Hiring internationally opens up your talent pool but it also introduces complex legal and compliance challenges. Without the right structure, you risk fines, misclassification penalties, and HR headaches. This guide breaks down how to legally hire globally, the risks to avoid, and the easiest ways to stay compliant.
Why Companies Are Hiring Across Borders
Remote work made it possible to build distributed teams. Now, companies are hiring globally to:
- Access highly skilled talent in new markets
- Reduce costs by hiring in lower-cost regions
- Increase time zone coverage and customer support hours
- Build diverse and resilient teams
Related: Why Traditional Recruitment Is Broken—and What to Do Instead
The Legal Challenges of Global Hiring
Hiring someone in another country isn’t just about sending a contract and paying an invoice. Every country has its own labor laws, tax requirements, and benefit mandates.
Misclassification Risk
The biggest legal risk is classifying someone as a contractor when they function like an employee.
You may be misclassifying if:
- You set their schedule
- You provide tools and equipment
- They work only for you
- They are part of internal meetings and communications
Misclassification can lead to:
- Back taxes
- Fines
- Legal liability
- Bans on future hiring in that country
Related: How to Cut Time-to-Hire by 75% Without Sacrificing Quality
Compliance with Local Labor Laws
Each country has different rules for:
- Termination procedures
- Paid time off and national holidays
- Benefits (e.g., 13th month pay, pension)
- Maximum working hours
Failing to comply can invalidate contracts or lead to litigation.
Tax, Payroll, and Benefits
Hiring directly means handling:
- Income tax withholding
- Social security contributions
- Employer-side taxes
- Local benefit plans
This requires deep local expertise or the right partner.
Data and IP Protection
Remote employees often have access to sensitive systems and data. You must ensure compliance with international data laws like:
- GDPR (for the EU)
- LGPD (Brazil)
- PIPEDA (Canada)
You also need strong IP assignment and confidentiality clauses that hold up under local law.
Global Hiring Models Compared
| Option | Speed | Cost | Legal Risk | Best For |
|---|---|---|---|---|
| Independent Contractor | Fast | Low | High | Short-term freelance work |
| Local Entity | Slow | High | Low | Long-term expansion in one country |
| Employer of Record (EOR) | Fast | Moderate | Low | Compliant global hiring at scale |
When to Use an Employer of Record (EOR)
An Employer of Record is a third-party service that legally employs your international team member. You manage their work—they handle the compliance.
EORs take care of:
- Local employment contracts
- Tax registration and payroll
- Country-specific benefits
- Legal onboarding and offboarding
- IP and confidentiality protections
Use an EOR when you want to:
- Hire in a new country without setting up a local entity
- Stay compliant with local labor law
- Scale remote hiring fast and risk-free
Related: Agile Hiring: How to Build High-Performance Teams, Fast
Legal Hiring Checklist
Before hiring abroad, make sure you’ve addressed the following:
Local Employment Contracts
Use contracts written in the local language that meet legal standards.
Country-Specific Benefits
Ensure you’re offering mandatory benefits such as:
- Paid leave
- Healthcare
- Parental leave
- Severance pay
Intellectual Property Protection
Ensure that anything your hire creates is owned by your company, not the individual.
Tax Withholding
You are responsible for employer taxes, not just the employee’s gross salary.
Global Hiring Best Practices
| Task | Best Practice |
|---|---|
| Selecting candidates | Prioritize timezone compatibility and async communication skills |
| Contracts | Use localized templates from legal professionals or EORs |
| Payroll | Automate through EORs or local payroll providers |
| Onboarding | Offer clear expectations and role clarity across borders |
| Ongoing compliance | Monitor local law changes through your EOR or legal counsel |
Conclusion
Hiring globally can give you a major competitive edge but only if you do it right. Without proper legal frameworks, you could face serious compliance issues, reputational risk, and employee churn.
If you’re looking to:
- Hire fast
- Stay fully compliant
- Avoid the complexity of setting up entities
Then working with an Employer of Record may be the best solution. You’ll get access to top global talent without the legal headaches.
Frequently Asked Questions
What’s the safest way to hire globally?
An EOR offers the safest and most compliant method to hire in a new country without creating a local entity.
What are the risks of hiring contractors internationally?
Misclassification can lead to large fines, back taxes, and permanent bans from hiring in some countries.
Is opening a local entity worth it?
Only if you plan to hire multiple employees in a single country and invest in long-term presence.
How fast can I hire using an EOR?
Most EORs can onboard a new international hire within 1–2 weeks.
Do I need to offer benefits to global employees?
Yes—every country has minimum benefit standards that are legally required.
