Cross Border Hiring: Avoiding Legal Pitfalls in International Hiring

Hiring internationally feels like a natural next step once a startup begins to grow. Talent is global, remote work is normalized, and expanding beyond Switzerland often happens faster than startup founders expect. What feels simple in practice, however, can quickly become legally complex.

In a recent Swiss Startup Association webinar, legal experts from Eversheds Sutherland across Switzerland, France, Germany, and Italy unpacked what founders need to understand before hiring across borders. Their message was clear – employment law is not just administrative detail. It is strategic infrastructure and ignoring it rarely ends well.

Employment contracts are more than paperwork

Whether someone is considered an employee comes down to one key factor: subordination. If a person follows your instructions, operates within your structure, and is integrated into your organization, they are likely an employee, regardless of their title or the invoices they send. Courts look at the reality of the working relationship, not the labels. While verbal agreements may technically be valid, they carry risks, whereas written contracts provide clarity and protection, especially for terms like probation periods or non-compete clauses. Clear, precise, and properly documented agreements are essential to reflect the true nature of the working relationship.

Fixed term contracts are not a flexibility shortcut

Many startup founders assume fixed term contracts offer flexibility. In reality, they often create more constraints. In France, fixed term contracts are strictly regulated and cannot be terminated for poor performance. In Germany, if the contract is not properly executed in writing before the start date, it automatically converts into an indefinite contract. In Italy, total duration is capped under strict rules. In Switzerland, while more flexible, written clauses are still required for certain extensions and protections. The practical takeaway is that fixed term contracts are legal instruments, not tactical shortcuts. If used incorrectly, they increase risk rather than reduce it.

Collective agreements and mandatory rules matter

In countries like France and Italy, collective bargaining agreements apply to the vast majority of employees, whether the employer likes it or not. These agreements regulate working time, salary minimums, trial periods, non compete clauses, and termination conditions. You cannot contract out of mandatory minimum wage. You cannot waive statutory rights by mutual agreement. Public policy rules override private arrangements. Startup founders often assume that agreement equals compliance. That assumption can be costly.

The 4 hiring scenarios every startup faces

Here’re 4 practical scenarios for a Swiss company hiring engineers discussed during the webinar:

1. A Swiss national working in Switzerland
2. A foreign national living and working in Switzerland
3. A cross border commuter working in Switzerland but residing abroad
4. A remote employee working entirely from another country

The first scenario is simple, but the others are more complex. Work permit requirements vary by nationality and residency, while cross-border commuters may fall under international agreements that determine jurisdiction. Hiring remote employees abroad can trigger foreign employment laws, tax obligations, and even create permanent establishment risks for the company. Generally, the applicable law is tied to the employee’s place of work, and disputes may need to be resolved where the employee resides, sometimes requiring enforcement in a foreign court under local procedural rules. Cross-border hiring is never just a matter of payroll. It involves multiple legal, tax, and operational considerations.

Remote work and workation risks

Remote work introduces additional complexity. Social security obligations can arise from the very first day an employee works from another country, depending on bilateral treaties, and tax exposure may follow. In some cases, a remote employee can even create corporate tax risks for the company. Workations may seem harmless, but legally they are not always invisible. Founders should view long-term remote arrangements as structural business decisions rather than lifestyle perks.

Freelancers and misclassification

Freelancers can offer flexibility, but misclassification risk is real. If a freelancer works mainly for one company, follows instructions on working hours, uses company equipment, appears on the company website, or is subject to disciplinary control, courts may treat them as employees. This can lead to retroactive social security contributions, tax adjustments, and fines. While some structuring strategies can reduce risk, the underlying principle is consistent across jurisdictions: substance prevails over form, and the reality of the working relationship matters more than the label.

Employer of record is not universally allowed

Some startup founders try to hire through third-party employer-of-record services. While this model is legal in certain countries, it is strictly limited or even prohibited in others. In Switzerland and France, unlawful employee leasing can carry serious legal consequences, including, in some cases, criminal liability, with similar restrictions in Italy. What is permissible in one jurisdiction may be illegal in another, making careful local compliance essential.

What startup founders should remember

Cross border hiring requires alignment between:

• Immigration law
• Employment law
• Social security rules
• Tax obligations
• Corporate structure

Each country has similarities, but the differences are what create risk.

The advice from all speakers was to take a proactive approach to structuring. Draft contracts carefully, clarify the applicable law, understand where disputes would be resolved, review relevant collective agreements, define IP ownership explicitly, and plan termination rules in advance. When a conflict arises, it’s already too late to create the right structure.

Final thought

Growth and compliance go hand in hand – employment law provides the framework to make it possible. Startups move fast, but legal systems don’t. The founders who scale successfully across borders are those who build their employment structures as carefully as they build their products.

Catch the full webinar replay in the Swiss Startup Association Education Library, free for members. Not a member yet? Join the community and get access to practical sessions that help you protect your business before something goes wrong.