What is an employer of record used for?

An employer of record is used to legally employ workers on behalf of another company, handling all employment obligations while the client organisation retains day-to-day control over the work. This arrangement is most commonly used by international businesses hiring in a country where they have no legal entity, but it also serves startups, companies avoiding freelancer misclassification, and organisations that want to offload employment administration entirely. The sections below answer the most common questions decision-makers ask before choosing this model.

How does an employer of record actually work?

An employer of record becomes the legal employer of a worker on paper, taking on all statutory employment obligations, while the client company directs the employee’s actual work. The worker is seconded to the client organisation, which manages performance, assigns tasks, and sets objectives. The EoR handles everything on the employment side.

In practice, the EoR signs the employment contract with the worker, registers the employment with the relevant tax and social security authorities, runs payroll, withholds taxes, administers benefits, and ensures compliance with local labour law. The client company pays the EoR a service fee that covers the worker’s salary, social premiums, and administrative costs. No entity setup, no local HR infrastructure, and no direct employment liability for the client.

This triangular structure is well established in the Netherlands and across Europe. It is legally sound when structured correctly, and it allows companies to get workers operational within days rather than the months it typically takes to incorporate a local entity and build out an HR function.

What are the main use cases for an employer of record?

The most common use cases for an employer of record are international market entry without a local entity, hiring non-EU talent who require visa sponsorship, resolving freelancer misclassification risk, and providing employment infrastructure for companies that lack internal HR capacity. Each of these scenarios shares a common thread: the client needs compliant employment without the overhead of becoming a direct employer.

Consider a few concrete examples drawn from practice:

  • Market testing: An Australian company wanting to explore the Dutch market hired a local sales representative through an EoR. They avoided entity formation entirely while their new hire began building relationships and researching opportunities from day one.
  • Startup hiring: Early-stage tech companies rarely have the infrastructure to sponsor work permits or maintain IND-recognised sponsor status. An EoR that holds IND certification can hire the developer directly and second them to the startup, removing that compliance burden entirely.
  • Freelancer misclassification: Following stricter enforcement of Dutch self-employment rules in 2025, both freelancers and the companies engaging them face serious risk if the working relationship resembles employment. An EoR can formally employ the freelancer and second them to their client, preserving the working relationship while eliminating the legal exposure.
  • Pre-entity operations: A company from outside the EU needed to send a Managing Director to the Netherlands to establish a local office before the business entity was ready. The EoR employed the MD, handled the visa, and had her operational in Amsterdam within weeks.
  • Dutch companies without HR: Even locally incorporated businesses use EoR services when they lack internal HR support or want to keep headcount flexible during growth phases or project-based hiring.

What’s the difference between an employer of record and a staffing agency?

The key distinction is who initiates the hire and who controls the work. A staffing agency sources and places candidates on behalf of a client, while an employer of record provides the legal employment wrapper for a worker the client has already identified. These are complementary services, but they serve different purposes.

A staffing agency recruits, screens, and shortlists talent. The client selects from that shortlist. A traditional staffing arrangement can involve the agency acting as the employer of temporary workers, but the primary value delivered is candidate sourcing.

An EoR, by contrast, does not necessarily find the worker. The client may have already identified the person they want to hire, whether through their own recruitment, a referral, or a direct application. The EoR steps in to provide the legal and administrative employment structure. The client retains full control over the worker’s tasks, performance management, and strategic direction.

Some providers, including those with deep roots in the Dutch market, offer both services under one roof. This means a company can use recruitment support to find the right candidate and then immediately transition them into an EoR arrangement, without switching providers or losing continuity.

When should a company use an employer of record?

A company should use an employer of record when it needs to employ workers in a country where it has no legal entity, when it wants to hire quickly without the cost and delay of company formation, or when it needs to ensure compliance with local employment law without building internal HR expertise. It is also the right choice when engaging freelancers carries misclassification risk under local regulations.

More specifically, an EoR is the appropriate solution in the following situations:

  • Entering a new market to test commercial viability before committing to a permanent legal structure
  • Relocating employees to a new country ahead of entity setup
  • Hiring non-EU nationals who require visa sponsorship and IND-recognised employer status
  • Scaling quickly without the overhead of building a local HR and payroll function
  • Formalising relationships with freelancers to avoid bogus self-employment liability
  • Running short-term or project-based operations in a country without long-term commitments

Cost perception is a common barrier. Some organisations initially view EoR fees as expensive until they compare them against the true cost of direct employment in the Netherlands, which includes employer social premiums, pension contributions, statutory leave entitlements, and ongoing compliance obligations. Once those costs are laid out clearly, the EoR model frequently proves comparable or more cost-efficient, particularly for smaller headcounts.

What does an employer of record handle on behalf of a company?

An employer of record handles all statutory employment obligations in the country of hire, including payroll processing, income tax withholding, social security contributions, employment contracts, statutory benefits administration, work permit and visa applications where applicable, and ongoing compliance with local labour law. The client company is relieved of these responsibilities entirely.

In the Dutch context specifically, this includes:

  • Drafting and managing employment contracts in line with Dutch civil law or applicable collective labour agreements
  • Processing monthly payroll and issuing payslips via a compliant HRM platform
  • Withholding and remitting wage tax and social premiums to the Dutch tax authority
  • Administering holiday allowances, sick leave, and statutory benefits
  • Managing work permit and residence permit applications for non-EU hires
  • Handling contract extensions, salary negotiations, and offboarding
  • Absorbing payroll and employment liability as the legal employer of record

The client retains control over everything related to the work itself: what the employee does, how they perform, what targets they work toward, and how they fit into the team. The EoR manages the employment relationship; the client manages the professional relationship.

What are the risks of not using an employer of record when hiring internationally?

Hiring workers in a country without a legal entity or proper employment structure exposes a company to significant legal, financial, and reputational risk. The most immediate risks are misclassification penalties, tax authority scrutiny, and invalid employment contracts. In the Netherlands, these risks have become more acute following the stricter enforcement of self-employment rules that took effect in 2025.

Specific risks include:

  • Permanent establishment risk: Employing workers in a country without registering a business entity can trigger an unintended taxable presence, exposing the company to corporate tax obligations it did not anticipate.
  • Misclassification fines: Engaging workers as independent contractors when the working relationship meets the legal definition of employment can result in back taxes, social premium arrears, and penalties for both the company and the worker.
  • Invalid contracts: Employment agreements that do not comply with local labour law may be unenforceable or may default to more protective statutory terms, creating unexpected obligations for the employer.
  • Work permit violations: Employing non-EU nationals without the correct visa and permit structure exposes both the employer and the worker to enforcement action by immigration authorities.
  • Operational disruption: Non-compliant employment arrangements can unravel quickly when audited, leaving companies unable to retain key workers while they scramble to regularise their position.

The cost of remediation, including legal fees, back payments, and operational disruption, almost always exceeds the cost of structuring the employment correctly from the outset.

How Blue Lynx helps with employer of record services in the Netherlands

Blue Lynx has provided employer of record services in the Netherlands for over 37 years, acting as the legal employer for international businesses, startups, and companies managing freelancer transitions. As an NEN 4400-1 certified and fully GDPR-compliant provider, Blue Lynx takes on the full employment liability so clients can focus on running their business.

Key aspects of the service include:

  • Payroll processing, tax compliance, and social premium administration
  • Employment contracts in both English and Dutch
  • Visa and work permit support for non-EU hires via IND-recognised sponsorship
  • Scalable arrangements for single hires through to entire teams
  • Optional recruitment support via a database of 40,000+ active candidates
  • Dedicated account management and access to vetted legal, accounting, and relocation partners

Whether you are entering the Dutch market for the first time, regularising a freelancer relationship, or hiring a senior leader before your entity is ready, Blue Lynx can get your team employed and operational within days. Contact Blue Lynx to discuss your requirements.

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