Last updated: 15 September 2026
When you source your own contract through a recruitment agency and then ask an Employer of Record to employ you, the fee is normally invoiced to the agency. The agency signs the commercial contract, so the agency gets the bill. Who ends up carrying that cost is a separate question, and it is usually settled inside your rate.
A self-sourced contract like this has three parties around you. The agency holds the commercial contract. The end client directs the work. The Employer of Record becomes your legal employer in the country where you live and work. Each one signs a different document, and each pays or receives something different.
This page maps that chain and shows where the fee and the VAT sit. It stays general on purpose. The treatment turns on where each party belongs and on what the contracts say, so read it as the shape of the answer rather than the answer for your own deal.
Who signs what when an agency is in the middle?
Three separate agreements sit side by side. The agency signs a services agreement with the Employer of Record. You sign an employment contract with the provider's local entity in the country where you work. The agency and the end client have their own contract for the placement, and you are not party to that one.
That split explains a phrase you will hear on these calls. The Employer of Record is your legal employer. It runs your payroll, your tax and your social security in your country. The agency and the end client are your operational employer, because they direct the work you do each day. The two roles live in different contracts and they do not overlap.
| Party | What they sign | What they pay | What they receive |
|---|---|---|---|
| You, the worker | An employment contract with the provider's local entity | Income tax and employee social security, taken at source | A local payslip, statutory benefits and leave |
| The Employer of Record | Your employment contract and a services agreement with the agency | Your salary and employer contributions to the local authorities | One invoice, paid by the agency |
| The recruitment agency | The services agreement, plus its own contract with the end client | The Employer of Record's invoice | Its own margin on the placement |
| The end client | A contract with the agency | The agency's invoice | The work, directed day to day |
Read that as the common shape, not a rule. Some chains put the end client on the services agreement instead. Some add a fourth party. The point that matters is simple: one party is named as the client on the services agreement, and that party is the one who gets invoiced.
If the legal employer part of this is new to you, our page on what an Employer of Record does sets out the role in plain terms. It is worth ten minutes before you sign anything, because the employment contract you sign is a real local contract with real local rights.
Whose cost is the fee, really?
The party named as the client on the services agreement is the party that is invoiced. In a self-sourced chain that is normally the agency. This follows the signature rather than anyone's preference, and it should. The paperwork has to match the commercial relationship, or the chain stops making sense to an auditor.
Who bears the cost in the end is a different matter, and it is open to negotiation. A rate can be agreed before the provider's charges or after them. Contractors who found the work themselves often offer to carry the fee out of their rate to keep the deal simple. That is a rate negotiation. It does not change who receives the invoice.
Write it down either way. The line you want is whether the rate the agency quotes is before or after the provider's charges. Two people can shake hands on the same number and mean different things by it. The gap tends to show up on the first invoice, when it is much harder to fix.
How do you work back from a take-home figure?
You cannot do it reliably on your own. A day rate is a business figure. A salary is a payroll figure. Between the two sit employer social security, employee social security, income tax, holiday pay and any statutory bonus the country requires. All of those change by country, and some change with your own tax status.
So the work runs backwards. A provider takes the annual value of the contract, models the employer cost in the country where you will be employed, and then shows the gross salary and the net pay that fall out of it. Your target take-home is the input to that model, not the output, and the model has to be built for one country at a time.
You can get a sense of the shape with our employer cost calculator, which is built for the employer side of the sum. It will not settle a personal tax position, and it is not meant to. For that you need a payroll run modelled on your real circumstances in the country where you live.
Where does VAT land?
Where VAT is charged depends on where each business in the chain belongs. For services between businesses, HMRC's general rule is that the supply is treated as made where the customer belongs. So the country of the party being invoiced, rather than the country you work in, usually decides how the fee is treated.
That has two practical effects. If the provider's invoicing entity and the agency belong in the same country, domestic rules normally apply to the fee. If they belong in different countries, the charge may move to the customer instead. The detail is in VAT Notice 741A, HMRC's guidance on the place of supply of services.
Two things are worth agreeing before the first invoice: which entity is invoicing which, and what VAT treatment both sides expect. Where VAT does apply, it applies to the fee for the service. Wages and the statutory contributions paid over to the authorities are not a supply of services. Your own position depends on your registration and your country, so take advice on it.
What should you check before you sign?
Start with the employment contract, because that is the one that binds you. Check which entity employs you and in which country. Check the notice terms, how holiday and sick pay work locally, and whether the salary in the contract matches what you agreed. Check the start date, and check who you contact when something goes wrong.
The agency has its own list. Who is named as the client on the services agreement. When invoices fall due. What happens if the end client pays late. What notice ends the placement. Which entity in the provider's group does the invoicing. Agencies that have done this before also ask to see the local employment contract template first.
There is more than one way to build a chain like this, and an agency sits in it differently from the way a staffing supplier does. Our comparison of an Employer of Record and a staffing agency is a useful read if you are still deciding which shape you want.
The right answer depends on the countries involved and on what each contract says. Teamed employs people in 187+ countries, and a designated person will manage your account. Talk to an Expert at Teamed and we will walk through your chain with you, with the agency in the room if that helps.