We hired an editor for the podcast recently, offshore, and we did exactly what everyone does. Found the person, agreed a rate, got started. The reading about what we'd actually signed up for came afterwards, which is the wrong order & also the order almost every founder does it in.
The reason we hired offshore at all is worth being blunt about. The podcast isn't revenue-generating yet. Editing is a real cost against a thing that doesn't pay for itself, and every dollar of that cost is a dollar not going into the parts of the business that do. When the work is well-specified - here's the raw file, here's the brief, here's what good sounds like - the case for paying Australian rates for it is thin, and the money saved isn't a nice-to-have. It's the difference between the podcast continuing and not.
That logic applies far past podcasts. Most seed-stage Australian startups spread a fixed people budget evenly across six or seven roles all priced against what Canva and Atlassian pay, underpay slightly for every one of them, and lose the senior hire they actually needed to whoever could go $40k higher. Some roles have to be here - anything where knowing this market is the skill, your senior technical leadership, and core experimental R&D, since companies under $20m turnover get a refundable R&D Tax Incentive offset of 43.5% on eligible spend that overseas activity is excluded from. Plenty of others travel fine, and what you don't spend there is what lets you pay properly for the ones that couldn't move.
Founders accept that in about thirty seconds. What stops them acting on it is not knowing what they'd be liable for, so here's the actual answer.
The instinct is to take your Australian contractor agreement, change the currency, and send it. But that document determines status precisely nowhere except Australia. The country your person lives in applies its own test to your facts, and it doesn't much care what you called the relationship.
In the Philippines, where a lot of Australian startups go first, the Supreme Court set out how this works in Ditiangkin v. Lazada E-Services Philippines (G.R. No. 246892), decided in September 2022 and released publicly the following January. Five delivery riders had signed Independent Contractor Agreements with Lazada, were dropped from their routes, and filed for illegal dismissal. The Labour Arbiter and the NLRC both sided with Lazada, largely because the contract said what it said.
The Supreme Court reversed them and declared the riders regular employees, applying a two-tiered analysis: the four-fold test (who selected and engaged the worker, who pays the wages, who holds the power of dismissal, and who controls how the work is done, with control the most important) and then an economic dependence test. Lazada's control showed up in mundane operational detail - route sheets tracking arrival, departure and unloading times, a P500 penalty for a lost item. The riders worked twelve hours a day, six days a week, which left no room for other clients. The Court ordered reinstatement with full backwages and remanded the case for computation of everything else owed.
The part Australian founders should sit with is where the burden landed. When employment status is disputed, the employer has to prove the person is an independent contractor. You don't get the benefit of the doubt because you drafted carefully.
Where someone is reclassified, the relationship is reconstructed as employment from the beginning, not from the date of the finding.
In the Philippines that means 13th month pay, mandatory under Presidential Decree 851 at one twelfth of annual compensation, owed retroactively for every year of engagement. Retroactive employer contributions to SSS, PhilHealth and Pag-IBIG, with penalties and interest stacking on each missed period. Service incentive leave and holiday premiums. And security of tenure under Article 294 of the Labor Code, which is the one that genuinely catches people out, because ending the relationship then requires just or authorised cause with a full procedural process attached. Our notice-and-final-pay model doesn't exist there.
Every country has its own version of this list. None of it is exotic, it's just ordinary local employment law, and it applies to your hire whether or not anyone at your company has read it.
This is the least visible exposure and the one that lands on the company rather than the person.
A permanent establishment is a taxable presence in a foreign country under Article 5 of the OECD Model Tax Convention, created by a fixed place of business or an agent who habitually concludes contracts for you. Trigger one and you're looking at corporate income tax on profits attributed to that country, plus registration and filing obligations, without ever having opened an office.
The OECD updated its commentary on this on 19 November 2025, specifically addressing home-office working, and the news is mostly good: a two-part framework with a 50% working-time safe harbour and a commercial reason test, confirming no automatic PE arises from remote work driven by an employee's own choice about where to live.
The catch is that second limb, and most coverage skips it. Deliberately hiring someone in Manila because you want capability there is a commercial reason, which is a materially different fact pattern from an Australian employee who moved to Manila for personal reasons. The safe harbour protects planned offshore hiring considerably less than the headlines suggest. There's a related dependent-agent exposure where a contractor concludes contracts on your behalf or draws most of their income from you, which matters if you're considering offshore sales or partnerships roles.
The first question is which of two situations you're in, because they have different answers and treating them the same is how founders either overspend or get caught.
If the engagement is genuinely project-based with someone who has other clients, controls their own methods, and isn't economically dependent on you, a contractor arrangement is legitimate. What you still need is a properly localised contract, clean invoicing and payment records, tax documentation that satisfies both countries, and IP assignment that actually works under their law rather than yours - Australian-style assignment clauses don't automatically do the job everywhere. Contractor management platforms handle this layer, and Deel is one of the main ones, generating compliant local agreements, running payments in local currency, and keeping the paper trail you'd need if anyone asked.
If you intend to keep the person, direct them day to day, and treat them like part of the team, you're describing employment, and the honest move is to employ them. Doing that yourself means registering a foreign entity, which for a seed-stage startup is a genuinely stupid use of six months and a pile of legal spend. An employer of record is the alternative: the provider already holds an entity in that country and becomes the legal employer on paper, while the person works for you exactly as before. It issues the local employment contract, runs payroll and tax withholding, remits statutory contributions, administers whatever benefits are mandatory, and handles termination properly if it comes to that. Because the employment relationship sits inside their entity rather than yours, it substantially reduces the permanent establishment exposure as well.
Deel does both, which is the practical reason to start there - you can run genuine contractors on one model and convert anyone who's drifted into employment-shaped work onto the other without changing systems. [Check current pricing and country coverage on their site before quoting anything.] It isn't free, and it shouldn't be a reflex for every engagement, but it turns a legal project into a monthly line item, and that's the whole difference between doing this and talking about doing it.
We're an Australian startup recruitment firm, so being keen on offshore hiring might look strange. We're keen because it's what makes the Australian hiring work - the founders who draw this line properly are the ones who can afford to pay market rate for the senior local roles that had to stay here. Work out which side of the line each role sits on, get the employment machinery handled by someone whose job it is, and put the difference into the people who had to be here.
Use Deel to solve this problem: https://get.deel.com/x73bfsepw4jn
Disclosure: this link is a referral link to Deel and we may earn a commission if you sign up through it. General information only, not legal or tax advice - get proper advice before structuring offshore arrangements.
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