Fifteen years ago, hiring someone in another country without setting up a local entity was a workaround — a slightly improvised arrangement that a handful of specialists understood and most lawyers regarded with mild suspicion. Today it is a recognised category with its own acronym, its own compliance vendors, and its own line item in HR budgets. Few shifts in business services have been this large while attracting this little public attention.
The mechanism itself — an employer of record taking on the legal employment relationship so a company elsewhere can engage someone without local incorporation — hasn't changed much. What has changed is everything around it. Tax authorities that once treated this kind of arrangement as a curiosity now treat it as a standard structure worth scrutinising closely. Labour ministries have updated guidance specifically to address it. Banks and payment providers have built compliance processes around it rather than flagging it as unusual.
Remote work didn't create the category, but it normalised it
The underlying need long predates remote work becoming common. Companies have always wanted to hire specific people regardless of where those people happened to live, and the administrative cost of doing that properly — registering an entity, learning local labour law, running local payroll — has always been disproportionate to hiring one or two people in a new country. What changed after 2020 wasn't the need; it was the scale of demand and, more importantly, who was asking. When mainstream companies with conservative legal departments started asking how to hire someone in another country without incorporating there, the answer had to become defensible in a way it hadn't needed to be when the market was smaller and more specialist.
That shift from workaround to defensible structure is the real story. It shows up in small but telling ways: standard contract templates that used to vary wildly between providers have converged. Compliance documentation that used to be an afterthought is now often the actual product being sold. The conversation with a prospective client has moved from "is this legal" to "show me exactly how this satisfies the relevant employment and tax authority in this specific jurisdiction" — a much more demanding question, and a healthier one.
Regulation is catching up, unevenly
Some jurisdictions have responded to the growth of this model with clear guidance, which is, on balance, good for everyone operating in the space — clarity makes it easier to build something durable. Others have been slower, leaving structures to operate in a grey zone that's increasingly uncomfortable for larger, risk-averse clients even when the underlying practice is sound. The jurisdictions that have engaged seriously with the question — rather than ignoring it or banning it outright — have generally ended up with healthier markets, because clarity, even strict clarity, is something serious providers can build around.
What's notable, watching this over more than a decade, is how much the compliance burden has shifted from being a cost center to being the actual basis of competition. Providers that treated compliance as paperwork to minimise have mostly fallen behind providers that treated it as the core of what they were offering. That inversion — compliance as the product, not the tax — is probably the single clearest sign that this category has matured from workaround to infrastructure.