Hiring or placing talent across jurisdictions is key to building a flexible and competitive workforce. But it also exposes businesses to complex regulatory challenges.
We break down what you need to know about managing compliance for international contingent workers and contractors, and how to avoid costly missteps along the way.
The Hidden Complexity of Cross-Border Engagements
Compliance has never been this complex. According to PwC’s latest Global Compliance Survey, 85% of companies say regulatory requirements have become more difficult to manage over the last three years. Nearly eight in ten report that these challenges are already limiting their ability to grow.
Managing talent across jurisdictions carries significant compliance risk and little room for error. When we use the word “jurisdiction”, we’re referring to a long list of possible remote work arrangements, including international placements and engagements that cross state or provincial lines.
Rules governing employment classification, tax withholding, employee benefits, and labor protections vary widely from one jurisdiction to another. And those rules apply whether or not a business fully understands them.
The Dangers of Noncompliance
Many enterprises and staffing firms have expanded their reach, either sourcing candidates from more locations or serving clients across more markets. A recent World Economic Forum report, for instance, notes roughly one-quarter of employers worldwide are introducing remote work across borders, with figures reaching nearly 50% in regions like Australia. Yet in many cases, these cross-border engagements are happening without the right compliance structures in place.
These businesses are, often unknowingly, playing a dangerous game. Accidentally misclassifying independent contractors, for instance, can cost millions in fines, to say nothing about reputational damage from noncompliance.
Privacy laws have become a major compliance challenge in their own right. Requirements differ significantly by location, whether it’s the GDPR in the EU, South Africa’s POPIA, or California’s CalOPPA. Falling short of these standards can lead to regulatory scrutiny and financial penalties. One high-profile tech firm, for example, was recently hit with a staggering €1.2 billion fine for violating GDPR.
These aren’t edge cases. Rather, they’re the common, expected outcome when compliance is treated as an afterthought. For any business that places or engages talent across borders, compliance must be part of the core operational model.
What Compliance Involves
Hiring across borders means aligning with the legal and operational standards of the jurisdictions where your talent is based. Whether you’re engaging an employee or an independent contractor, these standards shape everything from how you classify workers to how you pay them, support them, and keep records.
Businesses are responsible for:
- Worker Classification: Each jurisdiction has its own rules for defining whether someone is an employee or a contractor. Misclassifying a worker can lead to penalties and retroactive tax bills.
- Tax Withholding and Payroll: Employers are often required to register locally, calculate taxes correctly, and make contributions to public systems. This includes income tax, insurance, and other social charges.
- Benefits and Entitlements: Statutory benefits vary widely and are usually non-negotiable. These might include paid time off, pensions, healthcare contributions, or sick leave.
- Employment Contracts: Contracts need to reflect local standards. That includes using the right language and clearly setting out terms like working hours and notice periods.
- Data and Documentation: Privacy laws govern how worker data is collected and stored. Many jurisdictions also expect you to keep records that show you’ve classified workers correctly and met tax and labor requirements.
Meeting local standards is critical to earning trust. Workers are more likely to engage with companies that offer fair terms and respect the norms of their region. In competitive markets, this is key to attracting and retaining top flexible talent.
Compliance Is Complex and Ever-Changing
Keeping up with compliance is a full-time job, especially as rules vary not only between countries but also from one state, province, or region to another. A contractor engagement that works in New York might be noncompliant in California. A valid payroll process in Ontario may fall short in British Columbia. These differences impact compliance. They also make it harder to build a repeatable process across regions, which increases the risk of missteps as teams expand.
At the same time, compliance requirements aren’t fixed. Governments revise laws, and enforcement agencies update how those laws are applied. When changes take effect, businesses must adapt how they engage workers or risk noncompliance. Compliance shifts don’t always come with much lead time, and even small adjustments can carry serious financial or reputational consequences if missed.
A Spotlight on Regional Compliance
In the United States, California uses the ABC test to determine whether a worker can be treated as an independent contractor. This standard is narrower than what other states apply. As legislation changes, businesses may need to reclassify workers or revise contracts to avoid exposure. Differences like these make it difficult to apply a single contractor policy across states.
In the UK, businesses are still adapting to IR35 enforcement, which places the burden of tax compliance on the hiring party. Recent changes to how umbrella companies are treated have increased the risk for firms that rely on these models.
Australia is seeing a steady stream of regulatory changes. Several states now require labor hire licenses, even for short-term placements. Recent updates to the Fair Work Act and the Closing Loopholes legislation have added new compliance obligations for businesses engaging Australian talent.
Tracking Legal Shifts
Knowing the rules is important, but it isn’t enough. Businesses also need to monitor how those rules change over time. Staying compliant means reviewing processes regularly and adjusting them whenever the legal landscape shifts.
Getting Cross-Border Hiring Right with an EOR or AOR
To overcome the complexity of cross-border compliance, many staffing firms and enterprises partner with employer of record (EOR) and agent of record (AOR) providers.
As talent and compliance experts, these partners are critical to minimizing risk by helping businesses expand into new markets without falling behind on local rules.
What an EOR Does
An employer of record acts as the legal employer on your behalf. They manage contracts, run payroll, administer benefits, and handle local tax contributions for contingent workers.
You still manage the work, while the EOR ensures employment is delivered in line with the law. This is useful when hiring flexible talent in countries or jurisdictions where your enterprise or agency isn’t set up to operate directly.
If it sounds like your business would benefit from partnering with an employer of record, check out our Complete Guide to EOR services.
What an AOR Does
An agent of record helps businesses engage independent contractors.
They confirm contractor status, manage onboarding and invoicing, and ensure all documentation meets local standards. This reduces the risk of worker reclassification and allows you to work with independent talent while staying on the right side of the law.
For everything you need to know about agents of record, read our Complete Guide to AOR Services.
Do You Need an AOR or an EOR?
Use an EOR when you’re hiring contingent workers in a jurisdiction where you don’t have a legal entity.
Use an AOR when working with independent contractors and need support in structuring engagements correctly.
Both models help you minimize risk and ensure compliance. At People2.0, for instance, we offer both EOR and AOR services and have a 20+ year history supporting organizations in accessing talent wherever they need it. Many organizations benefit from a combination of the two services.
Building a More Agile and Cost-Effective Workforce Strategy
A strong compliance model, like one provided by an EOR or AOR, does more than keep your business out of trouble. By handling critical tasks, it can reduce day-to-day operational strain and give businesses more flexibility in how they build and manage distributed teams.
With an EOR or AOR taking care of compliance, companies can enter new markets without having to set up local legal entities or build in-house compliance teams. This path is often more cost-effective, as it reduces upfront investment and lowers ongoing operational costs.
It also lightens the internal load. The right compliance partners can take on a wide range of responsibilities, from drafting compliant contracts to managing onboarding, payroll, and documentation. Without that support, these tasks would fall on HR, finance, and legal teams. Along with lowering administrative load and overhead, your partner limits the need for reactive legal work if things go wrong. And with the right support, businesses can scale their workforce up or down without being tied to fixed infrastructure in each region.
Simplify Cross-Border Compliance
International hiring opens the door to broader talent pools and new growth opportunities. Tapping into those markets requires a solid framework for compliance, one that’s aligned with the legal and operational standards of each region.
At People2.0, we help staffing firms and enterprises engage contingent workers and contractors across jurisdictions. Our team manages over 150,000 worker deployments every year with full regulatory compliance and zero misclassifications on record.
The right support turns international hiring into a growth lever. Speak with our compliance experts to see how we make cross-border hiring and placements simpler, safer, and easier to scale.
