TL;DR: Hiring a remote employee in a different country (or even a different state/province) triggers significant legal and tax obligations that many small businesses overlook. A single remote worker can create "permanent establishment" tax risk, require payroll registration in a new jurisdiction, and subject you to unfamiliar employment law. This guide explains the key considerations across 7 countries.
Disclaimer: MmowW Scrib🐮 is a document preparation service, not a law firm. We do not provide legal advice. This guide is for general informational purposes only. Remote work and cross-border employment create complex legal and tax issues that vary significantly by jurisdiction. Always consult a qualified employment solicitor or attorney and tax adviser for advice specific to your situation.
Remote work has blurred the traditional assumption that an employee works in the same location as their employer. But the law has not moved as fast as the technology. When you hire someone who works remotely:
Hiring your first remote employee in a new country is not simply a matter of adding them to your existing payroll — it often requires registering a new entity or using an Employer of Record service.
One of the most significant risks of international remote hiring is "permanent establishment" (PE). If your company creates a PE in another country, that country's tax authorities may require you to pay corporate tax on profits attributable to the PE.
What creates PE risk:
Countries that are particularly strict about PE:
PE risk does not mean you cannot hire remotely internationally — it means you need to structure the arrangement carefully and seek professional tax advice.
The fundamental principle: Employment law of the country where the employee physically works generally governs the employment relationship, regardless of where the employer is based.
This means:
You cannot contract out of local employment law by choosing a different governing law in the contract — while the choice of law clause may be valid for some aspects of the contract, mandatory employment law protections (minimum wage, leave entitlements, notice periods) of the employee's jurisdiction apply automatically.
In almost all cases, you must withhold income tax and pay employer social contributions in the jurisdiction where the employee works — not where your business is registered.
This typically requires:
Without local registration, you may be able to use:
Use our free tool: Employment Checker
Try it free →For UK companies hiring remote workers in other countries:
For foreign companies hiring UK-based remote workers:
France has some of the most employee-protective laws in the world. Hiring a remote employee in France — from any country — subjects your business to:
Reference: service-public.fr/professionnels-entreprises
Sweden has strong collective bargaining coverage — about 90% of workers are covered by collective agreements. A remote employee in Sweden may be covered by the relevant sectoral collective agreement even if your company is not a signatory, if the employee is a union member.
Reference: av.se/en / skatteverket.se/en
For a foreign company with a remote employee in Australia:
Reference: ato.gov.au / fairwork.gov.au
For a foreign company employing a remote worker in New Zealand:
Reference: ird.govt.nz/employing-staff
Canada's employment law is primarily provincial. A remote employee in British Columbia is governed by BC's Employment Standards Act; an employee in Quebec by Quebec's labour legislation (and in French). Each province has different minimum wage, leave entitlements, and termination notice requirements.
For payroll, register with CRA for CPP/EI deductions; register provincially where required (e.g., Quebec's QPP, provincial income tax).
Reference: canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll
US remote work creates state-level obligations. If your employee works from California, you must comply with California employment law (among the most employee-protective in the world). If they work from Texas, different rules apply.
Even remote work within the same country creates considerations:
Health and safety at home offices:
Employers have a duty of care that extends to home offices. You should:
Expenses and allowances:
Many jurisdictions allow tax-free allowances for working from home (broadband, desk equipment). The UK introduced specific home working allowances during COVID-19 that have partly remained. Australia allows home office expense deductions via the ATO.
Working hours monitoring:
The EU Working Time Directive (applying to UK pre-Brexit and now retained in UK law, and EU member states France and Sweden) limits working hours. Remote workers are still covered — employers should not expect remote workers to be always-on.
1. Adding a remote worker abroad to your home-country payroll
Running a French employee through UK payroll is not compliant — French social contributions are not paid, French income tax is not withheld, and the employee's French statutory entitlements are not met.
2. Misclassifying the remote worker as a contractor
This is tempting for cross-border simplicity but creates significant risk. If the working relationship satisfies the employment tests of the employee's country, you are their employer regardless of the label — with all attendant obligations.
3. Overlooking the permanent establishment risk
A single remote employee in a country for an extended period can trigger PE. This is particularly acute in France, Germany, and Australia. Get PE advice before you hire internationally.
4. Using a contract governed by your home country's law
While a governing law clause may be enforceable for commercial aspects of the contract, the mandatory employment law protections of the employee's country apply regardless of governing law.
5. Not providing equipment that meets home office health and safety standards
Employers retain health and safety obligations for home workers. Failing to assess home office ergonomics creates liability exposure.
Q: Can I hire a remote employee in another country without setting up a local entity?
A: Yes — through an Employer of Record (EoR) service, which acts as the legal employer in the local jurisdiction and handles all local payroll, taxes, and compliance. You manage the employee's day-to-day work. EoR services are available in most countries and are a common solution for small businesses wanting to hire internationally without the cost of a local entity.
Q: Does "remote" mean I can apply my home country's employment law?
A: Generally no. The mandatory employment law protections of the jurisdiction where the employee works apply — this cannot be contracted out of. You can agree on a governing law for the contract, but this governs interpretation, not mandatory statutory rights.
Q: What is the tax risk if I don't register for payroll in my remote employee's country?
A: Significant. You become liable for unpaid employer payroll taxes, social contributions, and interest. In the EU, tax authorities can pursue foreign companies for payroll tax obligations of local employees. In Australia, the ATO pursues cross-border payroll non-compliance. In the US, each state can pursue payroll tax for state-resident employees.
Q: My employee works from different countries on different weeks — how do I handle payroll?
A: This is complex. Social security and income tax obligations depend on where the employee is habitually resident and working — not day-to-day location. Social security treaties between countries determine which country's scheme applies. Get specialist advice from a qualified employment solicitor or attorney and tax adviser.
Our Employment Checker gives you a starting-point overview of employment obligations by country for remote workers.
Track payroll registration deadlines and filing obligations across jurisdictions with our Filing Deadlines tool.
Use our Cost Calculator to estimate the all-in cost of a remote employee in a specific country, including employer social contributions.
Remember: International remote hiring is one of the most complex areas of employment and tax law. Always consult a qualified employment solicitor or attorney and tax adviser with cross-border experience before hiring internationally.
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