Working as a contractor in Europe: who employs you, and how you get paid

A rigger takes an eight-month contract on a wind project off the Dutch coast. A cyber engineer is offered twelve months in Frankfurt. A radiographer is asked to cover a unit in Dublin for a quarter.

All three ask the agency the same thing — will I still be paid through my usual arrangement? — and all three get a confident yes from a consultant who has not checked.

Then the first payday arrives, or worse, the first tax year ends, and it turns out the answer was no. Overseas contracts are where UK contractors are most likely to end up with a problem they did not create and cannot easily unwind. The good news is that the questions you need to ask are few, and asking them takes one phone call before you fly out rather than a specialist's fee afterwards.

The rule that decides almost everything#

Employment income is generally taxed where the work is physically performed.

Not where you live. Not where the agency is. Not where the client's head office is. Where you are standing when you do the job.

So if you are in Rotterdam for eight months, the Dutch system has a claim on that income. Running it through a UK PAYE scheme, or invoicing from your UK limited company and hoping, does not make that claim go away — it leaves you owing tax in one country while having paid it in another, and unpicking that is slow and expensive.

Two further points sit on top of the rule.

Residence. Where you remain tax-resident affects what else you are taxed on and what relief you can claim under the double tax agreement between the UK and the country you are working in. Long assignments can shift your residence position, and the UK statutory residence test counts days.

Social security is a separate question from tax. You can be liable for income tax in one country and social security contributions in another. Within the EU and EEA the coordination rules decide which country's system you belong to, and an A1 certificate is the document that evidences it. If you are going to remain in the UK system while working abroad, you want the A1 in hand before you start, not applied for in month four.

The routes available to you#

Local PAYE employment through a provider in the country. A local entity employs you and runs that country's payroll — income tax and social contributions deducted at source, local payslip, local entitlements. The simplest answer for a single assignment of any real length, and the one most agencies will arrange.

Employer of Record. Functionally similar from where you stand: a company with a legal entity in that country employs you on a local contract, runs local payroll, handles the filings, and invoices your agency or the client one amount. The difference is mostly structural and commercial rather than something you experience. EOR is what makes it possible for a client with no entity in a country to engage you there properly.

Your own limited company, invoicing from the UK. Occasionally right — genuinely short assignments, work substantially performed from the UK, a real business with multiple clients. It can be the wrong fit where the role is employment in substance; that is the arrangement where the most damage is done when it is used anyway. Several European countries take a firm line on arrangements that look like employment dressed as a service company, and in Ireland the Karshan framework tests control, integration and whether you are genuinely in business on your own account. If a country's authorities conclude you were an employee, the liability comes back up the chain and part of it lands on you.

Setting up locally in your own right — a Dutch or German or Irish business structure. Real independence, real administration, and only worth it if you intend to work in that country repeatedly.

Ireland specifically is the most common destination for UK contractors and has its own shape — real-time reporting to Revenue on or before every pay date, employer PRSI above 11%, USC in bands on top of income tax. We have set it out from the agency side in placing contractors in Ireland, and the mechanics are the same ones that determine your net pay.

What this does to your rate, and why you must ask early#

Where you are employed locally, the rate quoted to the agency has to cover that country's employer social costs — and several are materially higher than the UK's.

Irish employer PRSI runs above 11% of earnings with no ceiling and no allowance to offset it. Employer contributions in the Netherlands, Germany, France and Belgium are all substantial, structured differently in each, and in some cases capped at income levels that a contractor rate clears easily.

None of that is a hidden fee. It is the cost of employing somebody in that country, and it comes out of the assignment rate before your gross pay is calculated. Which means a rate that looked generous against your UK work can be worse in the hand, and a rate that looked flat can be better once you factor in what the local system gives back.

So ask, before you commit: is the figure you have quoted me the assignment rate or my gross pay, and has it been priced with local employer costs included? An agency that has done overseas placements properly will have a model and will show you. An agency that has not will say "we'll come back to you", and that is the moment to slow down.

Questions to ask before you accept an overseas contract#

• Which country will I be physically working in, and how many days a week? Split arrangements — three days in Amsterdam, two at home — are the hardest version and need proper advice, not a rule of thumb.
• How long is the assignment, and could it extend? Length changes the tax and residence answer, sometimes at a specific threshold.
• Who will employ me? Name the entity.
• Is the quoted figure the assignment rate or my gross pay, and does it include local employer costs?
• Who is applying for my A1 certificate, and when?
• Will I get a local contract of employment, and in which language?
• What happens to my UK National Insurance record and my pension while I am away?
• Who pays for the work permit or registration, if one is needed?
• Am I covered for healthcare, and by whom?
• What happens if the assignment is cut short in month two?

Write the answers down. The consultant who gave them may have moved desks by the time it matters.

Where the honest answer is "don't"#

If the work can genuinely be done from the UK, doing it from the UK is simpler, cheaper and lower risk. A fair amount of "the client needs you on site in Munich" is preference rather than requirement, and it is worth testing.

If the assignment is three weeks, the cost of doing it properly may take most of the uplift. Somebody should tell you that before you agree, and if nobody has, ask for the numbers.

If you are being encouraged to invoice from your UK company for a role that is plainly an employment in another country, decline. The liability does not stay with whoever suggested it.

And if a provider offers you an overseas take-home figure well above what every compliant route produces — with part of it described as an allowance, an advance, a loan or a grant — that is the same disguised remuneration problem that exists in the UK, with an extra border in the way when it unwinds. Walk away.

How Freelancer Supermarket helps#

We are an independent consultancy and an introducer. We are not a payroll company, we are not your employer, and we do not run payroll in any country.

What we do is the assessment and the introduction. We look at where the work is physically performed and for how long, your residence position, what the client requires and what the rate can actually carry, we set out the routes that genuinely fit side by side with the local employer costs stated, and we introduce you to two or three partners from a panel we have checked — providers who hold real entities in the country concerned, not intermediaries reselling someone else's.

This is part of our payroll service, not a separate product. It is payroll for people working somewhere else.

It costs you nothing. We are paid by whichever partner you engage, and the same amount either way, so there is no route we have a reason to push. If the answer is that the placement should stay in the UK, or that the rate on the table does not survive the local employer costs, we will tell you. There is no fee riding on it. Regulated tax and legal advice on your own position comes from the regulated partner you engage.

We also find contractors work in these markets — recruitment and contractor sourcing runs alongside the payroll rather than after it. And for the wider picture of company setup, sole trader management and the paperwork behind the work, see payroll and business support for self-employed contractors.