Remote Work Regulations 2026 Guide for Global Employers

Your VP of Engineering just messaged you. One of your best developers wants to spend three months working from Portugal. Your head of sales relocated to Texas without telling anyone. And your CFO is asking why you're paying for EOR services in six countries when you only planned to hire in three.

Welcome to the reality of remote work regulations in 2026.

Remote work regulations are the set of employment law, tax, social security, health and safety, and data protection rules that apply when an employee performs work away from an employer's premises, typically from home or another location. For mid-market companies scaling across borders, these regulations don't sit neatly in one jurisdiction. They overlap, conflict, and create obligations you didn't know existed until an auditor or tax authority comes knocking.

This guide breaks down what you actually need to know: which laws apply where, how US state rules differ from European frameworks, when your employment model choices create regulatory exposure, and how to build a compliance approach that doesn't fall apart every time someone moves.

Key Takeaways

• Remote work regulations exist at multiple levels (national/federal, regional/EU, state/province), and overlapping rules can apply simultaneously to a single employee
• European mid-market employers operating cross-border remote work commonly need to manage at least 5 separate compliance streams per worker location: employment law, payroll tax withholding, social security, health and safety, and privacy compliance
• For mid-market companies (200 to 2,000 employees), a practical governance baseline is to require pre-approval for any cross-border remote work and to mandate employee location reporting within 5 business days of any move
• Employment model choices (contractor vs employee vs EOR) are shaped by remote work law and enforcement trends, not just cost considerations
• The US is not one market in legal terms: expect fragmented state rules and plan for registrations in each state where you have staff
• A common control for reducing cross-border compliance exposure is to cap "work-from-anywhere" requests at 10 to 20 working days per year unless formal tax, social security, and employment law assessments are completed

What Remote Work Regulations Apply to Employers and Employees

Remote work regulations span five distinct categories, and most scaling companies need to manage all of them simultaneously.

Employment law covers working time limits, minimum wage, overtime, leave entitlements, and termination rules. In the UK, the Working Time Regulations 1998 provide a statutory right to 5.6 weeks of paid annual leave for full-time workers and set a 48-hour average weekly working time limit over a 17-week reference period unless an opt-out applies. Under the EU Working Time Directive framework, the minimum daily rest requirement is 11 consecutive hours per 24-hour period for most workers.

Tax and social security determines where you withhold income tax, which country receives social security contributions, and how coordination rules apply when employees work across borders.

Health and safety obligations extend to home offices. You're still responsible for ensuring your remote employees have safe working conditions, even when you can't see their workspace.

Data protection and privacy governs how you monitor remote workers, what data you collect, and how you process it. In the EU, the General Data Protection Regulation (GDPR) applies to employee monitoring and requires a lawful basis, transparency, and data minimisation.

Sector-specific rules add another layer for regulated industries. Financial services, healthcare, and defence companies face additional requirements around data access, supervision, and where critical functions can be performed.

Here's what catches most companies off guard: the location where work is physically performed usually drives labour and tax rules, even if the employer is headquartered elsewhere. Your London-based company doesn't get to apply UK employment law to someone working from their apartment in Berlin just because you signed the contract in England.

A telework or work-from-home policy is an internal governance document that sets eligibility, location rules, working time expectations, equipment and expense rules, monitoring practices, and reporting requirements for remote employees. Written policies must reflect legal obligations. Informal agreements aren't sufficient when regulators come asking questions.

Teamed can map applicable rules across 180+ countries, helping you understand which regulations apply before you make commitments you can't keep.

Remote Work Laws by State in the US for Distributed Teams

If you're a European company hiring in the US, prepare yourself: the US is not one market in legal terms.

Federal rules set a baseline. The Fair Labor Standards Act (FLSA) covers minimum wage and overtime for non-exempt workers. Anti-discrimination laws apply regardless of where employees sit. But that's where uniformity ends.

State variability is substantial. Minimum wage ranges from the federal floor of $7.25 to over $16 in states like California and Washington. Overtime calculations differ. Break requirements vary. Expense reimbursement rules diverge significantly.

One employee can trigger obligations. A single remote hire in a new state can require payroll registration, unemployment insurance enrolment, and workers' compensation coverage in that state. You don't get to wait until you have a "critical mass" of employees.

California deserves special attention. The state requires employers to reimburse employees for necessary business expenses, including a reasonable portion of home internet and phone costs. Generic policies that work in Texas often fail California compliance tests.

The practical approach for multi-state teams: set a company baseline that meets your strictest state's requirements, then adjust upwards where specific states demand more. Trying to maintain separate policies for each state creates administrative chaos and increases the risk of errors.

For non-US firms, the pathways include using an EOR to handle state-by-state compliance, establishing a US entity and managing registrations directly, or carefully designing roles to limit state exposure. Teamed advises on which approach fits your headcount, growth plans, and risk tolerance.

Which State Law Applies to Out-of-State Remote Employees

The general rule is straightforward: the employee's physical work state governs wage and hour rules and tax withholding. Where your headquarters sits rarely controls labour law for remote workers.

But the scenarios get complicated quickly.

Silent relocation: An employee moves from New York to Florida without telling you. In this case, Florida law now applies to their employment, and you may have payroll registration obligations you didn't know about. Your policy must require pre-approval and prompt reporting of any location changes.

Split-state work: An employee spends three days per week in New Jersey and two days in Pennsylvania. In this case, you need to track days worked in each state and apportion withholding accordingly. Some states have reciprocity agreements that simplify this; many don't.

Temporary work-from-anywhere: An employee wants to work from Colorado for six weeks while visiting family. In this case, define limits and approvals in your out-of-state remote work policy to avoid inadvertently creating tax nexus or triggering new registration requirements.

Your employer obligations include registering for payroll and unemployment insurance in each state where employees work, updating handbooks to reflect applicable state law, and tracking where people actually perform work rather than where they claim to be.

Teamed helps assess when a hire or relocation creates state tax nexus and whether the compliance burden justifies the arrangement.

Remote Work Regulations for Companies Above 50 Employees Expanding Internationally

For European and UK companies scaling remote hiring, the earliest repeatable compliance inflection point is typically reached around 50 employees, when ad hoc remote arrangements begin to create inconsistent payroll registrations, policy exceptions, and unmanaged location drift.

This is when remote work stops being a perk you grant on a case-by-case basis and becomes a strategic governance issue.

Cross-border remote work adds layers beyond local labour law. You're now dealing with immigration and visa requirements, right-to-work verification, social security coordination between countries, and permanent establishment risk for corporate tax purposes.

The common trigger: a key employee asks to work from another country "for a few months." The manager says yes without consulting HR, Legal, or Finance. Six months later, you discover you've created tax exposure in a jurisdiction you never intended to enter.

A global remote work policy should define which countries are pre-approved for remote work, which require case-by-case assessment, and which are prohibited. It should specify maximum durations, approval workflows, and what happens when someone violates the policy.

Teamed advises on suitable early markets for international expansion, where to avoid informal setups, and when to use EOR arrangements versus establishing entities. The goal is making these decisions with full visibility into the regulatory implications rather than discovering them after the fact.

Remote Work Compliance for Mid-Market Companies with 200 to 2,000 Employees

Mid-market companies (typically 200 to 2,000 employees or roughly £10m to £1bn in revenue) face a specific compliance challenge: they're large enough to have complex global footprints but not large enough to have dedicated global employment counsel on staff.

The symptoms are familiar. Multiple conflicting policies across regions. Vendor sprawl with different EOR providers in different countries. Inconsistent answers to the same compliance questions depending on who you ask. Unclear ownership of global employment decisions between HR, Finance, and Legal.

At this size, remote work cannot sit in the gaps between HR and Finance.

A coherent framework includes a single global policy that sets baseline expectations, a clear exception approval workflow that involves the right stakeholders, and a country-by-country register of roles, risks, and compliance requirements.

Alignment across functions is critical. Tax implications affect Finance. Legal exposure affects Compliance. Operational execution affects HR. When these teams make decisions in isolation, you get contradictory guidance and unmanaged risk.

Teamed provides central advisory oversight across markets and employment models, helping execute decisions once strategy is clear. The cadence that works: review arrangements and vendors around funding rounds, headcount milestones, or whenever you enter new countries.

Choosing Between Employees, Contractors and EOR for Remote Workers

Remote work regulations directly shape your employment model choices. The decision between contractors, EOR arrangements, and direct employment isn't just about cost or speed. It's about regulatory accountability.

Contractor arrangements work when the worker operates as an independent business with control over how work is performed, isn't embedded into management structures, and isn't subject to set working hours or company-led performance management. Contractor misclassification is a compliance failure where a worker treated as an independent contractor is legally deemed to be an employee based on the reality of control, integration, and economic dependence in the working relationship. Remote work doesn't remove this risk. Many jurisdictions test control, integration, and dependence regardless of where the work happens.

Employer of Record (EOR) is a third-party organisation that becomes the legal employer for workers in a specific country, handling local payroll, taxes, statutory benefits, and employment compliance while the client company directs day-to-day work. EOR fits when you're testing a market, have small headcount in a country, or need speed-to-hire. It can provide regulatory insulation if structured properly.

Direct employment through an owned entity gives you full control and responsibility via local entity. It's higher setup and ongoing complexity but makes sense for growing headcount, local leadership roles, sector licensing requirements, or long-term presence.

Factor	Contractor	EOR	Owned Entity
Legal employer	Worker (self-employed)	EOR provider	Your company
Compliance responsibility	Limited (if truly independent)	EOR handles local compliance	Fully yours
Control over work	Must be limited	You direct work, EOR employs	Full control
Best for	Truly independent specialists	Market testing, small headcount	Sustained presence, regulated industries
Misclassification risk	High if managed like employee	Lower if structured correctly	N/A

The signals that suggest transitioning from EOR to entity: growing headcount in a single country, need for local leadership roles, sector licensing requirements, or strategic commitment to long-term presence.

Teamed helps choose the right model per country and role, then plan timing between models with compliance in mind.

Remote Work Regulations in Europe for Scaling Companies

European remote work regulations differ from US multi-state compliance because EU/UK obligations are primarily country-based with harmonised EU minimum standards, while US obligations often change materially by state even within the same country.

Working time and safety: Remote workers retain full employee rights. Working time limits, rest breaks, and paid holiday apply at home just as they would in an office. Under the EU Working Time Directive framework, the minimum weekly rest requirement is 24 uninterrupted hours per 7-day period, in addition to the daily rest requirement. Employers remain responsible for health and safety of home setups. In the Netherlands, employers retain occupational health and safety responsibilities for home workers, which typically requires documented risk assessments and ergonomic guidance.

Monitoring and privacy: GDPR and national rules require transparency, proportionality, and lawful basis for monitoring. Intrusive tools that might be tolerated in some US states can create significant legal exposure in Europe. You need to justify what you're monitoring and why.

Cross-border within Europe: Employees based in one country and employed by another can raise social security and tax coordination issues. Across the EU/EEA and Switzerland, cross-border remote work can trigger social security coordination issues, requiring employers to confirm the correct contribution system based on the employee's work pattern and residence.

In Germany, remote work arrangements often require works council engagement where co-determination applies. In France, remote work arrangements commonly require formalisation through a company charter or agreement.

The practical approach: map key locations, prioritise legal review in countries with clusters of remote staff, and consider sector-specific rules that may apply. Teamed can provide country-specific counsel across Europe.

Remote Work Rules for European Companies Hiring in the US

"The US is not one market in legal terms."

That's the first thing European HR leaders need to understand when hiring American remote workers. Federal rules exist, but they don't regulate private employerssector companies the way you might expect from EU directives.

Federal telework context: The OPM guidance that dominates search results applies to federal government employees, not private sector companies. There's no equivalent to the EU Working Time Directive that sets binding standards for all US employers.

Policy expectations: US staff expect explicit written work-from-home policies covering hours, equipment, expenses, and performance expectations. The informality that might work in some European contexts often creates confusion and legal exposure in the US.

Cultural and legal differences: Employment-at-will is common, meaning employers can generally terminate without cause (subject to anti-discrimination laws). Benefits and healthcare are tied to employment in ways that don't apply in countries with universal healthcare.

Tax nexus: A single US remote employee can create state registrations and filing requirements. Tax nexus is the legal connection between a company and a jurisdiction that can trigger obligations such as payroll withholding registrations, corporate tax filings, or sales tax reporting, even where the company has no local entity.

Entry options include using an EOR to handle US compliance, establishing a single-state entity and managing multi-state registrations, or hybrid approaches depending on headcount and growth plans. Teamed advises on which approach aligns with your remote governance and risk tolerance.

How Remote Work Regulations Affect Tax, Payroll and Permanent Establishment Risk

Remote work can create tax nexus or permanent establishment (PE) in another jurisdiction. This is where HR decisions become Finance problems.

Permanent establishment (PE) is a corporate tax concept where a company can become subject to taxation in a country because it has a sufficient fixed place of business or dependent agent activity there, which can be triggered by certain remote work arrangements. OECD commentary considers home offices and remote work, with factors including time thresholds and business purpose.

US multi-state payroll: You need to register for income tax withholding and unemployment insurance in each state where employees work. Sales tax nexus may also apply depending on what your company sells.

Tracking reality: Finance and HR must track where people actually work, not where they say they work. Location drift silently creates filing obligations. An employee who "temporarily" works from a different state for six months has created compliance requirements you may not discover until audit.

The flow for new roles should be: assess location → check nexus/PE implications → choose employment model → document position. Technology can flag regulatory changes and risk patterns, but human judgment validates and recommends actions.

Teamed helps evaluate when roles trigger entity decisions, when EOR fits, and how to document a defensible tax and PE position.

Employer Obligations for Remote Employees on Monitoring, Safety and Equipment

Beyond payroll and tax, you have ongoing obligations to remote employees that differ by jurisdiction.

Safety duties: Provide guidance on workstation setup, breaks, and ergonomics. Document risk assessments for home workers. In the EU, you can't simply ignore the fact that someone is working from a kitchen table with poor lighting and an uncomfortable chair.

Privacy and monitoring limits: GDPR and US state privacy laws constrain intrusive monitoring tools. You need transparency about what you're monitoring and justification for why. Keystroke logging, constant screen recording, and location tracking face restrictions in many jurisdictions.

Expense and equipment: Some jurisdictions mandate reimbursement of necessary business expenses. California requires it. The UK doesn't have the same statutory requirement but best practice suggests clear policies.

A reasonable policy approach: "The company provides laptop and standard peripherals. Necessary, pre-approved home internet and phone costs are reimbursed up to [cap] with itemized receipts."

Monitoring defaults: Different countries and states restrict recording, keystroke logging, and location tracking. Adopt minimal, proportionate monitoring. If you can't explain to a regulator why you need a particular monitoring tool, you probably shouldn't be using it.

Set global standards for safety and monitoring, then tune to the strictest local rules in key markets. Teamed can guide this calibration.

Remote Work Strategy for Mid-Market Companies in Regulated Industries

Financial services, healthcare, and defence companies face additional requirements that make remote work more complex than in unregulated sectors.

Added requirements: Data access and location restrictions, records retention rules, background check requirements, and supervision expectations are harder to satisfy with fully remote roles. Regulators want to know where critical functions occur and how you maintain controls.

Regulatory scrutiny: Auditors assess where critical functions occur, access controls, and documentation of remote work controls. If you cannot explain your remote work controls to an auditor, you probably need to simplify them.

Role classification: Categorise roles by sensitivity. Some are remote-eligible. Some require hybrid arrangements. Some must be on-site. Document the rationale for each classification.

Special restrictions: National security rules, patient data requirements, and financial regulatory expectations can limit cross-border remote work or access from certain countries. A developer with access to defence-related systems may face restrictions that don't apply to a marketing coordinator.

The advantage of a single advisor: unified guidance spanning employment models and sector regulation beats fragmented vendor input. Teamed advises on entity location, EOR usage, and workforce design aligned to regulatory expectations.

Turning Remote Work Regulations into a Global Employment Strategy

Remote work spans employment law, tax, payroll, safety, privacy, and sector rules. For scaling companies, it's not a perk-side issue. It's a strategic governance question.

The principles that work: define where you will and won't hire remotely, how you balance flexibility with risk, and how HR, Finance, and Legal coordinate on decisions. A phased approach starts with auditing current arrangements, then designing a global framework, then refining by country and role over time.

A single strategic partner across 180+ countries helps align contractors, EOR, and entities as you grow. That's not about vendor consolidation for its own sake. It's about having one conversation when critical decisions arise rather than piecing together advice from providers with conflicting incentives.

If you're making employment model decisions across multiple countries, navigating entity establishment timing, or trying to build a compliance framework that won't fall apart at your next funding round, talk to the experts at Teamed. Strategic clarity in days, execution in hours.

FAQs About Remote Work Regulations

How long can an employee work remotely from another country before local rules apply?

Local employment, tax, and social security rules can apply as soon as work starts in that country. There's no universal grace period. Seek advice before agreeing to any cross-border duration, and consider capping work-from-anywhere requests at 10 to 20 working days per year unless formal assessments are completed.

Do remote work regulations apply differently to contractors and employees?

Employees are fully covered by labour and safety rules. Contractors differ in law, but regulators assess the reality of control and integration to detect misclassification. Remote work doesn't change the analysis. If you manage a contractor like an employee, they may be deemed an employee regardless of what the contract says.

How should regulated companies handle remote work in sectors like financial services or defence?

Map sensitive roles, limit fully remote arrangements where oversight or data security would weaken, and align setups to regulatory guidance and audit expectations. Document your rationale for which roles can be remote and which cannot.

What are the biggest remote work compliance mistakes mid-market companies make?

Allowing informal relocations without approval, ignoring state or country rules until audit, and relying on vendor assurances without a central strategy. The pattern is consistent: ad hoc decisions create compliance debt that surfaces at the worst possible time.

How often should a company review and update its remote work policy?

Review regularly and whenever entering new countries or states. Coordinate input from HR, Finance, and Legal/Compliance. Funding rounds and headcount milestones are natural triggers for comprehensive reviews.

What is mid-market?

Typically 200 to 2,000 employees or roughly £10m to £1bn in revenue, where global employment decisions become strategically significant but dedicated global employment counsel isn't on staff.

When does a company need a dedicated global employment advisor for remote work?

Once remote staff span several countries or US states and questions arise about tax, entities, or misclassification, a global advisor adds strategic clarity. The threshold is usually around 50 employees for initial complexity and 200 employees for systematic governance needs.or