When hiring internationally in construction, compliance is a major challenge. Companies face risks like immigration delays, tax missteps, and labor law violations, all of which can lead to fines, project delays, and reputational damage. Here’s what you need to know:
Staying compliant requires proactive planning, the right partnerships, and a focus on local regulations. Noncompliance not only affects finances but also disrupts project timelines and client relationships.
International Construction Hiring Compliance: Key Statistics and Penalties
Getting construction talent into the U.S. legally is no small feat. Delays or mistakes in immigration processing can throw project timelines off track, making careful visa selection a critical step. The visa category is key - not all construction roles are eligible for every visa. For example, the H-1B visa is designed for "specialty occupations" like engineers, architects, and project managers who have at least a bachelor's degree. However, it doesn't cover trade workers such as electricians or plumbers. This limitation adds complexity to staffing for data center construction and other high-priority projects that depend on both technical expertise and skilled labor.
The H-1B visa program has its own bottlenecks. It's capped at 65,000 visas annually, with an additional 20,000 reserved for candidates holding U.S. master's degrees. High demand means a lottery system decides who gets in. As of June 2019, over 60% of H-1B petitions faced a Request for Evidence (RFE), delaying the process and creating uncertainty. For executives and managers, the L-1A visa is often a better option. It supports intracompany transfers, allowing up to seven years in the U.S. (three initially, plus extensions). Meanwhile, Canadian and Mexican professionals can use TN status under the USMCA. This option has no annual cap and can be renewed in three-year increments. These hurdles highlight the need for thorough visa planning and compliance strategies.
Selecting the right visa means aligning the candidate’s role and qualifications with visa criteria. For senior executives transferring from a foreign branch, the L-1A visa is ideal. To qualify, candidates must have worked for the same company abroad for at least one year within the past three years. The EB-1C category provides a quicker path to permanent residency for multinational executives, skipping the lengthy PERM labor certification process. For individuals with specialized expertise or extraordinary talent, the O-1 visa is an option, though applicants must present evidence of national or international recognition.
Sponsorship comes with costs. Employers must ensure salaries meet the Department of Labor’s prevailing wage requirements. Additionally, sponsoring an H-1B candidate overseas involves a $100,000 fee, while most temporary worker petitions require a $205 nonrefundable fee.
After securing a candidate, verifying their work authorization is the next step. Employers must use Form I-9 for this process. Employees must complete Section 1 no later than their first day of work, while employers have up to three business days after the hire date to complete Section 2. For construction firms operating at remote or temporary sites, this step can be tricky. As Sari M. Long, Partner at Faegre Drinker Biddle & Reath LLP, explains:
"The human factor in reviewing and completing I-9s can never be completely automated. Ongoing training, self-audits and staying up-to-date with Form I-9... rules are essential for compliance."
For executives working at remote sites, employers can assign an "authorized representative" (such as a foreman or notary) to handle Section 2. Starting August 1, 2023, employers enrolled in E-Verify can use an alternative procedure to review Form I-9 documents remotely, eliminating the need for in-person verification. This process is a critical part of maintaining compliance. Regular training and internal audits are essential to ensure everything stays on track.
Bringing international construction executives on board introduces a maze of tax and payroll obligations. Tax liability is tied to the location where the work is performed, not where the payroll originates. In fact, nearly 60% of global mobility failures are linked to compliance missteps in this area. For instance, a data center construction project manager working on a site in Texas would owe U.S. taxes, even if their paycheck comes from a foreign entity. After tackling immigration and work authorization, managing tax and payroll compliance becomes a top priority to avoid costly mistakes. Here’s how businesses can align their international hiring practices with U.S. compliance standards.
Once the visa process and work permits are sorted, the focus shifts to navigating local tax rules. Employers are responsible for calculating and paying local income taxes and social security contributions based on where the work is performed. In some European countries, combined employer and employee social security contributions can consume up to 50% of an individual's income. Without totalization agreements - bilateral treaties designed to prevent dual social security contributions - both employers and employees may face double payments. The U.S. has tax treaties with over 67 countries to help offset double taxation. For example, the "183-day rule" in many treaties allows employees to avoid host-country taxes if they stay fewer than 183 days within a 12-month period and are paid by a non-resident employer.
Another major concern is Permanent Establishment (PE) risk. Hiring an executive in a foreign country can inadvertently create a taxable presence for the company, especially if the executive has the power to negotiate or sign contracts. To minimize this risk, companies should limit an executive’s authority to finalize contracts in the host country until a formal legal entity is set up. Real-time location tracking can also help ensure compliance with 60-, 90-, or 183-day residency thresholds, reducing the risk of tax violations. Additionally, applying for a Certificate of Coverage (or an A1 certificate in the EU) ensures the executive stays within their home country’s social security system, avoiding dual contributions.
Payroll compliance has become more demanding, with many countries mandating real-time or monthly payroll reporting. Systems like the UK’s Real Time Information platform and India’s e-filing framework illustrate this growing trend. For companies without a local legal entity, partnering with an Employer of Record (EOR) can simplify compliance. An EOR acts as the legal employer, handling local tax withholding, filings, and statutory benefits. As noted by the Safeguard Editorial Team:
"For multinational businesses, payroll is no longer just a back-office function; it has become a strategic priority."
Leveraging a unified global payroll platform that integrates with HRIS and accounting tools can provide real-time insights and reduce manual errors. Paying employees in local currency ensures adherence to local regulations while mitigating currency fluctuation risks. Conducting quarterly payroll audits is another vital step to catch errors early and stay compliant with changing laws.
Navigating labor laws adds another layer of complexity to international construction hiring. Local labor laws differ widely, and construction firms must tread carefully to avoid missteps. For instance, in around 60% of countries, executives are classified as employees and are covered by labor laws, although they are often exempt from specific rules like working time limits. Meanwhile, 30% of jurisdictions allow executives to choose between an employment contract or operating as self-employed. If they opt for the latter, they are governed by commercial law instead of labor law.
Take France, for example. Executives there are allowed a probation period of up to four months, double the two-month limit for office workers. In Hungary, employers can deviate from mandatory labor provisions for executives, provided these terms are clearly outlined in a written employment contract. For firms managing construction projects across multiple countries, understanding these distinctions is critical to avoiding costly errors. As Mayank Bhutoria, Co-Founder of Gloroots, explains:
"The moment you hire someone across borders, your domestic playbook stops working. Local employment laws kick in from day one, and they're enforceable whether you understand them or not."
One way to stay ahead of these challenges is through regular compliance audits.
Periodic audits are a proactive way to identify and address labor law violations before they lead to penalties. For example, in 2024, OSHA conducted 34,696 inspections, resulting in $131.4 million in fines. For international construction projects, audits should focus on key areas like wage and timekeeping records. Employee and field staff interviews can also help verify compliance.
In California, labor compliance audits can be enforced up to 18 months after a project is accepted or completed. To avoid issues within this timeframe, companies should schedule audits around project completion dates. Cross-referencing timesheets with contractors' wage statements and daily reports from the resident engineer can uncover discrepancies in hours worked. If violations are found, contractors should be given a 10-day deadline to resolve them. Proof of restitution, such as copies of cashed checks or certified money orders, should be provided.
For firms managing global projects, including data center construction, these audits are essential for maintaining compliance across different jurisdictions. However, audits are just one piece of the puzzle - ensuring compliance with wage standards is equally critical.
In the U.S., federally funded or assisted construction projects must adhere to the Construction Wage Rate Requirements statute, which mandates that workers be paid at or above locally prevailing wages. This regulation applies to construction or repair work exceeding $2,000. Additionally, service calls or tasks requiring 32 or more work hours are classified as repair work and must comply with these requirements.
Internationally, compliance varies by country. For instance, projects in Spain must follow clause 252.222-7004 to meet Spanish Social Security Laws, while facility maintenance in Italy requires a permit from the Italian Inspectorate of Labor under clause 252.222-7003. Firms must ensure that worker classifications align with the actual work performed on-site. For non-signatory contractors, verification of private pension or health insurance contributions can be done using the annualization method, dividing yearly contributions by 2,080 hours.
Managing contractors, especially on an international scale, requires precision and clear boundaries to avoid costly misclassification issues. Misclassifying workers as contractors when they function more like employees can lead to severe financial penalties. For example, in May 2023, Nike faced potential liabilities of $530 million for misclassifying thousands of office workers, while FedEx settled similar claims with drivers for $228 million.
The key issue? Regulators evaluate the actual working relationship rather than just the contract language. As the CXC Team aptly puts it:
"Classification is an outcome of behavior, not paperwork."
Worker classification typically depends on three factors: how much control the company has over the contractor’s work methods and hours, the contractor's financial independence (such as providing their own equipment and assuming financial risk), and the overall nature of the relationship. If your company provides equipment, sets strict hours, or integrates contractors into your teams, it may inadvertently create an employer-employee relationship. For businesses managing construction project delivery across borders, this is particularly critical, emphasizing the need for thorough contractor verification.
Before entering into any agreement, it’s essential to verify the contractor’s legal status. Confirm their eligibility to work in the relevant country by checking business licenses, registrations, and proof of professional liability insurance. For U.S.-based companies, ensure compliance with IRS requirements by collecting Form W-9 for domestic contractors or Form W-8BEN/W-8BEN-E for foreign contractors. This step helps avoid the IRS’s 24% backup withholding requirement.
Once legal status is verified, focus on drafting agreements that maintain the contractor's independence.
To minimize misclassification risks, avoid using employment-related terms in your agreements. For instance, replace "work" with "services", "supervisor" with "liaison", and "discipline" with "defect in performance". Payment structures should also reflect independence - opt for payments tied to project milestones or deliverables rather than hourly or monthly payment models that resemble a salary.
Incorporating a right of substitution clause, which allows contractors to delegate tasks to qualified replacements, can further emphasize their independent status. For international construction projects, include indemnification provisions that hold contractors accountable for costs related to misclassification claims or tax liabilities. Additionally, intellectual property clauses (e.g., "work-for-hire") should be clear to ensure all project deliverables belong to your company, as default laws may vary by country.
For U.S. government-related overseas construction, agreements should include mandatory DFARS clauses, such as 252.222-7002 for compliance with local labor laws or 252.222-7004 for Spanish Social Security requirements. Draft contracts in both your home language and the local language to ensure clarity and enforceability. Lastly, steer clear of "at-will" termination clauses, which could imply an employment relationship. Instead, tie termination to the completion of specific deliverables or statements of work.
Keeping up with shifting regulations is becoming increasingly important to avoid delays and penalties in construction projects. Compliance isn't a one-and-done task - it’s a constant process. Governments worldwide are stepping up enforcement and sharing data like never before. For example, in October 2025, the European Union launched its Entry/Exit System (EES), which swapped out manual passport stamping for a centralized database that tracks permissible stay durations and flags overstayers in real time. Poland has digitized its work permit processes, giving labor inspectors instant access to employment data. Meanwhile, Spain introduced computer-forensic labs and algorithms to detect fraud in social security contributions as of September 2025.
The financial risks tied to noncompliance are also climbing. Penalties for immigration violations have skyrocketed - 200% in the UK, 300% in Luxembourg, and 400% in Taiwan. In 2024, businesses spent an additional $20 million on immigration-related fees, and this figure is expected to grow in 2025. In the U.S., a proclamation effective September 21, 2025, now requires sponsoring employers to pay a $100,000 fee for each H-1B visa petition. Over in the Czech Republic, failing to report a foreign employee’s start date at least a day in advance could lead to fines as high as CZK 3 million.
Abid Hamid from Acumen International sums it up well:
"Success is measured not by time-to-hire, but by time-to-lawful-work".
For companies handling construction project delivery across borders, compliance frameworks are increasingly shaping hiring and staffing timelines.
Staying informed about regulatory changes requires the right tools and partnerships. The key is visibility - knowing who is working where, for how long, and under what terms. Technology can make this easier, with compliance alerts and real-time reporting tools helping organizations track country-specific regulations. For construction firms juggling international projects, these tools help address the compliance hurdles discussed earlier.
Many companies rely on an Employer of Record (EOR) to reduce risk, keep up with labor law changes, and handle audits. Subscriptions to legal and professional services offer updates on immigration laws via newsletters and seminars. AI tools like Delphius provide quick, expert-verified answers to global employment law questions. Additionally, platforms like the Ius Laboris Global Mobility Compliance Dashboard allow businesses to monitor penalties and compliance risks across multiple countries.
Cross-department collaboration is also critical. HR, legal, compliance, and global mobility teams should work together to make unified decisions. In about 50% of countries, employment contracts must be written in the local language to hold up in court, so having standardized, localized contracts is a must.
With real-time updates in hand, companies also need to be ready to act fast when enforcement agencies come knocking.
When audits or inspections happen, preparation is everything. Immigration authorities are scrutinizing visa applications more closely, focusing on salary levels, job qualifications, and whether degrees align with job roles.
A dedicated response team with compliance expertise can help manage surprise inspections. Regular self-audits and accurate record-keeping, such as I-9 and PERM documentation, are essential to minimize risks. Frontline staff should also be trained on their legal rights during inspections, including the right to review warrants and remain silent.
Maintaining up-to-date electronic records ensures quick responses to digital portal requests during audits. Internal reporting systems can encourage employees to raise concerns internally, reducing the risk of external whistleblower claims. This is particularly important given the DOJ’s Corporate Whistleblower Awards Pilot Program, which offers financial rewards of up to 30% of the first $100 million recovered from immigration-related violations.
As the Atlas HXM Team points out:
"Poor mobility management incurs high legal, financial, and operational costs".
Hiring construction executives across borders comes with a maze of compliance challenges. These include issues like worker misclassification, risks tied to permanent establishment, localized labor laws, and termination requirements. The stakes are high - noncompliance can lead to serious financial and operational consequences. That’s why managing compliance proactively is not just smart but essential for sustainable expansion.
As Harris Sliwoski aptly puts it, "Prevention always costs less than litigation". For companies involved in construction project delivery on an international scale, compliance must be an ongoing effort, not a one-and-done task.
Relying solely on in-house resources may not be enough. Collaborating with external experts can provide an extra layer of protection. For example, in December 2025, SAPRO, a global tax advisory firm, successfully entered the Canadian market by teaming up with Playroll. This partnership allowed them to onboard international employees while staying compliant - without the need to establish a local entity. For construction firms hiring across multiple jurisdictions, such partnerships ensure that employment contracts, payroll, and benefits meet local standards.
Building strong compliance systems - whether through technology, expert partnerships, or legal guidance - not only prevents costly mistakes but also creates a foundation for growth. Nearly 80% of businesses report that compliance challenges are holding them back from scaling. By addressing these challenges head-on, companies can turn compliance from a legal hurdle into a strategic advantage, paving the way for global expansion without hidden risks.
Construction executives often fit the criteria for visas aimed at high-level managers, such as multinational executive or manager visas. Meanwhile, skilled tradespeople usually qualify for employment-based visas under categories like skilled worker, professional, or other worker. These visas typically require at least two years of training or experience and are distributed on an annual basis.
When working abroad, it’s important to avoid double taxation and overlapping social security contributions. International agreements, such as totalization agreements and double taxation treaties, can make a big difference. These agreements are designed to clarify tax responsibilities and allocate social security coverage, so you're not taxed twice by both countries.
To navigate this effectively, consider consulting with knowledgeable professionals or exploring relevant resources. This will help ensure you're meeting all the necessary regulations while taking advantage of the protections these agreements provide.
An Employer of Record (EOR) is a great solution when you need to hire international employees efficiently and in full compliance with local laws - without the hassle of setting up a branch or subsidiary in another country. This approach is particularly helpful when establishing a foreign entity would demand a lot of time or involve complicated legal, financial, and administrative processes. By using an EOR, you simplify the hiring process while ensuring adherence to local labor laws and tax requirements.
