Employer of Record solution enables companies to hire employees anywhere in the world without setting up a legal entity. The EOR is deemed to be the legal employer (of record), however the employees are subordinated to the EOR’ customer.

The employee will exclusively “service” the EOR’ customer (i.e. the latter represents the party responsible for inter alia engaging and dismissing the employee, although the employee will be formally engaged and dismissed by the EOR).

Granting compliance with the country of operations’ law, the EOR offers administrative onboarding, payroll processing, HR management and administrative support.

In a recent case referred to the European Court of Justice, the Raad van bestuur van de Sociale verzekeringsbank (the Netherlands), called into discussion an eventual dual interpretation of the concept of employer, under the social security coordination regulations and labour law (AFMB Ltd and Others C-610/18).

In the case at issue, the concept of “employer of record” is not called into discussion. AFMB is a” flexible and internationally operating organization based in Cyprus”, assists “internationally operating road transporters in improving their competitive position”, by means of ” working with them to see how European regulations can be applied as favorably as possible for their company”. (http://www.afmb.eu).

At the ECJ hearing, most of the parties took the view that the concept of employer must be given an autonomous definition, under the social security coordination regulations.

In his Opinion, AG M Priit Pikamae, nuances somehow the discussion on the duality of the concept of employer:

  • relying solely on the employment contract would result in an excessively formalistic approach
  • a case-by-case examination of all relevant circumstances and by using objective criteria seems …. to be the most appropriate approach
  • the concept of employer is not defined by EU law
  • the social security coordination regulations do not contain reference to the law of the Member States, and consequently, pursuant to settled ECJ case law, the concept must be given an autonomous interpretation throughout the EU

The AG analyses the case at issue on grounds of:

  • elements characterising an employment relationship
  • criteria from the case-law on social security
  • criteria from the case-law on employment relationship
  • criteria from the case-law on private international law

AG Pikamae underlines the difference between formal and genuine employment relationship. Criteria such as “findings on the employed person’s actual situation”, “the party responsible for engaging the worker, paying the salary and sanctioning and dismissing the latter”, “the hierarchical relationship under which the worker is subject to supervision”, are invoked in view of clarifying such a difference.

Assessing the circumstances of the case at issue, the AG concludes that “the contractual relationship, under which AFMB is formally the drivers’ employer, is only indicative in nature”, and consequently, the employer is the company located in the Netherlands.


  • the response to the first question is for the purposes of Article 13(1) (b) Regulation 883/2004
  • the assessment whether the objective and subjective elements would determine the existence of an abuse of law can be established, is grounded on the choice of a registered office made with the alleged aim of circumventing Netherlands social security legislation,

assessing the Opinion delivered by AG Pikamae, the conclusion is valid beyond the interpretation of Article 13(1) (b) Regulation 883/2004.

AFMB can be regarded “as a kind of payroll service, but not as an actual employer”.

The question is how “a case-by-case examination of all relevant circumstances and by using objective criteria” will add to the case, in the assessment of the intra-EU mobility of employees hired by Employers of Record.

And not as an ancillary issue, how to define such objective criteria.

Must each case be examined distinctively under labour law and social security coordination regulations, by applying a distinctive set of objective criteria? Where to date, Member States have a different approach to recognising and interpreting the concept of “employer of record”, the response should be in positive.

Where the EOR is established in the country of “employment”, the customer can be located within or outside the Union.

Certain situations of multi-state activity on behalf of an employer established outside the territory of the Union, are addressed by Article 14 (11) Regulation 987/2009.

The Dutch civil code was recently amended to contain the definition of “payroll agreement”. Two elements distinguish payrolling from agency work : “ A payroll agreement exists if the employer does not fulfill an allocation function and the employee is posted exclusively to a single client” (Loyens & Loeff  Are you ready for the WAB ? , 11 July 2019). The concept of “posting” must be read in the meaning of hiring out to a customer operating in the Netherlands.

Provided that such an employee must be posted in the meaning of EU law, who is the employer?

In Belgium, on the one hand, hiring out by an undertaking not holding a license in the capacity of employment agency, triggers employment by the user undertaking, and on the other hand,” an authorised representative is not deemed to be the employer ,but only to act on the latter’s behalf” (Bruno De Pauw-Advisor-general, International Relations Department of the National Social Security Office).

A posting in the meaning of labour law, can be eventually addressed under the ruling in Danieli and Others (C-18/17 14 November 2018 ECLI:EU:C: 2018:904). Provided that the EOR is recognised as an employer by the sending Member State, the latter will be posting the employee to a user undertaking located in another Member State (X), by means of hiring out that employee to its customer (the genuine service provider),established in a country (Y), and operating in the Member State (X).

Social security coordination point of view the assessment is less obvious.

The first question is whether the status of employer is recognised by the sending Member State.

Provided that the status of “employer” is recognised by the sending Member State, implicitly the status of employee (vs bogus employee) is recognised.

In case of posting under Article 12 Regulation 883/2004, “the country from where the worker is posted retains the qualification competency over the activities” (Social Security Coordination and non-standard forms of (self)employment- Paul Schoukens  interpretation of  C-390/98, Banks, EU:C:2001:456).

As regards Article 13 Regulation 883/2004, “Each of the Member States (involved) on whose territory professional activities are performed is competent to determine the nature of these activities. Taking into account the outcome of the legal qualification of each of these activities, the competent Member State will eventually be assigned by the rules of Title II” ( Social Security Coordination and non-standard forms of (self)employment- Paul Schoukens - interpretation of  C-121/92, Staatssecretaris van Financiën v A. Zinnecker, EU:C:1993:840).

Conclusion: “We are facing an atypical form of employment that must be addressed as such” (Bruno De Pauw- Advisor-general, International Relations Department of the National Social Security Office).