Absolutely! Employer of Record is your legal gateway to hiring software developers without the complexities of opening a legal entity abroad. Your EOR partner serves as the legal employer of programmers on your behalf, taking care of all the admin functions, like payroll, HR, legal, and benefits management. They also assume full liability for adhering to local labor laws, employment rules, and tax obligations, bearing any potential legal risks.

But make no mistake—you remain the one and only real employer of software engineers. From day one, you manage your team directly and integrate it into your culture and practices. All the bureaucracy? Gone. Legal risks and admin burdens? Off your shoulders. Instead, you focus on what matters the most—developing your software product.

So, an EOR service in Eastern Europe is simply a means for tech companies to swiftly expand into new markets and hire a development team compliantly. Exactly what tech companies like BigCommerce, People.ai, Dotmatics, and Sift did. With the help of Alcor, an EOR provider for tech, they have seamlessly and securely built fully backed teams of 30+ developers and fast-tracked their product growth.

Picking the location to grow your business isn’t just about pinpointing dots on a map or chasing the market trends. A hotspot for one company could be a dead end for another. That’s why conducting thorough market research is key to finding a destination that aligns with your talent needs, budget, business comfort zone, and long-term goals.

Start by asking:

1. Is there a large talent pool with the tech skills you need?
2. How cost-effective is it, and does the price align with the quality of the software development?
3. Is the legal and business landscape expansion-friendly?
4. What are the time zones and cultural proximity?
5. Does the location embrace innovation?

Here are a few locations in Eastern Europe for your consideration:

Poland

• 650K+ tech experts—largest talent pool in CEE
• 37% lower developer salaries than in the US
• #1 in the CEE region for tech skills
• #2 in CEE for English proficiency
• #4 innovation economy in CEE

Romania

• #1 in CEE for English proficiency
• 250K+ tech talents
• 40% lower developer salaries than in the US
• #1 in CEE for IT infrastructure
• #6 innovation economy in CEE

Ukraine

• 48% savings—lowest developer salaries in CEE
• 302K+ tech talents
• #3 in CEE for data science skills
• #7 in CEE for IT infrastructure
• #7 innovation economy in CEE

There are two prevalent models for hiring Eastern European developers: employment agreement and B2B contract. 

An employment agreement forms an employer-employee relationship governed by local Federal Labor Laws. For employers, this type of employment comes with tax obligations, including paying payroll taxes and social security contributions, as well as withholding income tax on behalf of the employee. Additionally, it is full of rigorous working terms and employee termination procedures. That’s where Alcor’s IT EOR in Eastern Europe can serve as your lifeline in the deep employment waters.

For employees, an employment contract serves as a safety net, securing their salary amount, benefits, working hours, paid time off (PTO), and termination terms. The downside? Their salary is paid in a local currency, which may be affected by inflation. 

A B2B contract is signed between a hiring tech company and a software developer, establishing a contractor-client relationship under local civil or commercial laws. The programmer must register as a sole propriator with the local tax authority to provide IT services. 

Unlike an employment agreement, in B2B relations, the employer is free from tax obligations, while the contractors handle taxes and social contributions on their own or via an EOR vendor in Eastern Europe. The reward is paid in a foreign currency, so inflation and exchange rate swings are not an issue. However, benefits, PTO, and working terms are typically negotiated individually and are usually more restrictive than those outlined in the employment contract. 

An employment agreement typically entails tax obligations for both the employer and the employee. 

What does the employer’s share include?

Social Security Contributions and payroll taxes are determined at the national level and collected by the local institutions. In each EE country, the scope of these contributions is quite dissimilar, but they typically include health insurance, pension funds, labor risk, sickness, disability, and unemployment contributions.

Here are the average SSCs total in each country:

• Poland: 19.48% to 22.14% of the employee’s salary should be paid by the 15th of each following month
• Romania: 2.25%-10.25% of the employee’s salary should be paid by the 25th of each following month
• Ukraine: 22% of the employee’s salary should be paid by the 20th of each following month

Now, the employee’s share:

1. Personal income tax follows, with rates fluctuating as follows: 

• Poland: progressive structure; 12% (minus the amount of the decreasing tax) for income up to $29,821 and tax of $2,683 plus 32% of the excess over the income of $29,821
• Romania: 10%
• Ukraine: 18% or 5% under the Diia.City regime

Both locally registered and foreign tech companies that engage EE software developers are required to withhold and remit income taxes on behalf of their employees. Partner with an Employer of Record company in %geo%, like Alcor, to get all the taxes paid for you—no more worries about miscalculations or missed deadlines.

2. Social Security contributions on the employee’s side are usually lower compared to those of the employer, ranging as follows: 

• Poland: 22.71%
• Romania: 35%
• Ukraine: not presupposed

3. Military tax of 5% in Ukraine (applicable to both employment contracts and Diia.City regime). 

The B2B contract allows tech companies to hire Eastern European software engineers as contractors. In this case, paying payroll taxes is not mandatory for the company. Developers, on their part, are responsible for covering:

1. Personal income tax differs in each location as follows:

• Poland: lump-sum tax of 12%
• Romania: 16% income tax on net income or a 1%-3% micro-company tax for LLC and 10% for sole traders
• Ukraine: 5% of a single tax

2. Social Security contributions, which vary from country to country.

Poland: After the first 6 months of registering as a PE, SSCs are not required. For the next 24 months of work, PEs benefit from “preferential contributions” of $109 per/month. After this period, this payment increases to $436.17/month. Health insurance payments are income-based and range from $114.10 to $342.30. 

Romania:

• Pension insurance contribution (for income over 24 minimum salaries, where the min. salary in Romania is $831): 25% or $4,986 per year.
• Health insurance contribution: 10% of the net income or around $4,986 per year. The rate is subject to a minimum threshold of 6 min. salaries, which is about $4,986, and a maximum threshold of 60 min. salaries, which is around $49,860.

Ukraine: 22% of the minimum salary of about $125, paid quarterly.

3. Military tax of 1% in Ukraine.

Eastern Europe is a goldmine of skilled software engineers, offering a comparable talent pool to Silicon Valley without the high price tag. The average senior developer salary here ranges from $61,520 to $73,880 per year.

Even the highest-paid tech experts don’t break the bank in EE. For instance, senior Site Reliability Engineers earn approximately $72,000 to $81,600, while an Engineering Manager receives an annual salary ranging from $97,200 to $120,000.

That’s up to 46% savings compared to the US. See yourself:

So, how much should you really budget to hire a software developer in Eastern Europe? To break down the total cost beyond just salary, you need to include:

• annual income of a software engineer,
• taxes, social contributions, and additional payments presupposed by the local labor laws,
• employee benefits package, which typically includes health insurance, professional training, hardware, and corporate merchandise, totaling about $6,350 in EE and $15,400 in the US per developer/year,
• recruitment fee, which is typically 20% in EE and 30% in the US of the senior developer’s gross annual salary.

Have a sneak peek at the figures:

Contact Alcor, your EOR service provider in Eastern Europe, to get precise payroll calculations for your tech positions and discover your true savings.

When hiring software engineers in EE, as an employer, you must comply with statutory employee benefits under local labor laws. They are mandatory for tech specialists working on the employment contract. Failure to provide these benefits may lead to legal troubles, penalties, and fines.

So, what are these statutory employee benefits?

• Social security, including retirement, unemployment, healthcare, disability, sick and parental leave, occupational risk, etc.
• Annual vacation consists of predetermined paid days off.
• Leaves, including sick, maternal, paternal, parental, and childcare.
• National holidays, including Christmas Day, New Year’s Day, and Independence Day, are all set out in the local Labor Codes.
• Termination protection includes a notice period and just cause.

There are also supplementary employee benefits, which are optional but good to have if you want to attract top software engineers in EE, like:

• Private medical insurance is a common addition to the basic medical package, typically covering hospitalization, vision and dental care, emergencies, and other related expenses. Both employee-only plans and family coverage options are available.
• Tech courses & English classes to promote professional development;
• Gym membership is offered as a subsidized benefit or fully paid by the employer.
• WFH setup & Internet allowance, relevant for international dev teams working remotely; 
• Stock options are predominantly offered to senior and C-level executives.

The standard workweek in Eastern European countries typically lasts 40 hours. Each country presupposes the possibility of overtime:

• Poland: shouldn’t exceed 8 hours per week. The overtime compensation amounts to 150% of the regular rate for regular hours and 200% for night shifts, Sundays, or national holidays, or can be compensated with time off.
• Romania: shouldn’t exceed 8 hours per week. The overtime compensation amounts to 175% of the base salary in regular hours and 200% on national holidays.
• Ukraine: shouldn’t exceed 4 hours/day for two consecutive days and 120 hours/year (not applicable during martial law). The overtime compensation amounts to 200% of the standard rate in regular hours and on national holidays.

When you hire a software developer in Eastern Europe, their probation period lasts: 

• Poland: from 1 to 3 months, depending on the contract,
• Romania: 3 months for standard jobs and 4 months for managerial roles,
• Ukraine: from 1 to 6 months, depending on the type of role.

Typically, this period is sufficient to evaluate the skills and assess the new hire’s performance. We at Alcor guarantee only high-quality tech talent, with 98.6% of our hires passing probation with flying colors. In the rare case that someone doesn’t meet your expectations, we provide a replacement at no additional charge.

Software developers working on an employment contract in Eastern Europe are entitled to annual leave, sick leave, maternity leave, extraordinary paid leave, and public holidays, which vary from country to country.

Sick leave policies vary significantly across each EE country.

Poland: The first 33 days of sick leave (or 14 days if an employee is 50+ y.o.) are paid at 80% of the employee’s salary by the employer. If it extends up to 182 days, it is covered by Social Insurance (ZUS).

Romania: The first 5 days of sick leave are paid at 75% of the employee’s salary by the employer. If it extends from the 6th to the 183rd day, then it’s covered by health insurance.

Ukraine: The first 5 days are compensated by the employer; thereafter, the Pension Fund compensates for the entire duration until an employee’s recovery or disability is determined. In both cases, the rate ranges from 50% to 100% of the employee’s average salary.

When a US-based tech company hires software developers in Eastern Europe, it should consider visa requirements. To travel on a business trip to the United States, EE programmers should obtain a B1/B2 visa, which permits a stay of up to six months. It allows business-related activities, such as attending conferences and meetings, participating in short-term training or team-building sessions, and exploring partnerships, but not permanent work in the United States.

To get it, Romanian and Ukrainian citizens should 

• Complete Form DS-160, 
• Pay the application fee of $185,
• Schedule and pass the interview at the nearest U.S. embassy/consulate,
• Prepare documents, including a valid passport, proof of corporate ties, and financial documentation (such as bank statements and a sponsor letter).

For Polish citizens traveling to the US on a business trip for up to 90 days, an ESTA approval is required, which confirms they meet the Visa Waiver Program (VWP) requirements (e.g., a valid e-passport and no prior visa denials).

Sounds like a lot of visa peculiarities. But no need to stress out. Alcor, your Employer of Record service provider in Eastern Europe, can seamlessly handle all aspects of visas for your software engineers, just like we did for US tech company ThredUP. 

Local labor codes govern the termination of an employee in Eastern Europe and have their own unique characteristics in each country. Luckily, there are EOR companies in Eastern Europe like Alcor that serve as your compliance buffer, ensuring a smooth employee offboarding process.

General termination rules:

The notice period depends on the grounds for dismissal and/or the type of contract.  

Dismissal: Employment usually can be terminated by an employer only under specific, legally defined circumstances. 

Termination payments: 

Compensation for unused vacation days accrued, bonuses, and any pending compensation for days worked but not yet paid.

Severance payments:

Poland

• Severance payments are applicable only if an employer has more than 20 employees and dismisses an employee solely for non-employee-related reasons: 
• 1-month salary: for employees with less than 2 years’ service; 
• 2 months’ salary: for employees with 2–8 years’ service;
• 3 months’ salary: for employees with more than 8 years’ service;
• Capped at 15× the minimum wage.

Romania

• Severance payments are not mandatory, except in cases of medical unfitness, and are typically paid in accordance with the terms of the employment contract or collective agreement.

Ukraine

• Severance payments are required in certain cases, ranging from 1 to 6 months’ average salary. 

Employees on sick leave or with a justified absence, pregnant employees, those on maternity, paternity, or childcare leave, employees on annual leave, and union leaders are protected from termination, with the list varying by country.

Expanding your development team abroad often means establishing a local legal entity, which varies from country to country based on the local laws of business incorporation. Generally, you would need to navigate complex legal requirements, including selecting the type of entity, registering with relevant authorities, opening bank accounts, and ensuring compliance with local tax and social security laws.

The business incorporation process can drag on for months, draining tens of thousands of dollars in legal fees, registration, and insurance. What is even worse, failing to comply with local laws and practices can expose your tech company to hefty fines or even legal actions, putting your expansion plans at risk.

The EOR solution in Eastern Europe allows you to bypass the lengthy and expensive route of setting up your own entity abroad. For instance, with Alcor EOR for tech, you can hire developers through our readily established legal entities in LATAM or Eastern Europe, saving an average of 3.5 months on business incorporation. Plus, manage admin and legal complexities hassle-free. It’s a faster, safer way to expand your business compliantly without the financial burden.

Alcor’s Employer of Record for Tech is a 360-degree solution devised for the compliant and seamless hiring of software engineers in Latin America and Eastern Europe. With no need to open a legal entity, it saves tech companies an average of 3.5 months and tens of thousands of dollars in setup costs. This means you can skip the red tape and build your own team of 30+ developers in just three months, accelerating your software development and unlocking faster growth.

With our Employer of Record solution in Eastern Europe, you get more than just HR & payroll:

• Tech-focused services: from FTE or B2B employment options and tax incentives to R&D deductions and tailored benefits for developers.
• 100% compliance: get shielded with guidance from our lawyers, who have expertise in IT law.
• Customized pricing: volume discounts, no hidden costs or pre-payment.
• Ongoing in-country support: our Dedicated Customer Success Managers go above and beyond to simplify your business expansion.
• All-in-one place: manage everything in one place, no need for multiple vendors.

But EOR is just the beginning…

You can upgrade it to our software R&D center solution, which includes:

• In-house tech hiring is handled by our 40 recruiters, who headhunt the top 10% of the market developers across LATAM and EE. With our 80% CV pass rate and 2-6 weeks to fill a vacancy, you can scale your team from 0 to 100 engineers in a year.
• Operational support encompasses additional services, including leasing office or co-working space, procuring equipment, setting up IT infrastructure, and employer branding.

The result? A fully backed tech R&D center with a software development team that’s 100% yours from day one.