Why is it so hard to pay cross-border employees in Europe?

"There's naturally a certain amount of friction in terms of labor law compatibility between European states inside and outside of the European Union (EU). But even within the umbrella of the EU, countries have their own labor, tax, and social security rules that can turn simple payroll procedures into a nightmare. That's because EU labor law is issued via directives that allow member states discretion in how they implement rulings."

"For businesses, this makes an EU-wide hiring strategy impossible, instead requiring individual approaches to each and every country a company might want to hire in-up to and including incorporation. This isn't something that can be done as an afterthought. Misclassifying a worker, for instance by employing someone as a contractor rather than an employee, may lead to penalties and legal trouble."

European countries maintain divergent labor, tax, and social security rules that complicate cross-border hiring and payroll even within the EU. EU directives allow member states wide discretion, producing inconsistent national implementations and preventing a single EU-wide hiring strategy. Employers must adopt country-specific approaches that can include local incorporation and tailored payroll processes. Incorrect worker classification, such as treating an employee as a contractor, carries financial penalties and legal exposure. Talent shortages are pushing employers to recruit across borders despite the complexity. Fifty-four percent of European employers expect labor shortages to worsen, while demand for specialized talent rose 112% in three years.

Read at Fast Company