local rules, ignoring social security until after the employee starts, and failing to update the contract when the working pattern changes. Another common mistake is treating the signed contract as decisive when courts look at where the work is actually done. Regular reviews of each employee’s real location and duties help avoid all of these.
How do I apply for an A1 certificate, and when should I do it?
The A1 certificate is requested from the social security authority of the country where the employee is currently insured, usually through the employer. Apply before the posting begins, since retroactive certificates can be slow and are not always granted. Keep a copy with the employee during the assignment, as host country inspectors may ask to see it.
When does using an Employer of Record make more sense than setting up a local entity?
An Employer of Record is often the better choice when you want to test a market, hire only a few people, or need to start quickly without incorporating. The provider acts as the legal employer, handling contracts, payroll, taxes and social premiums under local law. If your headcount grows and the market becomes a long-term priority, you can reassess whether establishing your own entity is worthwhile.