Can We Hire Employees in France or Latvia on Our Dutch Entity?

Your Dutch BV has become the natural hub for European operations. The team in Amsterdam is humming along, and now you've found the perfect candidate in Lyon. Or maybe your CTO wants to build an engineering pod in Riga. The question lands on your desk: can we just add them to the Dutch payroll?

The short answer is yes, a Dutch entity can employ people who live and work in France or Latvia. But "can" and "should" are different questions, and the gap between them is where compliance headaches, tax surprises, and six-figure correction costs live. The reality is that employees physically working in France or Latvia are generally governed by local employment law, social security, and often income tax in those countries, regardless of which entity signs their contract or processes their salary.

This isn't a reason to abandon your expansion plans. It's a reason to understand your options clearly before you make promises to candidates or commitments to the board.

Key Takeaways for Hiring in France or Latvia from a Dutch Entity

A Dutch entity (typically a BV) is a Netherlands-registered legal employer that can contract and pay workers, but it does not automatically give the company employer registration or payroll capability in other EU countries. Here's what you need to know before moving forward:

• A Dutch BV can legally employ staff who live and work in France or Latvia, provided it complies with local employment, tax, and social security rules in those countries.

• French and Latvian employees are generally governed by the law of where they physically work, even when paid from a Dutch entity.

• Your main employment model options are foreign employer registration, Employer of Record (EOR), or establishing a local entity. Contractors and posting workers are separate arrangements with distinct rules.

• Payroll registration in France or Latvia does not automatically create a corporate tax permanent establishment, but the issues are related and require separate assessment.

• France is administratively heavier for employment compliance, with mandatory employee representation thresholds and extensive collective bargaining requirements. Latvia is operationally simpler but still requires local payroll alignment.

• Mid-market companies (200 to 2,000 employees) frequently reach an inflection point around 200 to 300 employees where fragmented country-by-country employment vendors create measurable operational overhead.

Can a Dutch Entity Hire Employees in France or Latvia

Yes. A Dutch BV can employ staff who live and work in another EU country, including France and Latvia. EU free movement principles and social security coordination rules explicitly permit this arrangement.

But here's what most guidance fails to clarify: if someone works from France or Latvia on an ongoing basis, local labour law, social security, and often income tax in that country apply by default. The nationality of your company doesn't override where the work happens. Paying someone from Dutch payroll without compliant host-country registration can create multi-year arrears exposure for unpaid social contributions and tax withholding.

The distinction that matters is whether your employee is relocating to the Netherlands or remaining based in France or Latvia. If they're relocating, Dutch employment law applies. If they're staying put and working remotely from Lyon or Riga, you need a compliant structure in their country.

A foreign employer registration is an administrative process where a company without a local entity registers with a country's tax and social security authorities to run compliant local payroll for employees working in that country. This is one of several options, and the right choice depends on your headcount plans, risk tolerance, and how long you expect to operate in each market.

Employment Models for Hiring Employees in France and Latvia

For cross-border EU employment, Teamed advises CFOs to model a 3 to 5 year employment-structure horizon when deciding between EOR, foreign employer registration, and local entity establishment, because switching costs and compliance transition work typically recur over multi-year growth cycles.

Direct Employment via Foreign Employer Registration

Your Dutch company remains the legal employer. You register with French or Latvian authorities for payroll, social security, and tax withholding purposes. This works well when you want direct employment relationships without creating a subsidiary, but it requires navigating local registration processes and ongoing compliance reporting.

Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organisation that becomes the local legal employer for workers in a specific country, running payroll, tax, social security, and statutory benefits while the client company manages day-to-day work. EOR onboarding can be completed in as little as 24 hours once required worker data is available and checks are complete, which is materially faster than employer registrations or entity setup.

Choose EOR when you need a compliant hiring route within weeks rather than months, or when internal Legal and Finance require a clear allocation of local employment compliance responsibilities to a specialist provider.

Local Subsidiary Entity

Establishing a French SARL or Latvian SIA gives you maximum control over employment relationships, benefits design, and local HR policies. This makes sense when you're building a sustained presence with multiple employees and want direct authority over the employment relationship.

Contractors

Contractor arrangements are not employment. They're business-to-business service relationships with materially different tax and labour protections. Misclassification risk is the legal and financial exposure that arises when an individual treated as an independent contractor is later recharacterised as an employee by a court or authority, triggering back taxes, social security, and employment rights liabilities.

Choose a contractor model only when the role can be delivered as an independent service with genuine autonomy over working time and methods, and when the individual is not integrated into management structures typical of employment.

Posting Workers

The EU posting of workers framework is a cross-border employment mechanism that allows an employer established in one EU/EEA country to temporarily post employees to work in another EU/EEA country while keeping them on the home-country social security system under an A1 certificate. This is designed for temporary assignments, not permanent remote setups.

Registering as an Employer in Another EU Country

EU guidance is clear: if you hire employees in another EU country, you need to register with the local authorities as an employer. This applies to Dutch entities hiring in France or Latvia.

Foreign employer registration typically involves obtaining local employer and tax identification numbers, setting up local payroll reporting and withholding, enrolling employees in host-country social security, and complying with local minimum employment standards including contracts, notice periods, and leave entitlements.

The process differs between France and Latvia. France requires more extensive documentation and has longer processing times. Latvia is generally faster but still requires careful attention to registration requirements.

This registration does not automatically create a corporate tax permanent establishment. But if your French or Latvian employees negotiate contracts, manage key clients, or have broad authority to bind the company, you need a separate PE assessment with tax advisors.

Hiring Employees in France as a Foreign Employer

In France, the statutory full-time working time baseline is 35 hours per week, which directly affects overtime calculations and working-time compliance for employees working in France.

French Employment Law

Employees normally working in France are covered by the Code du Travail, even if legally employed by a Dutch company. This means French rules on working time, paid leave, notice periods, and termination apply from day one. Sectoral collective bargaining agreements (Conventions Collectives) may add additional requirements depending on your industry.

Payroll and Social Security

Register in France as an employer with no establishment (employeur sans établissement) and use French payroll to pay salaries, withhold income tax, and remit social contributions. All work permit-related procedures must now be submitted digitally through the ANEF-Emploi platform.

Employee Representation

France requires establishment of a Comité Social et Économique (CSE) once you employ at least 11 employees for 12 consecutive months. The CSE has rights to prior information and consultation on significant business decisions. Failure to establish or respect CSE rights constitutes the criminal offense of "délit d'entrave," punishable with substantial penalties.

For Dutch employers in regulated sectors like financial services, healthcare, or technology, this threshold matters. Hiring beyond 11 employees in France introduces mandatory governance structures that require dedicated HR attention.

Immigration

EU/EEA citizens do not need work permits to work in France. Non-EU nationals typically require sponsored permits. France's Passeport Talent Monde offers a consolidated four-year renewable work permit for high-skilled roles, with approval guaranteed within 30 days for positions paying at least €34,650 gross annually.

Hiring Employees in Latvia as a Foreign Employer

Latvian Labour Law applies to employees normally working in Latvia, even when employed by a Dutch company without a subsidiary.

Contracts and Language

Written contracts must specify job duties, salary, hours, holiday entitlement, probation period, and notice requirements. Contracts are typically in Latvian or a mutually understood language if the employee cannot read Latvian.

Payroll and Social Insurance

Register for payroll and State social insurance. Latvian State Mandatory Social Insurance Contributions (VSAOI) for 2025 total 34.09% of gross salary, split as 23.59% employer contribution and 10.50% employee contribution. You must register foreign employees with the Latvian Tax Agency by the 194th day of their stay to maintain compliance.

Immigration

EU/EEA citizens can work without a permit and commence employment upon arrival, subject only to address registration for stays exceeding 90 days. Non-EU nationals require employer-sponsored work permits with processing typically taking 10 to 15 days.

Termination and Notice

Latvia allows probationary periods of up to three months, extendable to six months through collective agreements. During probation, termination requires only three days' written notice. Post-probation, employers must provide justifiable grounds for termination and follow statutory notice procedures. Unfair termination claims can result in reinstatement orders and back pay awards.

Posting Workers from a Dutch Entity Inside the EU

Under EU social security coordination rules, an A1 certificate is commonly used to keep an employee in the home-country social security system for postings that are typically capped at 24 months.

A posted worker normally works in one EU country but is sent temporarily to another EU country, keeps their original contract, and usually retains original social security coverage. Dutch companies can post workers to France or Latvia for time-limited projects, but must meet host-country core labour standards and notify authorities where required.

Under the EU Posted Workers Directive framework, host-country rules on a core set of working conditions, including minimum pay elements and working time, must generally be applied to posted workers while they work in the host country.

Don't use posting to avoid foreign employer registration when your needs are permanent. Posting is designed for temporary assignments, not ongoing remote work arrangements.

Permanent Establishment and Tax Risk for Mid-Market Companies

Permanent establishment (PE) is a corporate tax concept where a company can become subject to corporate income tax in another country if it has a sufficient business presence there, including certain dependent agent or fixed place of business arrangements.

Payroll registration doesn't automatically create PE, but the issues are related. Risk indicators include local employees who negotiate or sign contracts, dedicated office or facility space, and country managers with broad authority to bind the company.

For regulated mid-market employers, Teamed categorises employment-model risk into three measurable buckets: payroll non-registration exposure, misclassification exposure, and permanent establishment exposure. Each maps to different audit evidence and remediation cost profiles.

Many mid-market firms employ across Europe without triggering PE when roles and structures are designed carefully. But if your French sales director is closing deals or your Latvian country manager has authority over significant business decisions, involve tax and legal advisors early.

When Mid-Market Companies Should Move from EOR to Local Entities

EOR makes sense for fast market entry, small headcount, market testing, and uncertain time horizons. The trade-offs become more significant as teams grow: higher per-employee costs, less direct HR policy control, and potential vendor sprawl across countries.

A local entity offers employer brand strength, direct authority relationships, country-specific benefits and policies, and better audit and regulatory fit. For companies in regulated industries, entity establishment often becomes necessary to meet supervisory expectations.

Choose a mixed model (EOR for first hires, entity later) when you anticipate near-term hiring uncertainty and want to defer entity fixed costs while keeping a pre-planned transition path. The key is making this part of a deliberate employment model roadmap rather than a reactive vendor event.

How Companies Above 50 Employees Should Plan Hiring Across Europe

Assess

Map current and planned headcount by country. Identify clusters in France, Latvia, and other markets. Review current vendors and models. Capture industry-specific obligations.

Design

Create an employment model playbook with defaults for EOR versus foreign employer registration versus entity. Align People, Finance, Legal, and Compliance on criteria including cost, speed, control, and risk tolerance.

Implement

Phase market entries deliberately. Standardise processes across countries. Plan registrations and EOR onboarding. Embed PE and immigration checks. Review annually as headcount evolves.

Teamed can help design this roadmap and harmonise models across 180+ countries and regulated sectors, ensuring your employment strategy evolves with intention rather than by accident.

Common Compliance Mistakes Mid-Market Companies Make When Hiring in Europe

• Assuming Dutch rules apply everywhere. French and Latvian employees are governed by local law regardless of which entity pays them.

• Misclassifying contractors. Long-term, full-time contributors in France or Latvia who are integrated into your team are employees under local law, whatever your contract says.

• Partial compliance. Registering payroll but ignoring CSE requirements in France or lawful termination procedures in Latvia.

• Skipping PE assessment. Hiring senior commercial or managerial roles abroad without evaluating permanent establishment implications.

• Vendor sprawl. Multiple EOR and payroll providers without a unified strategy, causing inconsistent contracts, benefits, and compliance.

• Late immigration handling. Non-EU hires in France or Latvia need early work and residence planning to avoid delays.

• Set-and-forget models. Failing to review model suitability as headcount grows or business needs change.

Strategic Next Steps for Mid-Market Leaders Hiring in France or Latvia

Start by clarifying your business objectives in each country. Are you making a single strategic hire or building a team? The answer shapes your model choice.

For near-term hiring, select the appropriate model per role set. EOR offers speed and clear compliance allocation. Foreign employer registration maintains direct employment relationships. Local entities provide maximum control for sustained presence.

Align People, Finance, Legal, and Compliance on employment law, tax and PE considerations, immigration requirements, and sector-specific obligations. Build an action plan covering model selection, registrations, contract drafting, and payroll setup.

Plan reviews and transitions as headcount stabilises. The goal is a coherent European employment strategy that supports your growth without creating compliance surprises for boards or auditors.

If you're navigating these decisions and want strategic guidance tailored to your situation, talk to the experts at Teamed. We help mid-market companies design employment model roadmaps across Europe and support transitions between contractors, EOR, and entities over time.

FAQs About Hiring Employees in France or Latvia from a Dutch Entity

How can we fix existing hires in France or Latvia that were put on the Dutch entity incorrectly?

Review each case against French or Latvian requirements. Move people onto a compliant model, whether foreign employer registration or EOR. Obtain tax and legal input to regularise payroll, social security, and contracts. The correction process varies based on how long the non-compliant arrangement has been in place and what back-contributions may be owed.

How should we handle equity and stock options for French or Latvian employees of a Dutch entity?

Equity plans can usually extend to France and Latvia, but local tax, securities, and employment law affect plan design, documentation, and communication. French employees face specific tax treatment on stock options and RSUs. Latvian rules differ. Seek country-specific advice and assess withholding and reporting requirements before making grants.

What timelines should we expect to start payroll in France or Latvia from a Dutch entity?

EOR is typically fastest, often within days once worker data is available. Direct foreign employer registration takes several weeks depending on documentation readiness and authority processing times. Entity setup takes longer, typically several months. Plan accordingly based on your start date commitments.

How do HR systems and data protection rules change when we add French or Latvian employees to a Dutch entity?

Under GDPR, HR data processing for employees in France, Latvia, and the Netherlands requires a lawful basis and compliance with data subject rights. Regulatory fines can reach up to €20 million or 4% of global annual turnover for certain breaches. Ensure your HRIS supports GDPR compliance, review vendor data processing agreements, and provide appropriate privacy notices to employees.

What is mid-market and why does it matter for our hiring strategy?

Mid-market typically means 200 to 2,000 employees or approximately £10 million to £1 billion revenue. At this scale, employment model choices in France and Latvia have strategic implications for cost, control, audit readiness, and risk. You're large enough to need sophisticated guidance but not large enough to have dedicated global employment counsel in-house.

How do we compare the total cost of employment across EOR, foreign employer registration, and local entities?

Compare salary, employer social contributions, benefits, vendor fees, internal compliance workload, advisory costs, and transition costs. Build side-by-side cost and risk views for France and Latvia with expert support. The cheapest option on paper isn't always the best choice when you factor in compliance risk, operational complexity, and long-term flexibility.