Navigating International Compliance: Employers' Responsibilities When Hiring Gig Workers Overseas

It feels like the days of people joining organisations and staying there for many years are long gone. We see people moving from company to company, and indeed people wanting to work on projects at times and in places to suit them. 

As a company, how do you know what your obligations are for these project-based workers – or gig workers? Do you need to worry about them at all? 

First, what is a gig worker? 

A gig worker is an individual who is engaged in temporary, flexible, or project-based work, typically on a contractual basis. Unlike traditional full-time employees, gig workers are not usually bound by long-term employment contracts and may work for multiple clients or employers simultaneously. The term "gig" is often used to describe individual tasks or projects that these workers undertake. In the past, many of these individuals were classified as self-employed contractors. 

In today’s world, many organisations are looking to access a broader and more global talent pool, as well as save costs. They are therefore far more likely to consider a switch from permanent headcount to hired-in labour even for core business activities - something that has been made much easier by the technological enablement of remote work since the pandemic.  

Why do organisations need to watch out for these gig workers? 

Put simply, they may find that these people will be considered as employees. 

Where ‘core’ business activities are performed by gig workers, the question is whether these workers are really self-employed contractors given that they are performing, sometimes on a long-term basis, ‘employee’ type roles. The distinction between an employee and a contractor who substantially works for one business only, and who no longer really has the ability to set their own hours, or pick and choose which work they do, has become blurred. And with this blurring of boundaries comes the risk that they will be regarded as employees.  

In a domestic context, the risk of this reclassification may be costly, but administratively manageable. If gig workers fall over the line of becoming an employee, the employer has to follow minimum wage, holiday, pension legislation etc, but at least it has the existing payroll and HR infrastructure to do this. 

Now imagine the scenario where a UK business has outsourced various projects and roles to gig workers outside the UK. Let’s say a long-term IT project to a team in Macedonia, or an HR processing role to a team in Vietnam. On a short term basis, this would seem to be no different to traditional outsourcing to contractors. But if the roles persist, so does the chance that these will be regarded as employments.  

And, of course, the law which determines whether the gig workers have actually become employees is the local labour law: Even if under UK law they remain contractors, under Macedonian or Vietnamese law, they may have already crossed the line. Most countries have greater labour law protection for workers than the UK, and this generally means that contractors get more employee-like protection than they would if they were working in the UK. 

If they have become de facto employees under local law, what does this mean for the UK company which has hired them? 

The requirements could be significant. There is likely to be a requirement to operate a payroll and withhold tax and/or social security. The UK ‘employer’ may be obliged to offer a wide range of benefits and allowances, depending on what is defined in local labour law. They may have to offer maternity and paternity support, leave, insurance etc which, of course, have never been budgeted for. There may be all kinds of health and safety obligations arising from having an ‘employee’ in those countries. The list is substantial. 

The added complexity is that the UK line manager responsible for hiring the Macedonian IT team, or the Vietnamese HR processors, will probably have no idea of what the gig-worker/employee tipping point is. Local legal advice will be essential to make this judgement.   

This is an emerging problem in the post pandemic world. We have almost a perfect storm of the need to reduce costs, the desire to access a global talent pool, and the technological tools to support remote working and outsourcing of roles.

Employers need to be aware of the potential risks of taking on gig workers internationally. Some ways to mitigate this might be to:

• Consider the scale and importance to the business of the work they are offshoring, particularly if they keep using the same individuals or contractors – are there alternatives?  

• Make sure they understand the labour law landscape in these offshore locations, to assess the risk of becoming an ‘employer’ there and what that would mean in cost and administrative terms. 

• Educate the business about risks in this area, perhaps ensuring that there is a central point of visibility of all international subcontracting. 

While in many cases there will be no problems and the gig workers will continue to be regarded as contractors, with their own compliance responsibilities, it is becoming ever easier for mistakes – and costly ones at that - to be made.