You have found the person. A technical salesperson in Germany, an after-sales engineer in France, someone who can be in front of a distributor the same morning rather than the following quarter. You have no company in Europe, and employing someone requires an employer. The options are few, each one is familiar to the authorities of the country concerned, and each one fails in a way that can be predicted from the start.
The contractor, and the risk that the relationship is reclassified
A self-employed person invoices you monthly and the arrangement starts tomorrow. It is the fastest answer and the one that comes apart, because in every European country the nature of a working relationship is determined by how it actually works and not by what the contract calls it. A labour inspector, a social security body, or the person themselves at the end of the relationship can ask for it to be treated as employment, and the contract is a piece of evidence rather than an answer.
- Hours and availability set by you. A schedule, a requirement to be reachable during your working day, holidays that have to be approved before they are taken.
- Exclusivity in fact. No other client, or others so small that you are the income. Economic dependence is among the strongest indicators there is.
- Integration into your organisation. A place in a reporting line, attendance at internal meetings, objectives set and reviewed like an employee's, a company email address and a company business card.
- Your tools and your instructions. Equipment you provide, methods you impose, prices you set, and a customer relationship that belongs to you rather than to them.
- A fee that behaves like a salary. The same amount every month whatever was delivered, paid on a fixed day, sometimes with expenses reimbursed the way an employer reimburses them.
The consequence is not a fine and a correction going forward. The relationship is reconstructed as employment from its beginning: social contributions that were never paid fall due with penalties and interest, holiday and working-time entitlements are recalculated, and the ending of the relationship becomes a dismissal that had no valid reason and followed no procedure. The claim lands on the company that benefited from the work, which is the foreign parent, and being established elsewhere is not a defence.
The employer of record: who is legally the employer?
A local company — an umbrella employer or an employer of record — hires the person under the law of their country, runs the payroll, pays the contributions, and invoices you the whole cost with its fee on top. It is lawful, it starts quickly, and it is the honest answer for a presence you are not yet sure about. Understand what you are buying and what you are not. You are buying compliance with local employment and social rules, and the administrative work that goes with them. You are not buying authority: there is no direct relationship of subordination between you and the person, so you can set objectives and ask, but disciplinary power, and the obligations that come with it, sit with their actual employer. It is also materially more expensive than direct employment, and that gap widens with every month that passes.
The subsidiary, and when it becomes the only honest answer
A company of your own is heavier: incorporation, a registered address, accounts, filings, a bank account with the difficulties described elsewhere on this site, and a local representative who answers for it. It is also the only arrangement that holds beyond a handful of people. It gives you direct employment and the authority that goes with it, it lets you build a team instead of a collection of individual arrangements, and it settles the tax question in the open instead of leaving it to be discovered. The real comparison is not the monthly cost of an employer of record against the cost of a subsidiary. It is the monthly cost of an employer of record multiplied by the number of months you are honestly going to need it.
What European labour law imposes whatever the arrangement
- A written contract stating the essential terms. The role, the pay, the working time, the place of work, the notice arrangements. The required content and the required language vary by country, and an agreement that exists only in emails is a weak position for whoever wrote them.
- The law of the habitual place of work applies. A contract may designate another law; it cannot deprive the employee of the protection of the country where the work is normally performed. Writing that your own country's law governs changes less than it appears to.
- Social affiliation in the country where the work is done. Registration, contributions and the declarations that go with them, due locally and not where the salary is decided. Coordination rules exist for people posted temporarily from elsewhere, with their own conditions and their own paperwork.
- Working time, rest and leave follow local rules. Paid holiday, maximum working time, rest between shifts, public holidays. None of it is negotiable with the employee, and a sector-level collective agreement may add to it without anyone having signed it individually.
- Ending the relationship is regulated. A valid reason, a procedure, a notice period and often an indemnity. Dismissal at will does not exist, and a termination carried out as if it did is where most of the money is lost.
- Representation and health obligations appear with size. Beyond a certain headcount a country imposes employee representation, specific health and safety arrangements and formal consultation. The threshold exists and differs by country, so check it for yours before you cross it unknowingly.
Which arrangement to choose depends less on the monthly cost than on the expected duration and on the tax exposure the person creates. Someone exploring a market, with no authority to commit you, can sit with an employer of record while you learn. Someone negotiating prices and effectively closing contracts raises the permanent establishment question described in the neighbouring article — and in that case the structure you need is probably the one you were trying to avoid, because the tax consequence arrives whether or not you ever created a company.
Decide the duration before you decide the arrangement. Write down what the person may and may not do — negotiate, sign, hold stock, grant discounts — because that sentence drives both the reclassification risk and the tax exposure, and it is worth more than the choice of provider. If the answer is that they will be selling, price a subsidiary now and compare it against an employer of record over the whole period you intend to be there, not over the opening months.