Hiring a person who lives in a different country is straightforward to arrange and complicated to do lawfully. The complication comes from where the work physically happens.
Obligations follow the place of work
Employment law, payroll withholding and social contributions are generally determined by where the employee performs their duties rather than where the employer is incorporated.
A company with no presence in that country can therefore acquire obligations there simply by having someone work from home within its borders.
Those obligations typically include registering with local authorities, operating local payroll deductions and complying with local rules on contracts, leave and termination.
Permanent establishment is the larger risk
Beyond payroll, having people working in a country can create a taxable presence for the company itself, bringing corporate tax filing obligations in that jurisdiction.
What triggers this varies, and it commonly depends on the seniority of the person, whether they conclude contracts, and how permanent the arrangement is.
The consequences can substantially exceed the cost of the employment, which is why the question is a tax matter requiring advice rather than an administrative detail.
Contractor classification is frequently wrong
Engaging the person as a contractor appears to avoid the problem, and authorities in many countries apply their own tests to determine the real nature of the relationship.
Those tests usually examine control, integration into the organisation, exclusivity and who supplies the tools, rather than what the contract calls the arrangement.
Where a relationship is reclassified, the employer may owe back contributions, penalties and employment entitlements, and the criteria differ considerably between jurisdictions.
Employer of record structures shift the burden
An employer of record employs the person locally on the company's behalf, taking on the payroll, contractual and compliance obligations in exchange for a fee.
The company directs the work while the legal employer is a third party with an existing local entity, which removes the need to register in each country.
The arrangement costs more per employee than direct employment and does not resolve every issue, including some questions of corporate presence and intellectual property assignment.
Pay and benefits do not translate
Statutory entitlements differ substantially: leave, notice periods, sick pay, parental provisions and mandatory benefits are set locally and are not optional.
Applying one country's package across a distributed team therefore produces both non-compliance in some places and perceived unfairness in others.
Companies resolve this either by paying to a local benchmark or by defining a global standard that exceeds local minimums everywhere, and both approaches carry consequences.