What employment laws does an employer of record follow?
An employer of record follows the employment laws of the country where the worker is physically based and performing their work. This means the EoR must comply with local labour legislation, tax codes, social security frameworks, and data protection regulations, regardless of where the client company is headquartered. For businesses hiring across borders, understanding exactly which legal obligations an EoR assumes is essential before entering any arrangement.
Which countries’ laws does an employer of record operate under?
An employer of record operates under the employment laws of the country where the employee resides and works. The EoR’s legal obligations are determined by the worker’s location, not the client company’s country of origin. This principle applies universally: a US company hiring a worker in the Netherlands through an EoR must comply with Dutch employment law, not American labour standards.
This jurisdiction-based structure is what makes the EoR model effective for international hiring. The EoR entity is registered and legally recognised in the worker’s country, which means it can enter into employment contracts, process payroll, and administer statutory benefits in full compliance with local requirements. The client company retains operational control over the worker’s day-to-day tasks, but the EoR bears all formal legal employer responsibilities under that country’s framework.
In practice, this means an EoR operating in the Netherlands must navigate Dutch civil law, the Dutch Civil Code (Burgerlijk Wetboek), and any applicable collective labour agreements. These are distinct from the legal environments in Germany, Belgium, or the UK, each of which has its own statutory minimums, notice periods, and employee protections.
What labour regulations must an employer of record comply with?
An employer of record must comply with the full scope of labour regulations in the worker’s jurisdiction. In the Netherlands, this includes statutory minimum wage requirements, mandatory holiday entitlements, sick leave obligations, notice period rules, and contract type restrictions. The EoR is also responsible for ensuring that employment contracts meet local legal standards and that workers receive all statutory rights from day one.
Key areas of compliance for an EoR operating under Dutch employment law include:
- Minimum wage: Workers must be paid at or above the statutory minimum wage, which is reviewed periodically by the Dutch government.
- Holiday entitlement: Employees are legally entitled to a minimum of 20 days of paid leave per year, plus public holidays.
- Sick leave: Dutch law requires employers to continue paying at least 70% of salary during illness, for up to two years.
- Notice periods: These are governed by the length of employment and must be observed when terminating contracts.
- Pension contributions: Depending on the sector and contract type, employers may be required to enrol workers in a pension scheme.
- Social premiums: Employers must contribute to national insurance schemes covering unemployment, disability, and healthcare.
Where a collective labour agreement (CLA) applies to the sector in question, the EoR must also adhere to those terms. This can affect everything from salary scales to working hours and overtime rules. An EoR with deep knowledge of local labour law can navigate these obligations efficiently, reducing the risk of non-compliance for the client company.
How does an employer of record handle payroll tax obligations?
An employer of record handles all payroll tax obligations on behalf of the client company. This includes calculating, withholding, and remitting income tax, social security contributions, and any other statutory deductions to the relevant national tax authority. The EoR assumes full legal responsibility for accurate payroll processing and timely tax filings in the worker’s country.
In the Netherlands, payroll tax obligations are administered through the Dutch Tax and Customs Administration (Belastingdienst). The EoR must register as an employer with this authority, apply the correct tax tables for each employee, and submit monthly payroll declarations. Errors in payroll tax calculation can result in penalties and back payments, which is why this function demands both technical precision and up-to-date knowledge of local tax legislation.
Beyond income tax, Dutch payroll compliance involves employer contributions to national insurance (volksverzekeringen) and employee insurance schemes (werknemersverzekeringen). These cover provisions such as unemployment insurance (WW), disability insurance (WIA), and long-term care (WLZ). The EoR calculates both the employer and employee portions of these contributions and ensures they are correctly processed each pay cycle.
What happens when employment laws change in the worker’s country?
When employment laws change in the worker’s country, the employer of record is responsible for updating its processes, contracts, and payroll calculations to reflect the new legal requirements. This is one of the core advantages of the EoR model: the client company does not need to monitor regulatory changes or adjust its internal HR systems, the EoR absorbs that responsibility entirely.
A recent example in the Netherlands illustrates this well. The stricter enforcement of rules around freelancer classification, which intensified in 2025, created significant compliance risk for companies working with independent contractors. Businesses that had not structured their engagements correctly suddenly faced potential liability for false employment. An EoR operating in this environment must continuously track legislative updates and advise clients on how those changes affect their workforce arrangements.
Reputable EoR providers maintain dedicated legal and compliance teams whose sole function is to monitor regulatory developments, interpret new legislation, and implement changes before they take effect. For client companies, this means their workforce remains compliant without requiring internal legal expertise or constant attention to foreign regulatory calendars.
Does an employer of record follow GDPR and data protection laws?
Yes, an employer of record must fully comply with GDPR and all applicable data protection laws in the jurisdictions where it operates. Because the EoR processes sensitive personal data, including employee identification, salary information, tax records, and health-related sick leave data, it is classified as a data controller under GDPR and bears direct legal responsibility for how that data is collected, stored, and used.
For businesses operating in or hiring into the European Union, GDPR compliance is non-negotiable. An EoR must maintain lawful bases for processing employee data, implement appropriate technical and organisational security measures, and be prepared to respond to data subject access requests. Any data sharing with the client company must be governed by a formal data processing agreement that outlines each party’s responsibilities.
Beyond GDPR, some EoR providers hold additional quality certifications that reinforce their data governance standards. NEN 4400-1 certification, for example, is a Dutch quality mark for temporary employment agencies that involves regular independent audits of compliance practices. These certifications provide client companies with an additional layer of assurance that their EoR partner meets rigorous legal and ethical standards.
When should a business use an employer of record instead of setting up a legal entity?
A business should use an employer of record instead of setting up a legal entity when it needs to hire workers in a new country quickly, cost-effectively, or on a trial basis, without committing to the time, cost, and administrative burden of formal company registration. Setting up a legal entity in a foreign country can take months and requires ongoing compliance with corporate law, accounting standards, and local governance requirements.
The EoR model is particularly well-suited to the following scenarios:
- Market entry testing: A company wants to explore a new market with a local hire before committing to a permanent presence.
- Speed of hire: The business needs to onboard talent within days, not months.
- Small headcount: The cost of entity setup is disproportionate to the number of employees being hired.
- Project-based or temporary work: The hiring need is finite and does not justify a permanent legal structure.
- Compliance uncertainty: The company lacks internal expertise in the target country’s labour law and wants to avoid legal exposure.
- Freelancer regularisation: A business needs to formalise an existing contractor relationship to avoid misclassification risk.
Once a company has established a stable, growing workforce in a country and is ready to commit to a long-term presence, transitioning from an EoR arrangement to a locally registered entity becomes a natural next step. A well-structured EoR provider can support that transition too, ensuring continuity of employment and compliance throughout the process.
How Blue Lynx supports employer of record compliance
Blue Lynx provides a fully managed Employer of Record service in the Netherlands, handling every legal, payroll, and HR obligation on behalf of client companies. With over 37 years of experience in Dutch and international employment law, the service is built around compliance, precision, and operational simplicity. Key features include:
- Full compliance with Dutch labour law, tax regulations, and social premium obligations.
- NEN 4400-1 certified and fully GDPR compliant, with regular independent audits.
- Payroll processing via NMBRS, a modern HRM platform with transparent reporting.
- English-language contracts and documentation for international businesses.
- IND-certified sponsor status for non-EU work permit and visa support.
- Dedicated account management with bilingual Dutch-English support.
Whether you are entering the Dutch market for the first time or restructuring an existing contractor arrangement, speak with the Blue Lynx team to understand how the EoR model can work for your organisation.