Legal Considerations for Remote Hiring: Contract Terms, IP Rights, & More
Hiring Remote
Read this to get all your ducks in a row & stay on the right side of the law before you start hiring remote workers at home or abroad.
What legal considerations for remote hiring must your team plan for?
Federal, state, and international work regulations all come into play — and they can vary significantly across borders. After a while, trying to understand all those remote work laws may feel like deciphering hieroglyphics.
So before you sink into the sea of legal jargon and uncertainty, let us help you on your quest. We’ll be your compass to guide you through unfamiliar territory and straight to the treasure chest that is your new remote talent.
This guide explores all the legal aspects of hiring remote workers, from contract terms for remote employees and international remote work agreements to intellectual property rights, data privacy, and everything in between.
10 Legal Considerations for Remote Hiring
When it comes to compliance with remote work laws, there’s one general rule of thumb you should keep on a Post-It:
Your company must follow the local laws of where your employee resides, not where your HQ is located.
To get all your legal ducks in a row and create a hiring strategy for your remote company, make sure to account for these 10 legal considerations for remote work:
1. Hiring an Employer of Record (EOR)
Employment law for remote workers gets extremely complicated when hiring in different states, provinces, and countries.
Rather than hire a team of lawyers, accountants, and payroll providers well-versed in domestic and international remote workforce regulations, an EOR handles compliance with global employment laws on your behalf.
They act as a buffer between your company and remote work risks like incorrect tax reporting and compliance issues. Then you don’t have to become an expert in global remote hiring legalities to onboard the perfect candidates for your team.
For a flat monthly fee, an EOR will ensure your company correctly:
- Classifies employees and/or contractors
- Complies with local minimum wages and payday frequency laws
- Distributes payroll for hourly and salaried workers in their local currency
- Follows location-specific tax rules
- Provides proper health and medical coverage, benefits packages, vacation time, sick leave, and other time off regulations per local laws
- Abides local termination, notice period, and severance pay rules
🌎 Read more: Hiring Overseas Employees: A Complete Guide
If you decide not to partner with an EOR, like Remote, for example, hit the books on employment law compliance guidelines for every state, province, and country you wish to hire from.
Add these considerations to your research checklist:
2. Remote Worker Classification
Remote hiring in different industries brings teams a mix of full-time employees and independent contractors. How your team classifies these workers is vital to complying with employment laws and tax regulations.
Now that so many people are living the gig life, regulators are going through employee classifications with a fine-toothed comb. Misclassification can lead to severe penalties, pricey fines, back-payment of benefits and taxes, and other migraine-inducing consequences.
Rules for remote worker classification in Canada and the US are similar. The differences between a remote employee and remote freelancers or contractors come down to:
- Autonomy. If employers have control over where, how, and when a worker’s tasks are performed, they’re considered an employee. Contractors perform their work independently, use their own equipment, and can provide their services to multiple companies.
- Benefits. Contractors are not entitled to the same employment benefits, paid time off, job protection, overtime, and other perks employees receive.
- Taxes. Freelancers are responsible for paying their own taxes, social security contributions, healthcare, etc.
The EU has its own set of employment laws. However, individual countries are still responsible for classifying workers (and they all have different rules). The UK has multiple worker classifications, part-time remote worker rights, and independent contractor protections.
Classification rules in Asian-Pacific countries vary wildly. For example, any worker who follows a company’s guidelines in China can be technically classified as an employee.
And whether a person works full-time, part-time, or as a contractor, they’re entitled to the same employment benefits in most Latin American countries.
Head spinning? We don’t blame you.
That’s why it’s best to seek legal expertise in employment law specific to the locale you’re hiring from. It’s the cleanest way to ensure compliance with local labor laws and employee classification rules.
3. Remote Employment Contract Terms
Once you know how to classify your new remote employee, it’s way easier to determine their employment contract terms.
- Full-time or Open-ended contracts allow the employment relationship to continue until either party decides to terminate the deal. These are the most commonly used remote work contracts for full-time employees.
- Part-time contracts are used when you hire someone for a job that does not require a full-time commitment. You’ll need to check local labor laws to determine what part-time workers are/are not eligible for regarding scheduled work hours, overtime, benefits, etc.
- Fixed-term contracts specify a set period during which someone (usually a freelancer or contractor) will work remotely for your company. These are best for leveraging remote workers on a per-project basis, filling in temporary skills gaps, covering for full-time employees on leave, etc.
Remote work employment contracts ensure everyone’s on the same page. They outline expectations and compliance with all the applicable laws, regulations, and policies we’ll discuss today. They help establish trust and transparency, contributing to a positive and productive remote work experience.
Again, you’ll need to comply with your employee’s local laws. For example, EU remote work regulations require comprehensive employment contracts, whereas remote work agreements in other countries are less stringent.
Contracts are also typically written in the official language(s) of the country where your remote worker lives and signed by both parties.
4. Employee Work Hours & Overtime Pay
In the US, salaried workers are exempt from overtime pay, regardless of how many hours they spend on their grind. Hourly workers are non-exempt, which means they must receive 1.5x their hourly rate for every hour worked after 40/week.
But this isn’t a standard practice across the globe.
Take Australia. A full-time employee may work a maximum of 38 hours per week. If they work overtime, they receive 1.5x their hourly rate for the first three hours and twice their rate for all overtime hours after that.
So when you research local laws for your remote employees, think about:
- How many hours employees can legally work each day/week
- When you want them to be available (and in which time zone)
- How you’ll track employee work time (if you will) and discourage off-the-clock work
- How overtime works (when it’s approved, how much workers will receive, etc.)
📅 Psst! Some countries are implementing a 4-day work week. Should you follow their lead?
5. Remote Worker Tax Implications
Remote work tax liabilities are one of the more challenging considerations because your company may need to pay in both the state or country in which your employee resides and in its home state and nation.
For US employees, we’re talking federal and state income taxes, Social Security taxes, Federal Unemployment Tax (FUTA), Medicare taxes, and state unemployment tax assessment (SUTA)/state unemployment insurance (SUI) taxes.
US-based contractors? That’s a bit easier. Have your contractors fill out a W-9 form. Then complete a 1099 form for each contractor you’ve paid more than $600 during the fiscal tax year.
🇺🇸 Read next: Everything You Need To Know As a US-Based Remote Company Hiring Remote Employees In Other States
What about international employees? Ask your team members to complete IRS Form W-8BEN to exempt them from all US tax liabilities. You’ll then need to check their country’s rules for employer taxes.
💸 Dive deeper: How To Set Up Payroll and Taxes for Remote Workers
6. Termination & Severance Policies
No one wants to think about parting ways with a team member. Still, situations arise where a smooth transition out of the company is the best outcome.
Termination procedures for remote employees vary by state, province, and country. Your company must follow the laws in your employees’ locale, so look up justifiable vs. wrongful termination, notice periods before letting someone go, severance pay, and other nuances.
For example, the Termination Protection Act in Germany says that termination can only occur after all other options have been exhausted, including transferring the employee to another open position.[*] In Korea, employees are required to receive severance pay that equates to one month’s salary for each year of employment.
7. Equal Employment Opportunity Policies (EEO)
EEO ensures fairness and equal access to employment opportunities, imposing a zero-tolerance policy for discrimination in the workplace based on race, gender, religion, age, disability, or national origin.
Laws about employment discrimination in remote work aren’t just limited to employees in the US; you’ll find similar laws across the EU, Asia, and the Americas.
When a remote company is committed to DEIB, all its hiring metrics tend to improve.
Plus, prioritizing inclusive workplace practices fosters employee engagement and innovation, increasing retention, revenue, and company reputation scores.
So double-check that your remote hiring practices, promotions, project assignments, and work policies are equitable, comply with anti-discrimination laws in your employees’ location, and don’t unfairly favor one group over another.
🫶 Need a few remote hiring best practices to boost DEIB? We got you!
- Hiring for Diversity: 9 Best Practices To Follow ASAP
- 10 Things To Change & Act On In Your Inclusive Hiring Practices
- How To Reduce Bias In the Hiring Process
8. Intellectual Property Rights
The World Intellectual Property Organization (WIPO) defines intellectual property (IP) as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.”
IP rights clarify who owns the IP your employees create. They ensure compliance with local laws and safeguard sensitive company information to prevent unauthorized use or disclosure.
Defining intellectual property rights in remote work settings helps companies avoid theft of IP assets, costly legal battles, negative press, and more. So use the WIPO’s online database to find IP laws by country before drafting your policies.
9. Data Security, Cybersecurity, & Data Privacy Policies
The nature of the virtual workspace means workers are always accessing and handling company and employee data from remote locations all over the globe. You may be legally responsible for complying with and providing adequate resources for:
Data Security. Remote work data security compliance means using encryption, access controls, secure data storage, and backup strategies to prevent intentional or unintentional data breaches.
Cybersecurity. Cybersecurity protects an organization’s digital assets, including networks, systems, devices, and data, from cyber threats.
It involves firewalls, antivirus software, intrusion detection systems, and employee training to defend against cyberattacks like malware, phishing, and hacking.
Data Privacy. Data privacy focuses on properly handling and protecting individuals’ personal information and sensitive data. It ensures their data (like social security numbers, driver’s licenses, etc.) is used only for the intended purposes and with consent.
Data privacy for remote employees involves complying with data protection laws and regulations (like the GDPR in Europe or CCPA in California) when collecting, processing, or storing personal data. Data privacy laws vary by state and country, and your employees must follow those rules to remain compliant.
10. Home Office Expense Reimbursement
At least 11 US states now have reimbursement stipend laws for equipment and supplies remote employees need to work from home.
In other countries, employers are legally required to reimburse team members for all business-related expenses, ensure they have the necessary equipment and workspace to be productive, and even cover utility costs incurred during the work day.
These reimbursements typically cover the cost of employees’:
- Tech equipment (desktop, laptop, monitors, tablet, smartphone, etc.)
- Ergonomic chair and desk
- Reliable, fast internet
- Data plans for their devices
- Printer and printing supplies
- Office supplies
- Subscription services, software, or apps
- Co-working allowances
After your locale-specific research, outline a home office expense reimbursement policy that details:
- What your company will reimburse
- How much it will reimburse
- How often it will compensate for these expenses
Technically, reimbursing for office equipment means those items are now company property. So you’ll also need to draft an addendum in your employment contract or remote work policy about how employees will return this equipment if they leave.
Now You Have an A+ In Remote Hiring Legal Considerations!
The world of remote work compliance is ever-evolving. Remote work laws and regulations change, new technologies emerge, and the workforce adapts. Stay agile to ensure you’re always on the right side of the law.
These legal considerations may seem like a daunting dragon to slay. But they’re nothing compared to the fines you might incur for not complying with the legal rights of your remote workers across the globe.
Remember, you can always partner with an EOR and let them navigate this legal labyrinth while you focus on finding the best remote workers.
📚 Want some extra credit reading material? We think you’ll dig:
✨ WWR’s Remote Work Hiring Guide: From initial hiring decisions all the way to onboarding, this goody bag contains everything you need to know about sourcing phenomenal remote candidates.
🌟 Expert Advice for Hiring Remote: Hear from experts at the top remote companies about their processes for hiring, recruiting, interviewing, onboarding, and more.
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