Hiring across borders is a well-worn growth strategy, especially as local talent gaps widen.
But for finance leaders and hiring managers, finding the right candidate is only half the challenge — staying compliant is the hard part.
International hiring means navigating local labour laws, payroll systems and tax regimes, often without in-house expertise.
The pressure to move quickly, especially in new markets can push teams toward faster options, like hiring freelancers.
This is where problems can arise. Misclassifying employees as freelancers still remains a common mistake. Before long, a quick fix can turn into a long-term compliance risk.
“The freelancer route looks great on paper. It’s fast, flexible and relatively inexpensive,” says Jan Boeckstiegel, Chief Financial Officer of global HR and employment management platform WorkMotion. “But what starts as a short-term workaround often becomes a long-term dependency.
“If you rely on freelancers in core roles, you’re depending on individuals who, by law, must retain independence and can disengage quickly, taking critical knowledge with them.”
Boeckstiegel and Melike Anar, Team Lead of International Sales at WorkMotion, told us how businesses can balance speed, cost and compliance when hiring freelancers and why getting the structure right from the outset can prevent more complex problems down the line.
Benefits and risks of hiring freelancers
Hiring freelancers is often faster and more flexible, with no local entity, payroll registration or statutory benefits required.
Global demand for remote freelance workers is strong, with the highest demand coming from the US (44%), followed by the UK (8%) and Australia (6%), according to the Online Labour Index. European countries as a collective make up almost a quarter (23%) of global demand.
“It looks operationally simple. Hiring managers can onboard someone quickly without involving legal, tax or HR infrastructure, which sounds great when racing against the clock to fill a role,” says Boeckstiegel.
Having access to senior talent without long-term commitment can also be appealing to companies and can support overall business strategy, adds Anar.
“If a company doesn’t want to validate a product by hiring a full team, freelancers are an attractive option,” she says. “Startups often need to report to investors on what has been done in a certain amount of time. Freelancers are a legitimate tool for many startups to do this.”
However, this is often where the risk of misclassification happens and freelancers slowly start to be treated as staff without the employee benefits or protections. Misclassification is far easier to do than employers think with an estimated 10-30% of employers doing so, according to the National Employment Law Project.
Even starting from small mistakes such as a freelancer being listed on Slack or on LinkedIn representing the company, says Anar.
There are also risks of this happening when the working relationship crosses into work and client exclusivity, fixed hours, managerial oversight and use of company tools, says Boeckstiegel.
“The exposure isn’t theoretical. In some jurisdictions, penalties range from six-figure fines to multimillion-euro liabilities,” he says.
Authorities such as HMRC (UK) or the IRS (US) only care about what the working relationship looks like in reality, regardless of what a contract states.
Data from the Ponemon Research Institute shows that non-compliance costs for companies are actually 2.71x higher than compliance.
On a misclassification risk score of one to ten, the biggest signals a freelancer is being misclassified is if they receive salary-type payments (scored nine), if an employer has control over hours and work methods (scored nine) and having no formal contract (scored eight).
These risks become most visible during company audits, funding rounds or acquisitions.
How non-compliance can hit valuations
If misclassification risks arise, companies have a few options to remain compliant, says Boeckstiegel. For example, redesigning the role, moving to an Employer of Record (EOR) if the freelancer agrees and is based abroad or ultimately ending the relationship.
An EOR is a third-party organisation that formally acts as the employer for a workforce, handling legal responsibilities like payroll, taxes and compliance.
Freelancers are not the only option when hiring abroad.
“No matter how you slice it, you disrupt continuity especially if that person holds key knowledge or client relationships," Boeckstiegel adds. “You can’t force employment, but you also can’t knowingly remain non-compliant.”
Freelancers are not the only option when hiring abroad and an EOR can provide “comparable speed while significantly reducing compliance risk,” he adds.
“An entity provides full control but requires more time, capital and administration. Companies need to be smart about their decisions.”
Educating internal teams
Having robust education internally around freelancers and international employees is crucial for companies to avoid easy mistakes.
Companies can create internal tools and resources to promote better compliance awareness. For example, WorkMotion has developed a Contractor Misclassification Tool and assessment quiz.
Internal resources can help teams and clients evaluate their current hiring structures, identify potential red flags and understand the specific risks associated with local labor regulations.
HR and recruitment teams are generally aware of the risks, but it’s also crucial to spread awareness among stakeholders, says Anar.
If you understand your options, you can hire at speed without creating future liabilities.
She says: “We often see that in the need to find quick solutions, the freelancer route is taken by department heads or managing directors without fully aligning with legal and people teams.
“As long as you’re internally aligned early with your legal department and HR, you won't run into such traps. The freelancer issue is usually born out of the need to move quickly without thinking. That's rarely the best option, at least if you want to build a longer term team.”
If CFOs and hiring managers use the correct hiring model upfront, speed and compliance can work together, says Boeckstiegel.
“Every month you postpone hiring the person you need in a new market means lost revenue, slower product development or missed customer growth. But cutting corners isn’t the answer. If you understand your options, you can hire at speed without creating future liabilities.”
