Businesses hire internationally for a lot of reasons, including to expand their talent pool, reduce costs, diversify revenue streams, and stay ahead of the competition.
However, global expansion comes with significant legal requirements and complexity. Every country has unique labor laws; mistakes can mean costly fines, lawsuits, and reputational harm.
In fact, 82% of compliance leaders reported experiencing consequences due to third‑party risk in the past year.
Key takeaways:
- Country-specific labor laws cover everything from working hours to entitlements like paid time off and parental leave to employment contracts.
- Real-world non-compliance issues and lawsuits can result in companies paying hundreds of thousands or even millions in fines or restitution.
- Employers must proactively build global compliance strategies, encompassing everything from employment contracts, to classification frameworks, and data privacy processes.
Common International Labor Laws & Consequences of Non-compliance
Labor regulations constantly evolve, and compliance across multiple countries is complex. Companies that get it wrong risk severe consequences, such as legal disputes, fines, and even jail time.
It's important to understand common employment laws and learn from real-life examples of companies that paid the price for non-compliance.
Working Hours & Overtime
A lot of countries cap working hours to help protect employees' health and well-being. They also set rules around overtime, making sure people get paid fairly when they put in extra time.
Working hours and overtime norms differ by country:
- United Arab Emirates: The maximum working hours are eight hours per day, 48 hours per week. Hours are reduced to six per day during Ramadan.
- France: Most employees work 35 hours a week, and any hours worked beyond that are payable as overtime, except when governed by a collective agreement.
- Chile: The maximum legal workweek hours in Chile are gradually transitioning from 45 to 40. In 2024, the limit was officially reduced to 44 hours. In 2026, it will be reduced to 42 hours, and ultimately to 40 hours in 2028.
- United States: Employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay if they work more than 40 hours in a workweek.
Failure to comply with these requirements may result in significant fines or disciplinary action, even if a third party is at fault.
For example, in the United States, sewing contractors producing garments for the Beyond Yoga apparel brand failed to pay their workers overtime wages and falsified payroll records, among other labor violations.
Beyond Yoga voluntarily paid $582,317 in back wages and an equal amount in damages (as part of its contractors’ legal obligations).
Minimum Wage
A minimum wage ensures workers are paid what’s considered a living wage in their area, and rates vary, sometimes even within a country.
For example, in Canada the hourly minimum wage varies by province and territory. In 2025, the minimum wage is set at CAD 15 per hour in Alberta and Saskatchewan, but it’s CAD 19 in Nunavut.
Businesses must know the minimum wages where they’re hiring, and revise wages as minimums change (typically due to inflation or changes in the cost of living).
Worker Classification
Generally, self-employed workers don’t receive the same legal benefits and protections as regular employees. That’s why misclassifying someone as an independent contractor when they’re really functioning like an employee can lead to owed back pay and other serious penalties.
Each country handles worker classification differently. For example:
- Mexico: The Labor Ministry may require businesses to pay back a misclassified worker’s missed benefits and severance pay, and fines are assessed based on the period of misclassification.
- Australia: Misclassifying a worker can result in enforcement action by the Fair Work Ombudsman, including penalty notices and compensation orders.
Worker misclassification can also result in hefty fines.
For example, in Spain, it was determined that over 17,000 workers were falsely classified as self-employed at food and grocery delivery service company Glovo, resulting in the company paying EUR 253 million in penalties and Social Security claims.
Employment Contracts & Probation
Comprehensive contracts protect your business from legal risk. Many countries have requirements and stipulations related to employment contracts and probation periods.
For example, in Argentina, employment contracts must be in writing for fixed-term, temporary, and seasonal employment or teleworking contracts, but not in all instances.
Generally, Argentinian employees are assumed to be on a trial (probationary) period for six months, but this may vary based on collective negotiation and other factors.
It’s not uncommon for labor courts in Argentina to award full severance or damages, when an employee’s termination doesn’t adhere to probation laws.
Health & Safety Regulations
Workplace safety laws aim to provide a safe working environment and protect employees from preventable injuries and illnesses.
For example, businesses in Canada must prohibit discrimination in the workplace and adhere to the Canadian Occupational Health and Safety (OHS) laws in their jurisdictions. The regulations specify factors, like protective equipment, incident reporting requirements, and safety training.
Failure to comply can result in fines, forced shutdowns, or even criminal liability if workers are harmed.
In fact, the United Food and Commercial Workers union (UFCW) and Ecojustice are in legislation against Health Canada, saying the agency put migrant workers’ health at risk by not enforcing pesticide safety data sheet requirements.
Employer Payroll Tax Contributions
Payroll taxes fund critical government programs, including Social Security, pensions, unemployment benefits, and public health. Payroll rates vary by country.
For example, French employers contribute between 24% and 45% of an employee’s gross pay to mandatory social benefit programs, depending on salary, role, and benefit types.
Meanwhile, in Cambodia, employers pay 0.8% of gross wages for occupational risk coverage, and 2.6% for health insurance as of 2025— totaling only 3.4% in mandatory Social Security contributions for most employees.
Remote Work & Right to Disconnect
As remote work becomes more prevalent, many countries have passed “right to disconnect” laws or remote work protections. This means that employees cannot be penalized if they do not respond to work-related calls or emails after hours.
These laws help employees set clear boundaries with employers and avoid the burnout of being “always on.” For example:
- France: French Labour Code gives French employees the legal right to request telework and protections to honor the right to disconnect.
- Ireland: Employees gained the right to disconnect in 2021, although the code is non-binding.
- Portugal: Companies that don’t follow working hour restrictions and don’t protect employees from digital work interfering with their rights face monetary fines.
Health Insurance
In some countries, employers are responsible for funding part or all of a worker’s healthcare. In others, public systems cover care, but employers still play a role through taxes or private benefits.
- Germany: Public health insurance costs are split between employees and employers.
- Philippines: Employers contribute to PhilHealth (5% of basic monthly salary) on behalf of employees.
- Spain: Employer payroll taxes fund healthcare.
Employers are responsible for understanding health insurance requirements in the region where they hire. Businesses often offer supplemental insurance options above statutory requirements to attract top talent.
Paid Time Off
Most countries have laws governing mandatory minimum paid leave that employers must adhere to.
For example, Romania requires companies to provide 20 days of paid annual leave, while Brazilians are entitled to 30 days.
Meanwhile, in the Philippines, employers are only required to provide five days of annual paid time off.
Parental Leave
Different countries offer varying levels of parental leave to support new parents and children:
- Norway: Pregnant women are entitled to 49 weeks of leave at full pay or 59 weeks with 80% pay. Leave can start up to 12 weeks before the due date.
- Netherlands: Employees receive 16 weeks of paid maternity leave and one week of employer-paid paternity leave.
- Colombia: Mothers are entitled to 18 weeks of fully paid maternity leave, which is typically divided into one week before the due date and 17 weeks after.
Termination & Severance Pay
The majority of countries have strict policies governing employee termination. There are typically specific conditions or circumstances that need to be met in order for an employer to terminate an employee.
- Poland: The termination process depends on the employment contract or Collective Agreement in place, and the reason for termination. The notice period for termination depends on the employee’s length of service at the company, and ranges from two weeks to three months. Severance pay ranges from one month’s wages up to three month’s wages.
- South Africa: An employer wishing to terminate an employee due to a cause or transgression must follow a fair procedure and have a valid reason for the termination. Employees are generally entitled to one week of pay for each year employed as severance pay, which is known as a "transition payment."
- United States: Most employment relationships are considered “at will employment,” meaning employees can be terminated for any reason (excluding discrimination or retaliation). Some companies offer severance pay as part of a separation agreement, but are not required to do so.
In addition to following each country’s unique laws, businesses should set clear termination and severance standards in writing and treat all dismissals the same across the board to avoid legal scrutiny and costly penalties.
Data Protection & Privacy
Countries around the world have enacted strict privacy laws regulating how employers collect, store, and use employees' personal data.
Companies must navigate varying data protection frameworks, each with heavy consequences for non-compliance.
- European Union: The EU’s General Data Protection Regulation (GDPR) has set a global standard for many other countries’ data privacy laws. Failure to comply with GDPR risks costly fines, legal issues, and reputational damage.
- Germany: Germany enforces some of the strictest data protection rules in the world under the GDPR and its own supplemental provisions, imposing severe penalties for non-compliance.
- South Korea: The Personal Information Protection Act (PIPA) is considered one of Asia's most stringent data protection laws; violations can result in significant penalties, including fines and imprisonment.
Protecting employee data isn’t just a best practice — it’s a legal necessity with severe repercussions. Just ask H&M Germany: the apparel company was fined EUR 35.3 million for illegal surveillance of employees — one of the largest GDPR penalties to date.
Background Checks
Secure background checks safeguard your business from risk and fraud, or the mistake of hiring a team member who misrepresents their background.
But, countries have different laws and specifications for running background checks:
- European Union: GDPR requires background checks to have a legal basis, collect only necessary data, secure it, and companies must inform candidates beforehand.
- Canada: The use of Social Insurance Numbers (SINs) is heavily restricted, and federal laws specify privacy and consent requirements for background checks.
- Brazil: Background checks are quite common, but must follow the General Data Protection Law (LGPD).
How to Avoid Non-compliance Penalties When Hiring Internationally
Keeping up with labor laws across multiple countries is challenging and time-consuming, but partnering with compliance experts can simplify the process and reduce risk.
Three popular approaches to international compliance include:
1. Hire Local Employment Experts
Companies can hire a selection of partners in every country where they hire, such as labor attorneys, HR consultants, or compliance specialists, to advise on employment contracts, local tax registration, benefits, and local HR practices.
However, this method can become expensive and complicated to scale, especially if a business expands into multiple countries.
2. Open a Legal Entity
Businesses can open a legal entity in any country where they're hiring to employ local talent directly.
This requires registering with labor, tax, and Social Security agencies; maintaining local accounting practices; and hiring compliance and legal experts.
This option can be costly and impractical for companies that are only hiring a few employees in a particular country, and it can take months or even years to get a new entity up and running.
3. Work with an Employer of Record (EOR)
An Employer of Record (EOR) like RemoFirst serves as the legal employer on a company’s behalf in each country where it hires talent.
The EOR handles everything from global payroll and benefits to employment contracts, tax withholdings, and legal compliance.
This model is the fastest and most scalable way to hire employees globally without setting up foreign entities, and it significantly reduces legal risk.
Compliantly Build Your Global Team With RemoFirst
At RemoFirst, we help businesses hire employees in 185+ countries and contractors in 150+ countries, without the cost or complexity of setting up legal entities.
We handle everything from employment contracts to statutory benefits, onboarding, and tax compliance. Companies also have the ability to offer private health insurance through RemoHealth and RemoHealth Local.
Need to hire across borders quickly? Schedule a demo to see how RemoFirst can support your international hiring needs.
