How does an Employer of Record (EOR) manage payroll taxes in Eastern Europe
- Natia Gabarashvili
- Oct 22
- 13 min read
Updated: Oct 24
Table of contents:
TL;DR
Hiring across Eastern Europe sounds simple — until you realize every country has its own tax code, social fund, and filing calendar. Managing that alone isn’t payroll. It’s paperwork on hard mode.
Here’s the short version:
Employer contributions: Expect to pay around 18–22% of gross salary in social, pension, and health contributions across the region. It’s competitive by global standards but requires precise, country-specific filings.
Payroll laws differ by country: Poland, Romania, Bulgaria, and Hungary each have unique payroll systems, contribution caps, and reporting rules. There’s no single EU standard — compliance is local, and non-negotiable.
EOR handles everything: An Employer of Record (EOR) registers your employees, calculates taxes, files contributions, and issues payslips in each country — all while staying fully compliant with national labor laws.
Team Up’s advantage: Our unified EOR model gives you multi-country compliance under one contract, one invoice, and one point of accountability — without setting up entities or juggling five payroll providers.
Eastern Europe offers world-class talent. Team Up makes hiring them legally effortless.
Introduction
Hiring in Eastern Europe is easy. Paying taxes correctly across five different countries? Not so much.
On paper, the region looks simple: a shared timezone, overlapping work culture, and top-tier technical talent.
But when you start running payroll, you quickly discover each country plays by its own rules.
Poland’s contribution caps aren’t the same as Romania’s.
Bulgaria’s social tax rates differ from Hungary’s. And every government portal seems to require a new login, a different file format, and a local accountant who swears their version is “the right one.”
The complexity doesn’t stop there. Payroll taxes here don’t follow a single EU framework. Each country has its own income tax system, contribution base, reporting deadlines, and audit structure, all in separate currencies and, often, in local language filings.
That’s why more global teams rely on Employer of Record (EOR) payroll services to manage payroll taxes in Eastern Europe. An EOR acts as your local legal employer, handling everything from income tax and social security filings to monthly remittances and compliance certificates across multiple jurisdictions, all under one contract.
Instead of juggling accountants in five countries, you get one point of contact, one invoice, and one compliant payroll process that works everywhere you hire.
Employer of Record payroll taxes in Eastern Europe
Here’s what makes payroll in Eastern Europe deceptively complex, there’s no unified tax system.
Each country in the region, Poland, Romania, Bulgaria, Hungary, the Czech Republic, and beyond, operates under its own labor laws, tax rates, and contribution caps. There’s no single filing framework, no standardized rates, and no shared digital infrastructure. What works for payroll in Warsaw doesn’t automatically work in Sofia or Budapest.
And for global employers, that’s where the challenge begins.
When you’re paying employees across multiple Eastern European markets, you’re managing five separate sets of payroll rules:
Income Tax (PIT): Progressive or flat depending on the country, usually ranging from 10–25%.
Social Security / Pension Contributions: Split between employer and employee, often capped or adjusted annually.
Health Insurance Contributions: Mandatory in most jurisdictions, either standalone or bundled under social insurance.
Unemployment or Labor Fund Contributions: Typically paid by the employer to support national employment funds.
These core components form the foundation of payroll compliance — and missing even one contribution or filing can trigger audits, penalties, or withheld employee benefits.
Average payroll tax rates in Eastern Europe (2025)
(Sources: OECD Tax Database, PwC Worldwide Tax Summaries)
Now, imagine calculating all of this manually each month, across different currencies, languages, and filing portals. That’s exactly why companies hiring regionally depend on Employer of Record (EOR) payroll services to handle compliance.
An EOR handles multi-country payroll management under one unified structure, registering employees with each country’s local authorities, processing taxes and contributions, and ensuring filings are accurate and on time.
Payroll tax vs income tax in Eastern Europe
If you’re hiring in Eastern Europe, the first thing to understand is that payroll taxes and income taxes are not the same thing, and treating them like they are is the fastest way to end up with compliance headaches.
Here’s the short version:
Income tax (PIT) is the employee’s personal tax liability, based on what they earn.
Payroll taxes are employer-funded contributions that go toward social security, healthcare, and other mandatory funds.
In practice, though, both flow through the employer’s payroll process — and both are your responsibility to calculate, deduct, and file correctly.
So, how are payroll taxes different from personal income taxes?
How are payroll taxes different from personal income taxes?
Across Eastern Europe, employers face a payroll tax burden averaging 18–22% of the gross wage, according to the OECD Tax Database, almost identical to the OECD average of 23–25%.
That means even though the region remains attractive for cost efficiency, it’s still highly regulated, and the compliance load sits squarely on the employer’s side.
You’re responsible for ensuring every deduction, contribution, and remittance hits the right government account, in the right currency, on the right date.
That’s exactly why so many companies turn to Employer of Record (EOR) solutions. An EOR manages both sides of the equation, personal income tax withholdings and employer payroll contributions, through local registrations and automated filings in each country.
How to calculate payroll taxes in Eastern Europe (Example)
Let’s make this simple, because when it comes to how to compute payroll taxes in Eastern Europe, it’s the details that make or break compliance.
We’ll take a real-world scenario: you’re hiring a software engineer in Poland earning €3,000/month (gross).
Poland’s payroll structure includes:
Employee deductions: social and health contributions (~13%) + personal income tax (17%).
Employer contributions: roughly 21% toward pension, disability, accident insurance, and labor fund.
Here’s how the math works out:
Gross → Net payroll breakdown (illustration)
So, while the employee takes home €2,168, the company’s total payroll cost is €3,630 per month, a 21% increase beyond the gross salary.
This is why calculating employer payroll taxes correctly matters. Every contribution (ZUS, PIT, or Labor Fund) must be filed separately through Poland’s digital system, often in Polish, with strict monthly deadlines.
Important context across the region
Payroll rates differ across Eastern Europe:
Bulgaria and Romania apply flat income taxes (10%), which simplifies calculations but requires precise social fund filings.
Poland and Hungary use tiered or capped systems, meaning high earners eventually hit contribution ceilings — a common compliance pitfall for foreign employers.
Filing schedules, forms, and contribution caps vary, even within EU countries that share frameworks like social security coordination.
That’s why multi-country compliance gets messy fast, and why global companies partner with an Employer of Record (EOR) provider in Eastern Europe that already manages these nuances at scale.
An EOR doesn’t just run payroll; it ensures every euro, lev, or zloty is properly accounted for — across every authority, every month.
How an Employer of Record (EOR) manages payroll tax compliance
Running payroll across Eastern Europe isn’t just about sending salaries; it’s about aligning with five different tax systems, social funds, and filing calendars, each with its own language, portal, and penalties for getting it wrong.
That’s why companies expanding into Poland, Romania, Bulgaria, or Hungary use an Employer of Record (EOR).
The EOR becomes the legal employer for your team in each country, taking full responsibility for payroll, tax filings, and statutory compliance, while you retain full control over day-to-day management and performance.
Here’s how it works in practice.
1. Registration with local authorities
The EOR registers your employees with all relevant authorities in each country, ensuring full legal employment from day one:
Tax offices (e.g., ZUS in Poland, ANAF in Romania, NRA in Bulgaria)
Social insurance and pension agencies
Health insurance funds and labor offices
These registrations establish legal recognition, enable tax withholding, and activate social security and healthcare coverage for each employee.
2. Payroll calculation and statutory deductions
Each month, your EOR:
Calculates gross-to-net salaries, applying local income tax brackets and contribution caps.
Withholds employee-side taxes and contributions.
Adds employer contributions — typically 18–22% of gross salary — for social, pension, and health funds.
Uses multi-country payroll systems and global payroll software to ensure automatic rate updates, error-free calculations, and standardized reporting across jurisdictions.
This means compliance is consistent, whether your developer is in Warsaw or your finance lead is in Bucharest.
3. Local filings and tax reports
The EOR files all statutory reports directly with government agencies, monthly or quarterly, depending on the jurisdiction. That includes:
Payroll tax returns
Social fund and pension declarations
Employment insurance submissions
All filings are submitted through official digital platforms, in-country, and on schedule. You don’t chase accountants for confirmation; it’s all done through automated compliance workflows.
4. Payslips and bilingual documentation
Every employee receives compliant payslips in English and their local language, showing exact deductions, contributions, and employer payments.
At year-end, the EOR also issues:
Local tax summaries (PIT reports, annual income certificates)
Social insurance statements for verification
Employer compliance records for audits or due diligence
This bilingual documentation keeps employees informed and ensures transparency during audits.
5. Cross-border payroll reporting
For companies hiring across multiple Eastern European countries, the EOR consolidates all payroll data into one dashboard. You get regional visibility, total labor costs, contributions, and taxes in a single currency, without juggling five different accountants or systems.
That’s what multi-country payroll compliance looks like when it’s automated and centralized.
EOR vs global payroll outsourcing
On the surface, global payroll outsourcing and Employer of Record (EOR) payroll services look similar. Both take the manual work off your plate. Both calculate salaries, file taxes, and deliver payslips on time.
But here’s the critical difference: outsourcing payroll doesn’t make you compliant, it just makes your payroll faster.
If you’re hiring in multiple Eastern European countries, you need more than a local accountant who files your taxes. You need a legal employer who can actually register your team, sign contracts, and take on the liability that comes with hiring people abroad.
That’s the gap an EOR fills.
Comparing EOR Payroll vs Traditional Payroll Models
Here’s what that means in plain English:
Local payroll bureaus handle calculations, but you remain the legal employer — which means you are still responsible for taxes, registrations, and compliance.
In-house payroll gives you control but requires entity setup in every country, multiple software tools, and local legal teams to handle labor law changes.
An Employer of Record (EOR) covers it all, legal employment, multi-country payroll, tax filings, benefits, and compliance, under one regional framework.
So while a payroll bureau files your taxes, an EOR owns the legal responsibility for every employee you hire in Poland, Romania, Bulgaria, or Hungary.
If something goes wrong, a missed social contribution, a misclassified worker, a late remittance, the EOR, not your company, is on the hook. That’s why it’s the only model that truly protects you from local compliance risk.
And when you scale across borders, the difference becomes night and day. EOR payroll integrates multi-country compliance, bilingual payslips, and unified reporting, something traditional outsourcing or in-house teams simply can’t deliver.
To understand how these models compare in practice, see Employer of Record (EOR) vs Payroll Outsourcing in Eastern Europe.
Cost implications: The true price of compliance
Payroll in Eastern Europe isn’t just about paying salaries; it’s about paying for peace of mind. And depending on how you manage it, that peace can either be affordable or painfully expensive.
Let’s look at the three most common paths global employers take when hiring in multiple Eastern European countries.
1. Setting up local entities in 5+ countries
On paper, setting up your own entity in Eastern Europe sounds like the most “official” way to operate. In practice, it’s the slowest, most expensive route.
Each country, whether it’s Poland, Romania, Bulgaria, Hungary, or the Czech Republic, requires its own:
Company incorporation fees
Local tax registration and social security setup
Legal counsel for employment contracts
Local payroll software or an accountant
Ongoing audits and compliance checks
Average setup cost per country: €5,000–€10,000 upfront.
Monthly maintenance cost: €1,000–€2,000 for filings, payroll, and accounting.
Now multiply that by five countries, and you’re looking at a six-figure compliance bill before you’ve even onboarded your first hire.
2. Outsourcing to individual accountants in each country
A slightly cheaper route, but one that quickly turns chaotic. Each accountant has their own process, filing schedule, and interpretation of labor law.
You still remain the legal employer, meaning all liability rests with you if something is filed incorrectly or late. There’s no regional visibility, no unified reporting, and no single point of accountability.
Typical cost: €500–€1,000 per month, per country, plus your internal admin time chasing confirmations, receipts, and translations.
It works for one country. It’s a nightmare for five.
3. Using one EOR with regional coverage (Team Up)
This is where the model shifts from fragmented compliance to fully managed payroll across the region.
With Team Up as your Employer of Record (EOR), you don’t need to register a single entity or hire local accountants. ]
We handle:
Employee registration with tax and social authorities
Monthly payroll, tax calculations, and remittances
Bilingual payslips, social fund filings, and compliance certificates
Regional reporting consolidated into one invoice
While most global payroll providers charge 8–15% of salary, Team Up uses a flat-rate model, so your costs stay predictable no matter how senior your team is. No scaling penalties, no hidden markups.
The result: you save up to 30–40% compared to managing multiple local vendors, and eliminate the risk of cross-border non-compliance.
When it comes to the true price of compliance, the math is simple:
Local entities buy you control — but also bureaucracy.
Local accountants buy you flexibility — but no accountability.
An EOR like Team Up buys you both — compliance and simplicity — under one regional framework.
Final thoughts
Eastern Europe is one of the most powerful hiring regions in the world, with high skill, low turnover, and exceptional value for global teams.
But it’s also one of the most regulation-heavy. Each country comes with its own tax authority, contribution caps, and reporting formats, all written in different languages and governed by different labor laws.
That’s why expanding here successfully isn’t about hiring faster; it’s about hiring compliantly.
With Team Up’s Employer of Record (EOR) model, you can scale across borders without the weight of five separate payroll systems. We handle the registrations, filings, and statutory contributions across the region, so your team stays focused on growth, not government paperwork.
You get one contract, one invoice, and total compliance coverage across every country you hire in.
Ready to hire across Eastern Europe without juggling five tax systems?
Schedule a call with Team Up and discover how compliant multi-country payroll works through one partner.
Frequently asked questions
What are payroll taxes in Eastern Europe?
Payroll taxes in Eastern Europe are mandatory payments made by both employers and employees to cover income tax, social security, pension, and healthcare contributions. These taxes vary by country but typically include employer-side and employee-side charges. When hiring through an Employer of Record (EOR), all payroll taxes are calculated, deducted, and filed automatically to stay compliant with each country’s labor and tax laws.
How are payroll taxes different from personal income taxes?
The difference between payroll taxes vs income taxes lies in who pays and how they’re used:
Payroll taxes fund public benefits like healthcare, unemployment insurance, and pensions. Both employers and employees contribute.
Personal income taxes are paid only by employees based on their total annual income. An EOR ensures both are calculated and reported accurately across Eastern European jurisdictions.
Which payroll taxes are paid by employers only in Eastern Europe?
In most Eastern European countries, employers are responsible for:
Social security contributions (10–25% depending on the country)
Health insurance contributions (3–13%)
Unemployment and accident insurance (varies by state) These employer-only taxes are calculated based on gross salary and remitted monthly by the EOR.
How are payroll taxes calculated in Eastern Europe?
Payroll taxes are calculated as a percentage of an employee’s gross monthly salary. The rate depends on the country’s labor code and includes both employer and employee contributions. For example:
In Poland, employers pay about 19–22% in social and health insurance.
In Romania, employers contribute around 2.25% for social and labor insurance.
In Bulgaria, employer contributions are roughly 18–19%. The EOR uses local payroll software to ensure each component—income tax, social insurance, and healthcare—is calculated accurately.
How do I calculate employer payroll taxes in Eastern Europe?
To calculate employer payroll taxes, follow these steps:
Determine the employee’s gross salary.
Apply the local employer contribution rates for social, pension, and health funds.
Add these to the employee’s salary costs to find the total cost to the company (CTC). Example (Poland):
Gross Salary: €2,000
Employer social & health contributions: ~21% (€420)
Total employer cost: €2,420/month An EOR automates this process to avoid errors and compliance risks.
What payroll taxes are paid by employers only in Eastern Europe?
Employers alone pay:
Social Security and Pension Fund Contributions
Unemployment Insurance
Work Injury or Accident Insurance
Health Fund Contributions (in select countries). These are separate from employee deductions and are part of the employer’s total cost of employment.
How do I manually calculate payroll taxes for employees in Eastern Europe?
To manually calculate payroll taxes:
Start with gross salary.
Subtract employee deductions:
Income tax (10–20% depending on country)
Employee social contributions (8–13%)
Add employer contributions (typically 15–25%) to determine total employment cost. Because each country’s rules differ, most companies rely on an EOR for accuracy and real-time updates to tax rates.
What are examples of payroll taxes in Eastern Europe?
Examples include:
Personal Income Tax (PIT): Flat or progressive (10–20%)
Social Security Contributions (pension, unemployment, maternity)
Health Insurance Contributions
Accident or Injury Funds These taxes apply in all major Eastern European markets like Poland, Romania, Bulgaria, Hungary, and the Czech Republic.
How are payroll taxes calculated under an Employer of Record (EOR)?
Under an EOR model, payroll taxes are calculated automatically through integrated systems that track:
Gross-to-net salaries
Applicable contribution rates per country
Employer vs. employee obligations The EOR files all statutory reports, ensures compliance with tax deadlines, and pays authorities directly, saving you administrative overhead.
How do payroll taxes differ across Eastern European countries?
Each country has distinct rules:
Poland: Employer ~21%, Employee ~13.7%, Income tax 12–32%.
Romania: Employer 2.25%, Employee 35%, Income tax 10%.
Bulgaria: Employer ~18%, Employee ~13%, Income tax 10%. An EOR handles these differences, ensuring your team stays compliant no matter where
employees are based.
How does an Employer of Record simplify payroll tax compliance in Eastern Europe?
An EOR acts as your local legal employer, managing:
Payroll calculations and filings
Income tax and social contribution payments
Monthly reports to local authorities
Audit-ready documentation This means your company can hire in Poland, Romania, Bulgaria, Hungary, or the Czech Republic without opening entities or managing complex tax rules.
How to compute payroll taxes automatically with an EOR platform?
EOR platforms calculate payroll taxes using real-time country-specific data:
Input gross salaries.
The system applies all statutory tax and contribution rates.
Generates payroll summaries and compliance reports. This ensures your payroll is error-free and aligned with local legislation.
Why partner with an EOR for payroll taxes in Eastern Europe?
Working with an Employer of Record helps you:
Avoid double taxation or compliance errors.
Stay updated on regional tax reforms.
Scale operations across multiple Eastern European countries quickly.
Focus on growth while your EOR handles calculating employer payroll taxes, filings, and employee compliance.
