Top Procurement Strategies to Achieve External Workforce Compliance
As the use of external talent grows, so does the importance of getting worker classification and compliance right. With regulations evolving globally, procurement leaders must understand the nuances of hiring independent professionals and ensure that contractors and freelancers are engaged in a compliant way. Key to this is working with global platforms with specific expertise of regional compliance requirements and ensuring robust external workforce programs are adopted.
Principles of Worker Classification
Worker classification is a nuanced area of compliance, often made more complex by evolving regulations and regional differences. Regulatory changes, like the IR35 updates in the UK, have added to this confusion, leading some companies to view hiring external workers as a compliance risk. However, most global frameworks follow a similar logic: determining whether a worker operates independently or more similar to that of a full-time employee.
Key distinctions:
Disguised employment: Involves long-term engagement where the worker is integrated into company structure and processes, carrying the responsibilities similar to a full-time employee, but is classified as a contractor or freelancer.
Freelance work: Typically short-term and project-based, centered around niche skills, and fills needs which cannot be met internally.
Understanding the Global Compliance Landscape
While the core principles of worker classification are widely shared, it is important to understand that each country has their own regulatory nuances. Some examples of this include:
U.K. uses IR35 to determine if a contractor should be taxed as an employee based on the nature of the working relationship.
Spain has a unique TRADE category for dependent self-employed workers.
France emphasizes the absence of a subordinate relationship.
Germany penalizes disguised employment under Scheinselbstständigkeit laws.
The Netherlands enforces the Wet DBA, now fully active as of 2025.
U.S. applies IRS and DOL tests, with added scrutiny in states like California.
Despite these differences, the takeaway is consistent: organisations must clearly define relationships with external workers and align with local compliance standards.
How Platforms and External Workforce Programs Ensure Compliance
With over 1.57 billion freelancers worldwide, the use of contractors, freelancers, and external consultants is inevitable for most organisations. But to fully benefit, businesses must have the right frameworks in place to manage engagement, classification, and compliance effectively across borders. Enterprises can navigate these regional differences by utilising two key elements: working with trusted talent platforms with global expertise and adopting a well-designed external workforce program.
How Talent Platforms Support Seamless Compliance:
Provide expert, up-to-date guidance on local employment laws and worker classification.
Handle country-specific documentation, tax obligations, and contract requirements.
Centralize workforce data and documentation for effortless auditing and reporting.
Facilitate compliant cross-border payments and tax reporting.
How an External Workforce Program Supports Compliance:
Continuously monitors regulatory changes and ensures adherence.
Aligns legal, tax, and procurement teams under a unified compliance strategy.
Streamlines workforce operations across regions.
Minimizes compliance risks and uncertainty.
A Strategic and Proactive Compliance Approach
Global tax authorities are modernizing their approach, using AI and automation tools to operate at scale. They can now observe business trends, identify areas of concern, and conduct targeted investigations. The focus shouldn’t be on reacting to regulation, but building systems that anticipate it.
To stay ahead, MNEs should:
Work with global platforms to map regulatory requirements by country.
Centralise external workforce management.
Adopt clear, documented policies around worker classification.
Invest in technology and platforms that support compliance.
Foster transparency and collaboration between procurement and other business units.
Treat external workforce management as an ongoing, strategic journey.
Ultimately, a well‑governed external workforce procurement program ensures organisations remain compliant across jurisdictions—while unlocking the full value of global talent. With the right support and systems, enterprises can manage complexity, reduce risk, and stay focused on delivering business outcomes.
For further reading, learn more about the value of external workforce strategies in our previous blog here.