Employer Obligations for Remote Employees, Mid-market Companies

Your CFO just asked why you're registered for payroll in seven states when you only have employees in four. Your Head of Legal wants to know if that engineer who's been working from Portugal for three months has created a permanent establishment risk. And your VP of People is fielding requests from employees who want to relocate to different countries "temporarily."

Welcome to the reality of employer obligations for remote employees at scale.

A remote employee is an employee who performs their work from a location outside the employer's premises, including from another region or another country, while remaining subject to the employment laws that apply to the place where they habitually work. That definition sounds simple enough. The compliance reality is anything but.

Eurofound reported that about 12% of employed people in the EU usually worked from home in 2019, rising to about 24% in 2021. That shift didn't just change where work happens. It fundamentally expanded the compliance exposure for mid-market employers operating across borders. And most companies are still catching up.

This guide walks through the core obligations you need to understand, the jurisdictional complexity that trips up even experienced HR leaders, and the strategic framework for building a remote work compliance approach that scales with your business.

Key Takeaways

• Remote employees are entitled to the same pay, time, safety, and equality protections as office staff. Location adds compliance layers; it doesn't remove duties.

• Applicable law typically follows where work is physically performed. Multiple layers (federal, state, local or national, regional) can apply simultaneously.

• Mid-market complexity demands standardised policies, reliable time tracking, clear expense and equipment rules, and documented approvals for location changes.

• Payroll and tax obligations often arise immediately in the employee's work location and can create nexus or permanent establishment exposure.

• Build a staged roadmap: map your footprint, set a global policy framework with local addenda, assign ownership across HR, Finance, and Legal, and choose the right hiring model market by market.

Key Employer Obligations For Remote Employees

Under UK Working Time Regulations 1998, weekly working time is capped at 48 hours on average over a 17-week reference period unless the worker signs an opt-out. This rule applies equally to remote and office-based employees. The same principle holds across most European jurisdictions: core employment protections follow the worker, not the office.

Here's what that means in practice. Your remote employees are entitled to minimum wage compliance, working time limits, overtime pay for eligible roles, anti-discrimination protections, and protection from unfair dismissal. The fact that someone works from their kitchen table in Manchester rather than your London office changes nothing about these baseline obligations.

Timekeeping becomes more complex when you can't see when people start and stop working. For hourly or non-exempt staff, you need accurate recording and payment for all time worked. That means setting clear expectations about working hours, requiring time tracking, and defining what counts as overtime in plain language your employees actually understand.

Health and safety extends to home offices. You're responsible for providing ergonomic guidance, ensuring safe equipment use, and conducting reasonable risk assessments. In the UK, this means addressing display screen equipment requirements. In Germany, it often means more formal home office assessments.

Equal access matters too. Remote workers should have comparable access to benefits, training, promotions, and performance processes. Treating them as second-class employees creates indirect discrimination risk.

And all of this needs to be documented. A clear remote work policy supports consistent application and helps you demonstrate compliance when questions arise.

Which Employment Laws Apply To Remote Employees In Another State

A host-country employment law obligation is a legal requirement that attaches because an employee habitually works in a specific jurisdiction, covering areas such as minimum pay, working time, leave, termination, and mandatory employee protections. The basic rule is straightforward: the law of where the employee physically works typically governs their employment rights.

This creates immediate complexity for mid-market companies with distributed teams. An employee relocating from Texas to Washington triggers new paid sick leave and pay transparency obligations. A company based in New York hiring in Colorado faces Colorado's overtime thresholds and pay transparency requirements. An employee occasionally working from a city with local ordinances might trigger local sick leave or predictive scheduling rules.

Multiple layers can apply simultaneously. In the US, you're navigating federal, state, and sometimes local requirements. In Europe, you're dealing with EU directives, national legislation, and sometimes regional variations. The general principle is to follow the rule most protective of the employee when requirements conflict.

Some jurisdictions impose specific rules for out-of-state employers. California is notorious for this. Ignoring these requirements risks wage and hour violations even when your payroll processing is technically correct.

The operational controls you need: document work locations, require approval before cross-border moves, and align contracts and policies with the correct governing law and local rights. Teamed's guidance to mid-market companies emphasises that relying on manager-by-manager knowledge makes payroll withholding, social security, and permanent establishment exposure difficult to evidence in audits. Centralised location tracking and employee attestation becomes essential once you have employees in five or more countries.

Labour Laws For Remote Employees In Mid Market Companies

In the UK, an employer that fails to pay National Minimum Wage can face a financial penalty of up to 200% of arrears, capped at £20,000 per worker, plus public naming. Teamed flags this as a high-impact remote-work payroll control risk when employees move locations without proper notification.

As you scale from 50 to 500 employees, the categories of labour law compliance multiply. Pay obligations include minimum wage, overtime and working time rules, and equal pay requirements. Time and attendance means tracking hours, approving overtime, and ensuring proper breaks and rest periods. Leave encompasses statutory sick leave, family leave, and location-specific entitlements that vary dramatically by jurisdiction.

Benefits eligibility creates its own complexity. Local mandates differ, and equity in access across locations becomes both a legal and employee relations issue. Separation procedures require attention to notice periods, termination protections, and documentation requirements that vary by country.

The scale effects matter. Regulators and employees expect consistent treatment. Adopt standardised policies rather than allowing manager-by-manager exceptions that create inconsistency and risk.

Remote-specific risks compound these challenges. Flexible hours complicate time tracking. Without clear systems and processes, you're likely missing overtime, misclassifying break time, or creating wage and hour exposure you won't discover until an audit or employee complaint.

Location-driven variation requires explanation. When employees in different countries have different benefits or policies, explain the rationale to avoid perceived inequity. Audit regularly for equal pay and discrimination exposure.

For regulated sectors like financial services, healthcare, and defence, labour compliance is reviewed alongside sector rules. Be disciplined about controls and documentation. The consequences of getting it wrong extend beyond employment law into regulatory standing.

Remote Work Laws For European Employers Hiring In The US

The US is decentralised in ways that surprise European employers, where 35% of full-time employees worked remotely at least part-time in 2023. Employment rules come from federal, state, and local levels. There's no single national code equivalent to what you're used to in the UK or EU.

Compliance follows the worker's state and city. Wage rules, sick leave, family leave, pay transparency, and notice requirements may be state or local specific. This applies even when you're using an Employer of Record arrangement. The EOR handles the mechanics, but you need to understand what obligations exist.

Nexus basics create corporate exposure beyond employment law. A remote US employee can trigger state registration, payroll obligations, and potentially corporate tax requirements separate from federal rules. A single remote employee working from a state where your company has no legal entity can create statewide payroll withholding obligations, state income tax filings, unemployment insurance registrations, and potentially sales tax compliance requirements.

Common misconceptions trip up European employers. Contractors aren't "safe" just because a contract says so. Classification tests focus on actual working conditions, not contract labels. And European-level benefits don't automatically ensure compliance. State rules still apply regardless of how generous your overall package is.

Worker misclassification is the legal risk that arises when an individual treated as a contractor is later determined by authorities or courts to be an employee, triggering back-pay for taxes, social security, benefits, and employment protections. The misclassification penalty structure in the US is severe, with potential liability for back wages, unpaid payroll taxes, and civil penalties that can reach tens of thousands of dollars per worker in egregious cases.

Teamed helps European employers assess contractors versus EOR versus local entity for early US hires and plan for model shifts as teams scale. The decision you make at entry shapes your compliance burden for years.

Employer Obligations For Remote Employees In Europe And The UK

Under EU GDPR, administrative fines can reach up to €20 million or 4% of annual worldwide turnover, whichever is higher. Teamed highlights this as a key constraint on remote employee monitoring design for EU-based workforces.

Health and Safety

Duties extend to home workspaces. You need to risk assess remote work, provide ergonomic guidance, and document assessments where required. In the UK, Display Screen Equipment regulations apply to home workers just as they do to office workers. In France, the Labour Code recognises telework and commonly requires a formal framework such as a company agreement or charter.

Working Time and Leave

General rights apply equally to remote and office staff. Working time limits, paid holiday, family leave, unfair dismissal protections, and consultation procedures don't disappear because someone works from home. The UK's 48-hour weekly working time cap applies. EU member states have their own implementations of the Working Time Directive.

Equipment and Expenses

Typical practice is to provide laptops, peripherals, and secure access tools. Clarify contribution to internet, power, or coworking costs. Exact mandates vary by country and should be stated clearly in policy. Some jurisdictions require expense reimbursement; others leave it to employer discretion.

Data Protection

GDPR requires secure handling of company data at home, proportionate monitoring, and impact assessments when tools track staff. Under UK GDPR and EU GDPR, data breaches must generally be reported to the supervisory authority within 72 hours of becoming aware when the breach is likely to result in a risk to individuals' rights and freedoms.

Europe is not uniform. Align around shared themes and localise for each country. Don't copy-paste US-style policies without adapting for local rights and data protection requirements.

Payroll And Tax Obligations For Remote Employees In Different States And Countries

UK HMRC can generally assess underpaid taxes for up to 4 years, up to 6 years for careless behaviour, and up to 20 years for deliberate behaviour. This is a material time horizon for IR35 and payroll compliance risk according to Teamed's UK compliance guidance.

Domestic Obligations

Within a single country, you need to withhold and remit income tax and social security equivalents in the employee's work location. In the US, this means state-by-state compliance. In the UK, it means PAYE and National Insurance. In Germany, it means income tax and social security contributions to the appropriate funds.

Nexus creates exposure beyond payroll. Hiring or allowing a remote worker in a new jurisdiction can require state registration, payroll filings, and potentially business or sales tax obligations. Maintain accurate work location records to drive correct withholding and filings.

International Obligations

A permanent establishment is a corporate tax concept where a company can become liable for corporate tax filings in another country because it has a sufficiently fixed place of business or a dependent agent there. A remote employee can be a PE risk factor when their activities are core revenue-generating or contract-concluding.

The OECD Model Tax Convention commentary treats a home office as potentially creating a PE when it is used on a continuous basis for business and the employer requires the employee to work from home. Teamed uses this as a practical trigger for PE risk review in cross-border remote arrangements.

Views are evolving. The OECD's 2025 update establishes a 50% of total working time benchmark as a key indicator of permanence. If an individual works from home for 50% or more of their total working time over a 12-month period, this is generally considered a fixed place of business.

Choose your operating model with tax presence in mind. One remote employee in a new country can change your tax picture significantly.

Work From Home Law Health And Safety And Expense Requirements

A health and safety duty of care for remote work is an employer obligation to assess and manage work-related risks in an employee's home or remote workspace, including display screen equipment and ergonomic hazards where required by local rules.

Safety Obligations

Employers remain responsible for reasonably safe work environments even when that environment is someone's spare bedroom. Address ergonomics, isolation risks, excessive hours, and equipment use.

Practical measures include self-assessment checklists, workstation guidance, DSE training, and documentation where required. In the UK, the Health and Safety at Work Act applies to home workers. In France, employers commonly need formal telework agreements. In Germany, Works Council involvement may be required for remote work arrangements.

Equipment and Expenses

Provide necessary equipment: laptops, peripherals, security tools—with 60.2% of EU enterprises now offering remote access to email, documents, and business applications. Consider contributions to internet, power, or coworking where justified by local practice or law.

State clearly in policy what is covered and how. Reimbursement rules and tax treatment vary by jurisdiction. Some US states require reimbursement of necessary business expenses. The UK is more flexible but expects reasonable provision.

Ensure statutory notices and labour law posters are accessible electronically where required. US federal and state requirements often mandate poster access for all employees, including remote workers.

Choose a global minimum that meets the strictest rules you face. Teamed can help calibrate what that looks like across your specific footprint.

Remote Work Compliance And Monitoring Guidelines For Employers

A data protection monitoring obligation is a set of requirements that applies when employers monitor remote employee communications or device usage, typically requiring a lawful basis, transparency, proportionality, and documented safeguards under the UK GDPR or EU GDPR.

Compliance Scope

Working time, breaks, data protection, confidentiality, and surveillance rules all apply to remote work. The fact that you can't physically observe employees doesn't eliminate your obligations. It changes how you meet them.

Monitoring Types and Risks

Time tracking and access records are generally acceptable with proper notice. Activity logs require more justification. Webcams and screenshots raise high legal and ethical risk, particularly in Europe.

Principles for Acceptable Monitoring

Transparency means explaining what you monitor, why, and how data is used and stored. Proportionality means collecting the minimum required to meet a legitimate purpose. Purpose limitation means not repurposing data without notice or legal basis.

Employee monitoring in the EU and UK differs from monitoring in many non-European jurisdictions because EU GDPR and UK GDPR impose strict proportionality and transparency requirements, and enforcement can include fines up to 4% of global turnover.

Documentation Requirements

Define working hours, response times, acceptable equipment use, information security requirements, and limits on location changes. Document everything.

Jurisdictional Differences

Europe is privacy-forward with stricter consent and works council expectations. In Germany, remote work arrangements commonly require Works Council involvement when co-determination rights are triggered, particularly for working time systems and employee monitoring tools. The US varies by state, but notice and consent remain important everywhere.

Avoid continuous webcam monitoring, keystroke logging without clear justification, and any monitoring that feels disproportionate to legitimate business needs.

Remote Work Obligations For Mid Market Companies With 200 To 2,000 Employees

Most generic remote work obligations content does not explain a governance threshold for mid-market firms. Here's what that looks like in practice: assign a single owner for location approvals and use employee location attestations to make payroll and audit evidence defensible across five or more countries.

Typical Footprint Challenges

Mid-market companies typically have multiple states or countries, hybrid and fully remote roles, mixed use of contractors, EOR, and entities, with legacy one-off decisions that made sense at the time but create complexity now.

Board and Audit Visibility

This is increasingly a board and audit topic. You need to show consistent policies, documented risk assessments, and clear ownership across HR, Finance, and Legal. The question isn't whether you'll be asked about remote work compliance. It's when.

Common Pain Points

Unknown actual locations. Inconsistent model use across similar roles. Unmanaged cross-border trips that create surprise tax registrations. Employees who moved during the pandemic and never told anyone.

Strategic Approach

Build a single remote work policy framework with local addenda. Create a standard approval process for location changes. Establish criteria for model selection by market and role.

A "work from anywhere" policy differs from a "work from approved locations" policy because the former can create uncontrolled payroll, social security, and PE exposure, while the latter limits compliance scope to jurisdictions where you've confirmed registrations and support processes.

Governance Structure

Create a joint HR-Finance steering group with access to multi-jurisdictional advisors. Don't leave this to People Ops alone. The tax and legal implications require Finance and Legal involvement.

Choosing Contractors EOR Or Entities For Remote Employees In 180 Plus Countries

An Employer of Record is a third-party organisation that becomes the legal employer for workers in a specific country, handling payroll, statutory benefits, and local employment compliance while the client company directs day-to-day work. Understanding when each model fits matters more than defaulting to whatever's fastest.

Contractors

Use contractors for project-based, short-term, genuinely independent work. The contractor should have meaningful discretion about how work is performed, access to multiple clients, and financial risk in the relationship.

Risks are significant. Misclassification when used for core, ongoing roles under company control. Gaps in protections and benefits. Increased scrutiny by regulators, particularly in Europe.

Choose a contractor model only when the role is genuinely project-based, the worker controls how and when work is done, and you can demonstrate the absence of employee-like control, integration, and exclusivity.

Employer of Record

An EOR differs from a contractor arrangement because the EOR becomes the worker's legal employer in-country and runs statutory payroll, while a contractor arrangement leaves the client company responsible for avoiding employee-like control and bearing misclassification risk.

Pros: quick market entry, local payroll and benefits compliance, reduced administrative burden. Cons: per-head fees that add up at scale, constraints on benefit design and terms, not always suitable for regulated or fast-scaling teams.

Choose an EOR when you need to hire in a country within weeks and you don't have a local entity or payroll registration in that jurisdiction.

Owned Entity

A local entity differs from an EOR because the entity makes the company the direct employer with full local registrations and employment obligations, while an EOR is an outsourced legal-employer structure designed to operate without entity setup.

Pros: control over employment terms and benefits, better fit for scale or regulated activity. Cons: heavier ongoing governance, tax filings, and administration.

Choose a local entity when you expect to employ 10 or more employees in a single country within 12 to 18 months, need direct control of benefits and policies, or must contract with regulated customers that require a local employing entity.

Decision Approach

There's no single right answer. Teamed maps footprint, evaluates cost, risk, and control, and sequences moves from contractor to EOR to entity as you grow. Requirements vary by region. Stricter worker protections in parts of Europe and sector rules affect the model. One remote engineer doesn't equal the needs of a scaling sales or clinical team.

Building A Remote Work Compliance Roadmap For Scaling Mid Market Companies

Most articles fail to map employment model decisions to remote work risk. Here's how to build a roadmap that actually works.

Assess Current State

Map all employee and contractor locations. Record models used: contractor, EOR, entity. Inventory payroll, tax, and employment registrations. Find the gaps before someone else does.

Design Policy Framework

Build a global framework with local addenda covering eligibility, location changes, time recording, equipment and expenses, monitoring, and data security. Choose specialist legal review when an employee requests to work from another country for more than 30 days, because even temporary cross-border patterns can create payroll, immigration, and corporate tax filing exposure.

Assign Ownership

Create a cross-functional HR, Finance, and Legal group. Track legal changes and enforcement trends. Don't assume someone else is watching.

Prioritise Markets

Focus on higher-risk jurisdictions, larger headcount, or heavy contractor usage. Decide where to shift models: contractor to EOR, EOR to entity.

Execute and Iterate

Sequence registrations, model changes, and policy rollouts. Review at least annually or after major regulatory or business changes.

Ready to build your remote work compliance roadmap? Talk to the experts at Teamed.

FAQs about Employer Obligations for Remote Employees

How long can an employee work remotely from another state before new obligations apply?

Obligations can arise as soon as work begins in the new location. Some jurisdictions have specific day thresholds, but many don't. Require prior approval for location changes and seek local advice before moves occur.

When should a remote contractor be converted to an employee or moved to an EOR arrangement?

If the contractor mainly serves your company, follows your schedule, uses your tools, and performs ongoing core work, review classification and consider employment directly or via EOR. Base decisions on actual working conditions, not contract labels.

Can one remote employee in another country create permanent establishment risk?

Yes, particularly if senior, revenue-generating, or long-term. The OECD's 50% working time benchmark provides guidance, but standards are evolving. Evaluate with specialist tax input.

How should we respond if an employee changes their work location without approval?

Confirm the location, assess legal, tax, and security implications urgently, decide whether to regularise or require return, and reinforce policies requiring prior approval. Speed matters here.

What is mid-market?

Companies larger than early-stage but not large enterprises, typically hundreds to low thousands of employees with significant revenue, facing global employment complexity without deep in-house legal and tax teams.

How often should we update our remote work policy to stay compliant?

Review at least annually and after major regulatory or business changes such as new country entry or model shifts. Include HR, Finance, and Legal in the review.

When does it make sense to work with a specialist advisor on remote work compliance?

Once you have remote staff in several states or countries, a mix of contractors, EOR, and entities, or operate in regulated sectors. A partner like Teamed provides a single, long-term strategy and execution layer across markets, eliminating the fragmentation that creates compliance gaps.