In the EOR vs contractor decision, the model matters less than how the person will work. A contractor invoices you and is self-employed. An employer of record (EOR) becomes the legal employer of a person you manage day to day. A staff augmentation vendor places an engineer under its own contract and takes a margin. The German test looks at who directs the work and how integrated the person is, and the Dutch tax authority looks at how people really work together. Changing the label on the contract doesn't change who gives the instructions.
This is general information, not legal advice. Check your case with counsel in the country concerned. It's one of the questions in EU engineering hiring compliance: contracts, IP and GDPR, and the summary version of this decision sits in our guide to the legal requirements for hiring developers in Europe.
EOR, contractor or staff augmentation: what each one is
Three questions separate the models: who is the legal counterparty, who pays whom, and who directs the work.
With a contractor, you sign a services agreement with the individual (or their company). They invoice you, handle their own tax and social security, and decide how the work gets done. You're a client, not an employer.
With an EOR, the provider employs the person locally. It runs payroll, withholds tax and contributions, and issues the employment contract under local law. You tell the person what to work on. The provider is the employer on paper, you're the manager in practice.
With staff augmentation, a vendor contracts the engineer (as an employee or as its own contractor) and supplies them to you. You pay the vendor, and the vendor pays the engineer. The vendor's contract is what carries replacement terms and, depending on the vendor, employer duties.
What an EOR costs against a contractor
An EOR charges a fee on top of the salary and the employer's statutory contributions. Contractors cost you a rate, with no employer contributions.
Published prices, as listed in October 2026 (checked 29 October), are "starting at" figures and can change:
- Deel's pricing page lists its EOR from $599 per EOR employee per month, month to month, in 130+ countries.
- Remote's pricing page lists its EOR from $599 per employee per month on annual contracts, with no setup fee, a possible refundable reserve, and coverage in 90+ countries.
- For contractors, Deel lists self-classified contractor tooling from $49 per contractor per month, and a Contractor of Record product from $325 per month, where Deel takes on the classification liability.
- Remote lists contractor management from $29 per contractor per month, and you pay only for contractors active that month.
Those are platform fees. They don't include the salary, the employer's social security or any local benefits, and we won't compute a total because we have no sourced inputs for one.
A contractor's day rate has to cover what an employee's salary doesn't: their own tax and social security, insurance, holidays and gaps between engagements. That's our reasoning, not a figure we can source, and it means a contractor's headline rate will look higher than an employee's cost per hour.
Staff augmentation prices differently again. The vendor adds a margin or fee on top of what the engineer earns, and terms vary by vendor. A percentage margin and a flat monthly EOR fee only compare once you know the salary in question. Run both on your actual numbers before you decide.
Control and misclassification: how Germany and the Netherlands test it
Does an EOR remove misclassification risk? An EOR changes the employment label for that person. In our judgment it doesn't answer how you manage them.
Germany first. Section 7(1) of the Social Code IV (SGB IV) defines employment as non-self-employed work and names two indicators: activity under instructions (Weisungen) and integration into the instruction-giver's work organisation. The pension insurer procedure and the contribution rules are covered in the German guide linked at the end of this article, so we won't repeat them here.
In the Netherlands, KVK says client and contractor are jointly responsible for the working relationship. It says the tax authority (Belastingdienst) looks at how people really work, and that a model agreement can give false security. If the relationship turns out to be employment, the client owes wage tax (loonheffing) and pension contributions. For how the same distinction plays out when a company cuts staff and keeps contractors, see contractors after layoffs under UK, Dutch and German rules.
Here's our judgment, not regulator guidance. If you direct an EOR's employee day to day (stand-ups, tickets from your engineering manager, your tools), you keep the control those tests look at. The EOR changes who the employer is. It doesn't change who directs. Whether any national authority treats an EOR arrangement as settling the question, we found no ruling or guidance that says so, and we won't claim it does.
Germany: when an EOR employee you direct looks like temporary agency work
This section is our reading of a statute against an EOR set-up. It isn't regulator guidance, and it isn't legal advice.
The German Temporary Employment Act (AÜG) section 1(1) treats workers as seconded (the term is Arbeitnehmerüberlassung) when they are integrated into the borrower's work organisation and subject to its instructions. The lender needs a permit (Erlaubnis). Section 1(1b) caps the same worker with the same client at 18 consecutive months. The statute allows exceptions to that cap, and we haven't summarised them, so read the section in full or ask counsel.
An EOR employee who works inside your team and takes your instructions may fall within the section 1(1) test of integration and instructions. Whether the provider counts as a lender (Verleiher) depends on how it structures the arrangement, and we found no authority that settles it. We aren't saying EORs are illegal in Germany.
Put two questions to any provider that would employ a developer for you in Germany. Does it hold an Arbeitnehmerüberlassung permit? How does it handle the 18-month rule for a long engagement?
Who owns the code under each model
Directive 2009/24/EC on the legal protection of computer programs, Article 2(3), says that where an employee creates a program in the execution of their duties or following the employer's instructions, "the employer exclusively shall be entitled to exercise all economic rights" in it, unless the contract provides otherwise.
Art 2(3) covers employees, so a direct contractor has no such default under it, and you need a written assignment. We explain the clause in who owns the code an EU contractor writes.
Our reading for an EOR: the employer is the EOR, so the default points at the provider, not at you. You're the party directing the work, but you aren't the employer on paper. Nothing in the directive moves the rights from the EOR to the client. You need two documents: an assignment (or a licence) from the engineer to the EOR if the employment contract doesn't already cover it, and an assignment or licence from the EOR to you. Ask for both before the engineer gets repo access.
This is our analysis of the directive's wording, not an EU ruling. National copyright acts differ in detail, so check local counsel.
With staff augmentation, the answer sits in the vendor contract. Look for an explicit assignment to you.
Control, notice and exit
The three models end differently.
A contractor leaves on the contract's terms: notice period, termination clauses, handover duties. You negotiate those.
An EOR employee is a local employee, so local dismissal law and notice rules apply to them. The provider handles the process, but the cost and timing follow the country's rules, not your preferences. Ask the provider in writing what exit costs look like for the country in question.
Staff augmentation exits depend on the vendor contract and its replacement terms.
| Factor | Contractor | EOR | Staff augmentation vendor |
|---|---|---|---|
| Legal counterparty | The individual or their company | The EOR, as employer | The vendor |
| How it's priced | The contractor's rate | Salary and employer contributions plus an EOR fee (Deel and Remote list from $599 per month; Remote on an annual contract) | Engineer's earnings plus a vendor margin |
| Who directs the work | The contractor, in principle | You, in practice | You, in practice |
| Default code rights | None; you need a written assignment | The EOR, as employer, under Directive 2009/24 Art 2(3) (our reading) | Set by the vendor contract |
| Main risk | Reclassification as employment if the person is directed and integrated | Control stays with you; check permit and IP chain | Vendor terms; check who carries employer duties |
What this means for your engagement model
Choose by how the person will work, not by which label is cheapest. Our judgment, not legal advice: someone embedded in your team, working under your managers for a long stretch, points to an employment route (an EOR, your own entity, or a vendor whose contract carries the employer duties). A person who delivers a defined project with their own methods and other clients points to a contractor.
Whatever you choose, settle three things before the engineer touches your repo: the written code assignment, the provider's answers on permit and liability, and who pays if a tax authority reclassifies the arrangement. If finance or legal signs the contract, send them the sections on Germany and the Netherlands above.
For a long engagement in Germany, the next read is freelance developers in Germany and Scheinselbständigkeit, which covers the four-year contribution look-back. HighCircl, a staff augmentation provider, adds a capped 20% margin on top of what the engineer earns, with no recruitment fee; its model is on the HighCircl hire page.
FAQ
When should you use an EOR for a developer?
When you want one person on an employment contract in a country where you have no entity, and you accept that you'll direct their work. In our judgment it fits an embedded, long-running role better than a defined project. Check the German permit point above before using one there.
Is an EOR the same as a contractor of record?
No. An EOR employs the person. A contractor of record keeps the person as a contractor and takes on the classification liability. Deel prices them separately: self-classified contractors from $49 per month, Contractor of Record from $325 per month, against its EOR from $599 per month (all as listed in October 2026).
Does using an EOR remove misclassification risk?
It removes the freelance-misclassification question for that person, because they're an employee. It doesn't remove the control question. Under SGB IV section 7 and the Dutch approach KVK describes, direction and real working practice matter. In Germany, the AÜG question is separate (see above). We found no ruling that settles how authorities treat EOR set-ups.
Who owns code written by a developer hired through an EOR?
Under Directive 2009/24 Art 2(3), the employer holds the economic rights by default, unless the contract says otherwise. With an EOR, the employer is the provider, so you need a written assignment or licence from the EOR to you. That's our reading of the directive, so confirm the details under the relevant national law.
Can you hire a developer in the EU without a local entity?
Three routes exist: a contractor, an EOR, or a staff augmentation vendor. Each has the trade-offs above. Tax and VAT depend on where your company is based, so take that part to a tax adviser.