5 Offshore Hiring Risks for Australian Companies (And How to Avoid Them)
Hiring remote workers from the Philippines feels like a growth hack—until it lands you in legal trouble.
A recent case involving a Filipino contractor and an Australian company revealed just how easily things can go wrong, even when your team is based overseas.
The good news?
Most of these legal headaches are completely avoidable when you understand the common pitfalls. Here’s what to watch for—and how to stay compliant from day one:
1. Misclassification: Contractor vs. Employee
Many Aussie companies hire remote workers as “contractors” through DIY setups, thinking that a signed contract or invoice is enough to stay compliant. But as Pascua v Doessel Group shows, what matters isn’t the label—it’s the nature of the working relationship.
Misclassification happens when someone is engaged as a contractor but is treated like an employee. This often looks like fixed schedules, set KPIs, inability to delegate work, and working inside company systems—all signs of employment under Fair Work’s multi-factor test.
✋🏾 What are the consequences of employee misclassification?
Misclassification is one of the most common—and costly—offshore hiring mistakes. Australian employers that get it wrong may face entitlement claims from misclassified workers, including:
- unpaid leave
- redundancy pay —
- — and termination notice.
They may also be required to make back payments for superannuation, as mandatory contributions can apply retroactively once a worker is deemed an employee.
On top of that, failing to withhold the correct taxes—like —can expose the business to audits, penalties, and compliance headaches down the line.
Getting this wrong puts your business at legal and financial risk, even if your remote worker never sets foot in Australia.
2. Unfair Dismissal Claims
Ending a contract quickly might be acceptable in a genuine contractor setup. But if you treat your offshore hires like regular employees, you could be exposed to unfair dismissal claims.
Under the Fair Work Act, employees—regardless of where they’re based—are protected against unfair dismissal if the working relationship meets certain criteria.
A dismissal may be considered unfair if it is “harsh, unjust, or unreasonable”, (FWC).
This can include situations where:
- There was no valid reason for the dismissal
- The employee wasn’t given a proper chance to respond
- Or the dismissal process lacked procedural fairness
If the Commission finds that your offshore worker is effectively an employee, they may be entitled to these protections, even from abroad.
✋🏾 The consequences of unfair dismissal
Companies can be ordered to pay financial compensation, either by settling during conciliation or through a formal decision.
According to Fair Work, , and in some cases up to $91,550 (the current cap for FY 2025–26). Beyond that, there are legal costs for preparing evidence and attending hearings, reputational damage, and the time suck—a distraction most small teams can’t afford.
If you don’t follow proper termination processes, or if a worker is misclassified, it’s not just a simple contract ending. It could open the door to a legal claim.
3. Award and Minimum Wage Breaches
Offshoring can be a smart way to cut costs. A virtual assistant in the Philippines, for example, might charge just AUD $8–10/hour, while the Australian minimum wage sits at $24.95/hour—and can go above $30/hour under certain Modern Awards.
But that cost-saving edge comes with risk:
If your offshore hire is effectively an employee as we’ve discussed above, then Australian wage laws could still apply. And if you’re paying them below the applicable Award rate — even unknowingly — you could be exposed to serious legal consequences such as:
- Fines and civil penalties, particularly if Fair Work pursues litigation
- Back payments of wages owed across months or years,
And employee disputes that can spiral into broader compliance issues.
✋🏾 What happens when you breach award and minimum wage laws?
According to the , companies found in breach of wage laws can face tens of thousands of dollars in penalties—especially when non-compliance is systemic or affects multiple workers.
Specific company members like corporate directors, HR managers, accountants, and even businesses involved in the supply chain can also be taken to court, according to the FWC.
4. Overlooked Employee Entitlements
A contractor setup often means no leave, no superannuation, and no benefits—which is why it appeals to many Australian companies. This setup works when your overseas contractor genuinely runs their own business. But if the relationship looks and feels like employment, those skipped entitlements can quickly turn into legal trouble.
Under Australian law, employees are entitled to a minimum set of conditions under the. These include:
- Annual leave
- Sick leave
- Superannuation
- Public holidays, parental leave, and in some cases, workers’ compensation
If your offshore worker is reclassified as an employee, they may be entitled to all of these benefits retroactively. That means back pay for leave not taken, contributions you never made, and possible underpayment penalties.
✋🏾 What happens when you fail to provide entitlements?
- Financial penalties: Under the Fair Work Act, failure to provide entitlements can result in or—up to $18,780 per breach for individuals or $93,900 per breach for companies.
- Back payments: You may be ordered to repay unpaid leave, superannuation, or other benefits going back months or even years.
- Legal action: The FWC regularly initiates litigation in these cases—especially when employers fail to keep records or show intent to avoid obligations.
Bottom line: assuming your offshore hire is a freelancer doesn’t protect you. If their work resembles that of a full-time employee, you may be liable for benefits you never budgeted for.
5. Failure to Keep Proper Employment Records
Good record-keeping is a legal requirement under the Fair Work Act, yet many companies skip it when hiring offshore. They assume that because the worker is overseas, documentation like timesheets, pay slips, and leave records don’t apply.
This is a risky mistake.
If your offshore worker is later classified as an employee, missing records alone can lead to penalties—even if no other claims are filed. .
According to their website:
“If employment records aren’t made or kept or are incorrect, FWIs can give employers a fine, called an infringement notice.”
An infringement notice is a fine issued by Fair Work Inspectors for record-keeping failures, such as missing records, incomplete or late pay slips, or advertising roles below minimum entitlements.
In disputes or audits, the burden of proof falls on you. Without proper records, it’s almost impossible to defend yourself.
Consequences include:
- Infringement notices and fines of up to $93,900 per breach
- Greater vulnerability in legal disputes
- Risk of being seen as deliberately non-compliant, increasing penalties
Hiring offshore doesn’t exempt you from proper documentation. If anything, it makes having a clear paper trail even more important.
How an Employer of Record (EOR) Helps You Avoid All This
Hiring offshore talent can unlock major growth opportunities, but without the right structure, it carries serious risks. That’s where an Employer of Record (EOR) comes in.
An EOR like 91ĚŇÉ« legally employs your remote team, manages local labor compliance, and handles payroll, taxes, and benefits—all while keeping you aligned with Australian requirements.
With an EOR, Australian companies get:
âś… Correct employee classification from day one
Your team is properly classified under local labor laws, helping you avoid misclassification, backpay claims, and Fair Work disputes without needing to set up your own entity in the Philippines.
âś… Award-compliant pay and mandatory benefits for their employees
EORs ensure fair local pay and manage all mandatory contributions like SSS and PhilHealth, so you stay compliant without extra admin.
âś… Built-in legal and HR compliance
An EOR provider handles onboarding, contracts, and HR issues, helping you stay compliant across borders while reducing management overhead.
âś… Scale without red tape
Onboard compliantly in as little as seven days without the cost or hassle of setting up a local company.
Hire Smarter, Not Riskier
Hiring talent from the Philippines isn’t just a growth hack—it’s a legitimate strategy that can transform your business when done right. The five risk areas we’ve covered are all preventable with proper planning and the right systems in place.
Don’t let legal missteps prevent you from accessing this incredible talent pool. Whether you handle compliance in-house or partner with an EOR, take the time to get your employment structure right from the start—your future self (and your legal team) will thank you.
Ready to explore compliant hiring in the Philippines?
Sources:
FREQUENTLY ASKED QUESTIONS
Yes, if the working arrangement makes them an employee rather than a genuine contractor, Australian employment law can apply regardless of their location.
It depends on the actual working relationship, not just your contract. Key factors include level of control, integration into the business, and whether they work exclusively for you.
 If they’re classified as employees under Australian law, yes. The location of the worker doesn’t override Australian wage obligations for Australian companies.
The same employment records required for local staff: timesheets, pay records, leave entitlements, and any workplace agreements. Poor record-keeping can result in significant penalties.
Get proper legal advice on worker classification, maintain detailed employment records, and consider using an Employer of Record (EOR) service to handle compliance requirements.
