Legal and compliance checklist for Employer of Record (EOR) services in Eastern Europe
- Gegidze • გეგიძე | Marketing
- Jun 13
- 11 min read
Table of contents:
Introduction: What could possibly go wrong?
What could possibly go wrong?
Well, fines, back taxes, frozen bank accounts, retroactive social insurance contributions, or a sudden “friendly” inspection from the labor office in Bucharest. That’s what.
Hiring in Eastern Europe sounds straightforward, especially with the rise of remote-first teams and plug-and-play solutions. But underneath the surface?
Labor laws vary wildly from Poland to Bulgaria. Miss a mandatory clause in your contract, pay someone from abroad, or skip registering with the local tax office, and you’ve officially stepped into legal no man’s land.
That’s where an Employer of Record (EOR) comes in. Think of an EOR as your legal safety net; they’re the official employer on paper, responsible for registering your employees, paying their taxes, issuing compliant contracts, and keeping you on the good side of the local authorities. You manage the team; the EOR handles the risk.
In Eastern Europe, this isn’t just convenient, it’s essential. Regulations are strict. Documentation is formal. And mistakes aren’t forgiven with a slap on the wrist.
This guide breaks down exactly what a compliant EOR should handle for you, what local laws you need to be aware of, and how to avoid the kind of headaches that make founders wish they’d stayed in their home market.
Why compliance in Eastern Europe is complicated
If you think hiring in Eastern Europe is just copy-paste across borders, think again.
A Polish engineer, a Romanian developer, and a Ukrainian project manager walk into your Slack workspace, and suddenly you're juggling three completely different legal systems, payroll rules, and documentation requirements.
Let’s break down why this region keeps even seasoned legal teams on their toes:
1. Language isn’t just a preference; it’s the law
In countries like Romania or Hungary, employment contracts must be issued in the local language. Even if your candidate speaks fluent English, labor authorities don’t care. And if the contract ever ends up in court, the local version prevails every time.
2. Paper isn’t dead (triplicate still lives)
In much of the region, contracts aren’t just signed—they’re signed three times. One for the employee, one for the employer, and one for the labor authority. In some jurisdictions (looking at you, Serbia), certain contracts or documents must be notarized, filed with specific agencies, or even physically stamped.
3. EU vs non-EU adds complexity
You might assume that hiring in Bulgaria and hiring in Ukraine work the same. Not even close.
EU countries follow shared directives, but each transposes them differently.
Non-EU countries (like Ukraine, Serbia, Georgia) operate with their own rules—sometimes more protective, often more bureaucratic. This makes consistent, cross-border hiring hard to scale unless you're deeply plugged into each market.
4. Missteps don’t go unnoticed
Authorities in Poland and Romania have ramped up inspections, especially for remote work and foreign employers. A non-compliant contract or an unregistered employee doesn’t just earn you a warning; it can lead to back pay claims, fines, or even criminal charges for misclassification.
That’s why companies exploring the region often turn to EORs first to avoid learning the hard way that “it worked in Germany” doesn’t mean it’ll work in Bulgaria.
What EORs in Eastern Europe are legally responsible for
Hiring across Eastern Europe sounds easy until someone asks, “Whose name is on the payslip?” That’s where a compliant EOR steps in, not just as a payroll processor, but as the legal employer on record. Which means: if things go south, they’re the ones answering to tax inspectors, not you.
So what exactly are EORs on the hook for?
1. Drafting compliant local contracts
This isn’t a “plug your logo into a template” kind of deal.
In Poland, contracts need to distinguish between umowa o pracę (employment contract) and umowa zlecenie (mandate contract), each with different tax implications. In Romania, indefinite-term contracts are standard, and any deviation needs to be legally justified.
An EOR must localize contracts not just to the country, but to the type of worker, the employment model, and legal precedent.
Bonus headache: In many places, contracts must be issued in the national language and filed within a strict time window. Get that wrong, and the contract might be ruled invalid, even if both sides signed.
2. Registering employees with tax and social insurance authorities
Eastern Europe takes social contributions seriously. A good EOR handles:
Tax ID registration (mandatory in nearly every country)
Enrolling employees into national social funds (health, pension, unemployment)
Ensuring every deduction and contribution is filed correctly and on time.
This includes cross-border reporting for remote workers, especially in EU countries where coordination between social systems (A1 forms, anyone?) is non-negotiable.
3. Handling terminations legally
Eastern European labor laws protect employees heavily.
You can’t just say “we’re letting you go” and wire their final paycheck. In most countries:
Notice periods are fixed by law
Severance depends on tenure
Documentation must prove fair cause. Mess it up, and you could face wrongful termination lawsuits or be forced to reinstate the employee with back pay.
A reliable EOR navigates this minefield, ensuring every exit is handled cleanly, legally, and on record.
4. Monthly filings & audits
Payroll filings aren’t quarterly here. They’re monthly.
An EOR must submit:
Tax declarations
Social contribution reports
Labor bureau notifications on strict deadlines (and usually in local portals, written only in native languages).
They’re also expected to maintain spotless records in case of audits, which are far more common in countries like Romania and Ukraine than most companies realize.
Payroll & tax compliance across the region
If you think payroll is just about paying people on time, Eastern Europe is going to be a rude awakening.
Every country has its own tax logic, contribution thresholds, mandatory filings, and unforgiving deadlines. Miss a step in Bulgaria? You're paying late fees. Skip a form in Poland? You’re triggering an audit. Miscalculate in Romania? You’ll be explaining it, personally, to the tax authority’s anti-fraud unit.
Here’s what real payroll compliance actually looks like in the region:
1. Local currency payroll processing
You can't pay employees in USD or EUR unless the country allows it (and most don’t).
Salaries must be processed in local currency, Polish Zloty, Romanian Leu, Hungarian Forint, based on precise exchange rates for any foreign-based invoices.
This also affects net pay. Exchange rate fluctuations can cause disputes if not accounted for correctly, especially with remote teams paid from HQs abroad.
2. Mandatory social contributions
Every country has its own breakdown:
In Romania, Employers contribute ~2.25% to labor insurance, and employees ~35% of their gross income to pensions and health.
In Poland, Total social contributions hover around 35%, split between employer and employee, depending on contract type.
An EOR ensures proper deductions are made, employees are registered with the right funds, and payments are filed under each worker’s national ID.
3. Monthly tax and labor filings
Eastern Europe is not quarterly like the US. It’s monthly and unforgiving.
Each month, the EOR must:
File income tax declarations
Submit social security contributions
Report headcount and wage changes to the labor bureau
Failure to do so doesn’t just mean fines—it puts the employee at risk of losing health insurance, pension accrual, and unemployment benefits.
4. Cross-border worker rules (EU countries especially)
If your employee lives in one EU country and works for a company based in another (say, a Romanian working remotely from Bulgaria), you may need an A1 certification to prove where social taxes are being paid. Skip that, and both countries may demand contributions.
EORs familiar with EU coordination laws can manage these scenarios seamlessly and shield you from double taxation issues.
Benefits, insurance & working hours in Eastern Europe
Here’s the part most companies underestimate, until their new hire in Bucharest asks about their meal vouchers, and no one on your team knows what that even means.
Welcome to employee benefits in Eastern Europe, where mandatory doesn’t always mean obvious, and skipping the details can land you in hot water (or worse, on a local blacklist of non-compliant employers).
Mandatory benefits across the region
Let’s get the basics out of the way. Across Eastern Europe, a few employee entitlements are non-negotiable:
Health insurance: Almost every country requires enrollment in a public health scheme. In Poland, it's managed through ZUS; in Romania, through CNAS. Employees must be registered by the employer (or EOR) from day one. No exceptions.
Paid time off: Most countries require a minimum of 20 working days annually. Romania bumps it to 21, and in Ukraine, it can reach 24+ depending on the sector or seniority.
Sick leave: Covered partially by the employer, partially by the state. But it’s tricky. In Hungary, for example, the first 15 days are on you. In Poland, it's 33 days—unless the employee is over 50, in which case it drops to 14.
Country-specific perks you’ll miss if you don’t localize
Romania: Employees expect meal vouchers (tichete de masă) worth ~30–35 RON/day. Not legally required, but culturally expected. Not offering them can make you look like an unserious employer.
Czech Republic: Sick days (paid beyond statutory sick leave) are often built into company policy. Without them, your offer will look weak next to local competitors.
Lithuania & Latvia: Offer flexible working perks or remote-first contracts? You’d better document it correctly. Labor inspectors will ask to see proof.
An EOR keeps track of all these micro-details because getting them wrong doesn’t just cause friction. It can cause fines, churn, or loss of credibility with regulators.
HR policy adaptation: you can't just copy-paste
This isn’t about translating your global policy into Polish.
HR policies need to:
Match local definitions of leave, work hours, and notice periods
Be issued in the local language
Be adapted for collective bargaining agreements if relevant
Include any non-statutory benefits to avoid future disputes
That’s why smart companies use an EOR—not just to process payroll, but to translate their employer brand into something legally and culturally relevant in-market.
Immigration compliance: Can EORs sponsor permits?
Work permits. Visas. Residency approvals. If you’re hiring talent in Eastern Europe and crossing any borders, legal or literal, immigration compliance will sneak up faster than you think.
And no, an offer letter doesn’t magically unlock legal status.
When are permits required?
Here’s the short version:
If your hire isn’t a citizen of the country you’re hiring in, or isn’t an EU/EEA national working in another EU country, they need paperwork. Period.
A few common cases:
Hiring a Serbian developer to work in Romania? Permit required.
Hiring a Ukrainian project manager in Poland? Easier, thanks to regional agreements, but still requires official registration.
Hiring a Turkish engineer in Hungary? You’ll need a full permit package, likely including labor market tests.
And trust us, even “simplified” processes are anything but simple.
The tricky countries
Some Eastern European countries are more “red tape-prone” than others:
Ukraine: Even local hires need extensive paperwork. For foreigners? It’s a bureaucratic maze.
Bulgaria: Requires labor market tests, translations, notarized documents, and often involves two separate ministries.
Serbia: Dual permit systems and shifting laws mean you better have someone on the ground who knows the drill.
The point?
If your hire needs a permit and your EOR can’t handle it directly, they’re not really solving your problem.
Common compliance gaps when not using an EOR
Hiring without an Employer of Record (EOR) in Eastern Europe sounds lean. Fast. “Flexible.” But if you don’t know what you’re doing, it’s a legal mess waiting to happen. And in Eastern Europe, “oops” isn’t a defense when tax authorities come knocking.
Here’s what goes wrong most often:
1. Hiring contractors without contracts
Too many companies rely on handshake deals or vague freelance agreements pulled from Google. In countries like Poland or Romania, this can get you flagged for misclassification, especially if that “contractor”:
Works full-time for you
Uses your tools or email domain
Follow your schedule
This triggers back taxes, fines, and possibly even court-ordered reclassification as an employee.
2. Paying employees from abroad, with no local compliance
Sending USD or EUR straight to a dev’s Revolut account in Bulgaria might feel efficient. But if you skip:
Local payroll registration
Tax withholdings
Social insurance contributions
You’re violating labor and tax law, without any shield of plausible deniability.
Hint: Saying “But we didn’t know” doesn’t stop a tax audit.
3. Skipping social insurance registration
Social insurance is mandatory in most of Eastern Europe. If you don’t register employees (or even full-time contractors), you’re denying them benefits and exposing your company to government penalties.
Countries like Czechia, Hungary, and Serbia take this seriously. And no, it’s not optional, even if your team is remote.
4. Misusing PEOs without a legal entity
A PEO might sound like a cheaper option than EOR. But here’s the catch: in Eastern Europe, PEOs legally require your company to register locally.
No entity? No valid co-employment model.
Many global firms make the mistake of assuming PEO = EOR. It’s not. And it leaves your team in legal limbo.
What makes a compliant EOR provider in Eastern Europe?
Not all EORs are created equal. Especially not in Eastern Europe, where compliance is a moving target, and missing it means fines, lawsuits, or worse: a hiring freeze that nukes your roadmap.
Here’s what separates the real partners from the payroll vendors with fancy websites:
1. Registered with local labor, tax, and social insurance authorities
Seems obvious. But you’d be surprised how many EOR “aggregators” rely on third-party subcontractors. If your provider can’t show their official registration in Poland, Romania, Czechia, or wherever you’re hiring, they’re not legally allowed to employ anyone.
Look for:
Local tax ID numbers
Social insurance registration
Ministry of Labor documentation
Bonus: Ask them who signs the employment contract. If it’s not their name, they’re not your EOR.
2. In-house legal & HR staff in the countries they operate
A fancy dashboard won’t help you when the Bulgarian labor inspector asks for termination paperwork. A compliant EOR has actual lawyers and HR people who know the difference between a fixed-term contract in Warsaw and one in Tbilisi.
They’ll help you avoid:
Invalid contracts
Wrong probation lengths
Botched notice periods
And when the law changes (which it does often), they’ll catch it before your team gets fined.
3. Fully localized payroll and filings are done monthly
A compliant EOR doesn’t bulk-process payroll from Berlin and hope it sticks. They file monthly tax reports under local law, using local platforms, in local currency.
That means:
Income tax withheld and remitted correctly
Social contributions submitted on time
Payslips and ledgers are stored securely for audits
No guessing. No gaps. No excuses.
4. Clear employment contracts in the correct language
Romania requires triplicate contracts. Poland mandates Polish versions. Ukraine? Don’t even try using an English-only document.
Your EOR must:
Draft contracts in the official language
Include all mandatory clauses (job title, hours, benefits, severance rules)
Provide templates reviewed by local labor lawyers
Otherwise, that “contract” won’t hold up in court—or even in a routine inspection.
Final checklist before hiring via EOR
Don’t just pick the first shiny platform with a chatbot.
In Eastern Europe, a bad EOR choice doesn’t just slow things down, it can expose you to tax audits, employee claims, and compliance fines you didn’t even know existed.
Here’s how to gut-check if your EOR provider is actually up to the task:
1. Are they legally registered in each country?
Poland, Romania, Bulgaria, the Baltic, labor, and tax authorities are separate beasts. Your EOR should be registered with the right ones in every market you hire in.
2. Who’s doing the work?
If the EOR outsources everything to local third parties, they’re not your shield, they’re a middleman. Ask if they have real operations, real staff, and real accountability.
3. Are the contracts local, legal, and in the right language?
Triplicate contracts. Local labor codes. Mandatory clauses in Romanian or Polish. If your provider can’t explain these, run.
4. How do they handle taxes and filings?
You want monthly filings, full payroll documentation, and social contributions processed under local law. No guesswork, no shortcuts.
5. Will you get monthly compliance reports?
No report = no visibility = all risk on you. A good EOR sends updates you can forward straight to your CFO and legal team.
6. Do they take data protection seriously?
Eastern Europe is in the GDPR zone. That means you’re on the hook too. Your EOR should have local data processors, secured payroll platforms, and airtight documentation.
7. What’s their liability?
Ask about insurance. Ask about dispute resolution. Ask what happens when something breaks. A real EOR doesn’t hide behind fine print.
Hiring in Eastern Europe isn’t just “plug and play.”
It’s layered, regulated, and full of surprises — unless your EOR knows the terrain.
If you're not 100% sure your provider’s compliant, talk to us at Team Up.
We’ll break it down country by country, no sales pitch, just facts.
