What Comes First When You Hire Abroad?
Liam walks through the three checks, worker classification, legal employer, and mandatory local terms, that should happen before drafting any contract for a first international hire.
Someone on a legal team wants to hire their first person in Germany. The instinct is to draft an employment contract right away. Liam explains why that is the wrong first move, and what actually needs to happen before any contract gets written.
The contract's label does not decide the classification
A contract can call a role whatever the drafter likes, but the label on the page does not determine how that role is legally classified. The country's labor law does. Call someone a contractor while setting their hours, handing them your equipment, and standing as their only client, and a local court will read that relationship as an employee's regardless of what the contract says.
Three checks before any contract gets drafted
A real hiring plan runs three checks before a single clause gets written:
- How the role is likely to be classified under the local labor law.
- Who will be the legal employer on paper, your own entity in that country, or an Employer of Record standing in on your behalf.
- Which local rules are mandatory no matter what the contract says, things like notice periods and statutory benefits.
Running the Berlin example through the checks
Consider a developer in Berlin working forty hours a week, with one client, using that client's laptop and tools. Run that situation through the three checks: full control over their hours, a single client, and the client's own equipment. That is employee-shaped, no matter what label the contract puts on the relationship.
Classification is not permanent
Passing as contractor-shaped today does not lock the classification in place. If how the work actually runs changes, more hours dedicated to one client, more control exerted over schedule or tools, the classification can flip later, even under the exact same contract. Classification tracks the real working relationship, not the paperwork describing it.
Landing on employee-shaped does not require your own entity tomorrow
Determining that a role is employee-shaped does not mean a company needs to open its own legal entity in that country immediately. An Employer of Record can act as the legal employer on paper while the company sorts out its longer-term entity strategy. This separates the classification question from the entity-formation question, letting a company hire compliantly without rushing into a permanent legal presence.
Why this order matters
A contract cannot fix a bad classification after the fact. Working out how a role will be classified, and who the legal employer will be, needs to happen before drafting anything, because the country's labor law decides those questions, not whatever label ends up on the signed page.
Key takeaways
- A contract's label does not determine worker classification; the country's labor law does, based on the actual working relationship.
- Full schedule control, a single client, and use of the client's equipment are hallmarks of an employee-shaped relationship, regardless of contract wording.
- Three checks come before drafting any contract: likely classification, legal employer identity, and mandatory local terms like notice periods and statutory benefits.
- Classification is not fixed by the initial contract; a change in how work actually runs can flip the classification later under the same agreement.
- An Employer of Record can serve as the legal employer on paper, letting a company hire compliantly before establishing its own entity in that country.
Who this is for
Anyone on a legal, HR, or operations team preparing to hire their first employee or contractor in a new country, who needs to understand what has to be settled before a contract gets drafted.
Full transcript(auto-generated, with timestamps)
[0:00]Someone on a legal team wants to hire their first person in Germany. Wrong first move, draft a contract. What they actually need first is the workers classification. Liam, take them through it. You could draft an employment contract today calling the role whatever you like, but a contract's label doesn't decide the classification, the country's labor law does. Call someone a contractor while you set their hours, hand them your equipment, and take them as their only client, and a local court will call them an employee anyway, no matter what the page says. A real hiring plan runs three checks before any contract gets written. How the role is
[0:33]Classified, who will be the legal employer on paper, your own entity or an employer of record standing in for one, and which local rules are mandatory no matter what the contract says, like notice periods and statutory benefits. Watch the anchor, developer in Berlin, 40 hours a week, one client using your laptop and your tools. Run the Berlin developer through the checks, full control over their hours, one client, your equipment, that's employee shaped, no matter what the contract calls them. Passing as contractor shaped today doesn't mean it stays that way. Change how the work actually runs, and the classification can flip later, same contract. And landing on employee
[1:07]Doesn't mean you need your own German entity tomorrow, an employer of record can be the legal employer on paper while you sort that out. Well, if the contract can't fix a bad classification, work out how the role is classified and who the legal employer will be before you draft anything. The country's labor law decides that, not the label on the page. Your turn, here's the prompt, read it with me. I'm planning to hire our first employee in new country. Before drafting anything, walk me through how the role would likely be classified there under local labor law, the difference between opening our own entity there versus
[1:37]Using an employer of record, and which statutory terms, notice period, benefits, termination rules would apply once it's classified. Liam, in for Bear. What comes first when you hire abroad? Liam, in for Bear.
