Cross-border labour and employment law trends in a changing global landscape

Parag Bhide

AQUILAW, Mumbai

parag.bhide@aquilaw.com

Subarna Saha

AQUILAW, Kolkata

subarna.saha@aquilaw.com

Prakriti Rai

AQUILAW, New Delhi

prakriti.rai@aquilaw.com

As borders blur and workforces go global, the rules governing labour and employment are caught in a relentless race to keep pace. From the gig economy’s defiance of traditional employment classifications to the seismic shifts triggered by remote work, multinational enterprises and workers alike now navigate a labyrinth of overlapping, often conflicting legal regimes. Employment contracts, social security obligations and data governance frameworks are emerging as key areas which will require systematic re-examination in light of this evolving workforce structure.

A similar tide of reform is visible in India, where significant policy-level changes are being implemented to bring the country’s over 75-year hold labour law framework in line with the changing realities of the modern workforce. Most notably, the long-awaited commencement of the four labour codes on wages, social security, industrial relations and occupational safety (Labour Codes) which came into effect in November 2025 marks a landmark in employment law reform.

Considering the above, the first part of this article examines the changing labour landscape in the context of India; the second explores select areas from a global perspective where the disconnect between existing regulatory framework and contemporary cross-border employment realities are most acute.

India’s changing labour law landscape

The Labour Codes subsumed and repealed 29 central labour laws which had governed the employment landscape even before India’s independence, replacing a fragmented regulatory framework with a single, unified compliance architecture. This consolidation of laws is widely seen as a foundational step towards simplifying compliance and reducing interpretational uncertainty. From a global standpoint, this reform signals India’s intent to position itself as a competitive destination for foreign investment and cross-border talent deployment, bringing its regulatory architecture closer in spirit to the more flexible and consolidated labour frameworks seen in mature economies. Some key reforms introduced by the Labour Codes are outlined below.

Restructuring of wages and other wages related formalities

A significant reform under the Labour Codes is the introduction of a uniform statutory definition of ‘wages’, comprising basic pay, dearness allowance, and retaining allowance, with the collective floor set at no less than 50 per cent of an employee’s total remuneration. This has direct implications for multinational companies operating in India, particularly those applying standardised global compensation structures which will need to be reviewed and localised to ensure that excluded allowances do not breach the prescribed 50 per cent ceiling. Companies which have historically adopted a high-allowance, low-basic salary model will be required to restructure their compensation procedure, with a consequent increase in social security contribution obligations for both employer and employee.

Additionally, the payment of minimum wages under the Labour Codes are universal in application unlike under the previous framework, which applied to specified ‘scheduled employments’. Therefore, with the extension of minimum wage protection, companies must be aware of applicable statutory minimum wages notification issued periodically to ensure compliance.

Apart from cases of dismissal or retrenchment, there was formerly no time limit of paying wages in cases of employee resignation. Now, however, Labour Codes mandate that accrued wages must be paid within two working days of an employee’s departure. This significantly compresses payroll approval timelines, particularly for multinationals with multi-layered processes, necessitating automated settlement calculations and restructured internal approval workflows.

Social security benefits to fixed-term employees

One of the notable changes introduced under the Labour Codes is the extension of gratuity benefits to fixed-term employees on a pro-rata basis on completion of one year of service. This dispenses with the traditional requirement of five years of continuous service which applied under the former law. For multinational companies that routinely engage fixed-term or project-based workers in cross-border secondment arrangements and time-related project deployments, this change carries meaningful financial implications, as gratuity liability will now mature at the end of every fixed-term engagement (of at least one year or more), necessitating a reassessment of workforce cost modelling, employment contract structuring, and long-term employee benefit provisioning across their Indian operations.

Changing global employment landscape

Cross-border data transfers for employee data

As businesses deploy global workforces and rely on cross-border HR platforms, the transfer of employee personal data across jurisdictions specially with cloud-based payroll systems, and centralised employee databases, has emerged as a critical compliance challenge. Each country imposes its own data localisation and consent requirements creating a complex patchwork of obligations. A particular tension arises in the secondment and intra-group transfer context, where the host entity, home entity, and global HR vendor may each qualify as independent ‘data fiduciaries’/‘data controllers’ under their respective national laws, triggering multiple and sometimes conflicting obligations relating to data minimisation, purpose limitation and cross-border transfer mechanisms, the key pillars of data privacy regime. For Indian employers specifically, the yet-to-be-notified list of restricted countries under the (Indian) Digital Personal Data Protection Act, 2023 adds a layer of regulatory uncertainty which multinational employers must factor into their global mobility and secondment structuring.

Artificial intelligence in hiring and systematic biases

Discrimination in hiring, whether based on gender, religion or colour, has been a persistent global challenge for centuries, although the last few decades have witnessed a meaningful decline owing to sustained equality and inclusiveness campaigns and growing organisational awareness. Nevertheless, the advent of artificial intelligence has introduced a new and more insidious dimension to this challenge: algorithmic bias. According to the World Economic Forum, 88 per cent of companies use AI-driven tools to screen candidates, allocate tasks and evaluate performance.^[1] However, most commercially deployed hiring algorithms have been trained on historically skewed datasets, which may embed and perpetuate biases against candidates from underrepresented ethnic, gender or socioeconomic backgrounds.^[2] Therefore, the consequences of such systemic bias are no longer hypothetical and necessitate regulatory intervention which is gaining momentum globally. For example, the EU Artificial Intelligence Act, 2024 classifies AI systems used in employment, for recruitment, candidate selection, performance evaluation and employment termination as ‘high-risk’ and mandates use of representative, unbiased training datasets to minimise systemic biases. India, while not yet having enacted specific legislation governing AI in the employment lifecycle, is not without a normative framework, that is, the Constitution of India and new Labour Codes which enshrine principles of equality, fairness and non-discrimination that are equally applicable to automated decision-making processes.

A critical safeguard against the risks of algorithmic bias is the institutionalisation of meaningful human oversight at every stage of the AI-assisted employment process. This requires, that consequential decisions such as rejection of a candidate, termination of employment, or denial of promotion are not made solely on the basis of an algorithmic output, without review by a qualified human decision-maker. Ultimately, while AI holds considerable promise in enhancing efficiency and reducing subjective human biases in recruitment, its deployment in the employment lifecycle must be anchored in the fundamental principles of transparency, fairness and accountability.

Emergence of ‘digital nomad’ and rise in permanent establishment risk

The Covid-19 pandemic, assisted by rapid technological advancement, fundamentally accelerated the shift towards remote and cross-border work arrangements. While this shift has brought tangible operational advantages such as reduced overhead costs, access to global talent, and greater workforce flexibility, it has simultaneously exacerbated the regulatory lacunae that exists due to law not evolving with the market trends.

A key challenge of working remotely from anywhere in the world is risk of creation of a ‘permanent establishment’ (PE), that is, when an employee habitually works from a foreign country on behalf of their employer, tax authorities of that foreign jurisdiction of employee may deem the employer to have a taxable business presence, even in the absence of any formal office or legal registration. The two most commonly triggered forms of PE in this context are: agency PE arising where an employee habitually concludes or plays the principal role in concluding contracts on behalf of the foreign enterprise; and service PE which several bilateral tax treaties (including many of India’s) recognise where employees render services in the host country beyond a specified duration threshold.

In this regard, a widely adopted risk-mitigation strategy is the engagement of foreign talent through an independent consultant model rather than a traditional employment relationship. To substantiate this model and withstand regulatory scrutiny, companies adopt a substance-over-form approach, ensuring that the engagement genuinely lacks the hallmarks of employment including minimal supervision over the manner of work, absence of employer-issued assets such as laptops or devices, flexibility in working hours, and no integration into the organisational hierarchy. In India, however, the PE determination continues to be a fact-intensive exercise, examined against baseline criteria drawn from domestic tax law and the applicable bilateral tax treaty, leaving considerable room for interpretational uncertainty.

Therefore, while onboarding talent globally, companies should place particular care in customising onboarding documentation and assess any country-specific PE requirements.

Extension of social security benefit

With business expanding globally, the secondment and transfer of employees from Indian incorporated companies to group companies, sister companies, affiliates in foreign jurisdiction has become common practise. This trend, while operationally advantageous, has brought into sharp focus the adequacy of existing social security frameworks, both from the perspective of the home country and the host country. From an Indian law perspective, a key challenge is determining whether the employees’ provident fund obligations continue to apply to Indian employees deputed abroad, particularly when the host country also mandates social security contributions thereby creating a risk of dual contribution unless a bilateral Social Security Agreement (SSA) is in place. On the inbound side, the looming question of whether international workers employed in India are required to contribute to the Employees’ Provident Fund (EPF) without any salary threshold, unlike Indian employees who are exempt above INR 15,000 (approx US$160) per month, remains a live and consequential legal issue, currently pending adjudication before the Supreme Court of India.

The rise of digital nomads and remote work has also strained traditional social security models, which were designed around the assumption of a single, fixed place of employment. Such new working patters create coverage gaps and contribution ambiguities which no existing bilateral or multilateral framework has yet fully resolved.

The central lesson for employers and practitioners is that social security compliance in cross-border deployments demands jurisdiction-specific analysis and cannot be approached as a back-office formality. Further, social security agreements executed with India by the respective countries need to be analysed to ensure compliance with social security benefits.

Conclusion

Permanent establishment (PE) risk, social security misalignment, data privacy obligations, and employment law compliance across multiple jurisdictions are no longer edge-case concerns reserved for large multinationals, but rather live issues for any growth-stage company hiring across borders. The regulatory landscape, while still fragmented and evolving, is moving decisively towards greater scrutiny of cross-border employment structures as evidenced by the tightening of PE rules, and the extraterritorial reach of data protection laws. India, in particular, presents a complex and rapidly shifting compliance environment for global employers. The commencement of Labour Codes has fundamentally restructured the domestic employment framework, and this period of legislative transition demands heightened attention and proactive engagement rather than a wait-and-see approach.

Therefore, for businesses, the imperative is clear – a global talent strategy and legal strategy must be developed in tandem. Thoughtfully drafted onboarding documentation, jurisdiction-specific PE assessments, carefully structured engagement models, and proactive tax treaty analysis are not merely compliance exercises but are rather commercial necessitates which protect enterprise value, enable sustainable global growth, and ensure that the promise of a borderless workforce is realised without undue legal risk.