When saving on agency fees means gambling with your business and someone’s livelihood 

“I’ll just hire someone directly from the Philippines. Why pay an agency when I can find great talent for a few dollars an hour?” 

It sounds resourceful, but it’s actually a gamble that can cost you far more than an agency fee ever would.

I hear this reasoning from business owners who think they’ve cracked the code on global hiring. They’re excited about the cost savings. They’re proud of their entrepreneurial resourcefulness. And they have no idea they’re creating a disaster for themselves and the person they just hired. 

Direct hiring sounds brilliant until you understand what you’re actually doing. You’re engaging a foreign independent contractor without understanding the legal requirements in their country. You’re exposing yourself to penalties, back taxes, and potential criminal liability. And you’re leaving your worker with zero protections, zero benefits, and zero recourse if things go wrong. 

I understand why business owners consider this route. Today’s labor challenges are complex, and the pressure to find affordable talent is real. But shortcuts in international hiring create problems that far exceed any initial savings. 

The Legal Minefield You Just Entered 

Let’s start with what DIY global hiring means for your business. When you hire someone in the Philippines as an independent contractor, you step into a regulated space under the Department of Labor and Employment (DOLE). The country’s Department Order No. 174 prohibits “labor-only contracting,” where someone functions like an employee but is labeled a freelancer. 

If your hire works under your direction, uses your tools, or performs core functions of your business, the Philippine authorities can decide that person is legally your employee. That changes everything. Suddenly, you’re responsible for 13th-month pay, leave benefits, rest days, and all mandatory employee protections under Philippine labor law. 

You didn’t budget for that. You thought you were paying a flat hourly rate. Now you could be facing back pay, penalties, and the cost of local legal counsel to fix a situation that could have been prevented with proper structure. 

Understanding the international contractor vs employee classification becomes critical here. The legal risks of direct international hiring extend far beyond the Philippines. In France, misclassifying a worker can lead to heavy fines and even up to three years in prison. In Mexico, misclassification can expose you to back pay, penalties, retroactive contributions, and costly legal claims. 

The numbers tell the story. Between 10% and 30% of U.S. employers currently misclassify workers. The true scope is hard to measure, but the financial impact is significant. The U.S. Department of Labor’s Wage and Hour Division recovered over $24.5 million in back wages for about 20,000 misclassified workers in fiscal year 2023, highlighting how widespread the issue has become. Studies suggest misclassification costs federal and state governments billions each year in unpaid payroll taxes and lost unemployment insurance contributions. 

The Question You’re Avoiding 

Now let’s talk about the human side of this. Ask yourself: would you accept these working conditions? No health insurance. No job security. No recourse if your employer suddenly stops paying you. No ability to qualify for a car loan or mortgage because your employment isn’t legally recognized. Of course you wouldn’t. 

Beyond that, an employer’s long-time health is best served when they can cost-effectively provide others with what they would want for themselves: health coverage, job stability, and legal protections. Your employees deserve the ability to build a life, not just survive day-to-day. Direct hiring denies your international employee all of this so you can save on agency fees. And you end up gambling on a host of unknowns in the meantime. 

There’s a Better Way 

Of course, global hiring provides tremendous opportunities to scale without exorbitant expense, relieve overburdened team members, and provide needed redundancies, and the Philippines has emerged as a global leader in remote work. Foreign investment reflects this growth, with the Philippine Economic Zone Authority reporting a 59% year-over-year increase in approved investments for the first half of 2025. 

The opportunity to build diverse, skilled teams across borders is real and valuable. But accessing this opportunity responsibly requires infrastructure, compliance expertise, and commitment to worker welfare. 

This is exactly why employment agencies exist for international hiring — not as an unnecessary middleman, but as the entity that ensures both parties are protected. A legitimate agency becomes the legal employer in the worker’s country, handling all compliance requirements, providing benefits, and creating the stability workers need and the legal protection businesses require. 

When you work with an agency properly registered in the Philippines, they handle compliance requirements and provide the protections of legitimate employment. The benefits of using an employment agency for global workforce management extend far beyond legal compliance. At HireSmart, we ensure your virtual employee receives health and dental coverage, can qualify for loans, has access to emergency support, and works under full employee protections. The agency fee isn’t an expense. It’s what makes global hiring successful and sustainable for everyone involved. 

A Decade of Problem-Solving 

We’ve been doing this for over a decade at HireSmart, and every system we’ve built came from solving real problems when learning Philippine labor law compliance for US businesses. We learned early that workers need more than paychecks. They need health coverage, loan qualification, emergency support, and community. So we became a legally registered employer in the Philippines and built comprehensive benefits programs including health and dental insurance, educational scholarships through HireSmart Cares, and emergency assistance like we provided to 31 employees after Typhoon Rai. 

We learned that businesses need vetting that actually works and training that prepares employees for success. So we created screening systems where only 1% of applicants pass. We developed comprehensive 40-hour training programs that certify employees before they start with clients. We built ongoing support structures, performance tools, and replacement guarantees. 

“Every single HireSmart team member I’ve come into contact with has been so lovely, professional, quick to respond, and they do a really great job partnering the VE with our company, and all the training that goes in between. From every conversation I’ve had with my VEs, their experiences have also been super positive,” one client told us. 

The result is a 98% successful placement rate across more than 1,300 virtual employees. These aren’t accidents or luck. They’re the outcome of building proper infrastructure and refusing to cut corners on either worker protection or client success. 

The Choice That Defines Your Business 

That conversation I mentioned at the beginning? It usually ends one of two ways. Either the business owner recognizes that true partnership requires investment in expertise that protects everyone involved, or they proceed with direct hiring and eventually face the consequences I’ve described. 

The second group often comes back to us later. After the legal complications. After discovering their “bargain” hire wasn’t actually qualified. After realizing that managing international employment law is a full-time job they don’t have time for. But by then, they’ve wasted months, damaged their business operations, and potentially harmed someone who was just trying to earn a living. 

The hiring challenges are real. According to the U.S. Chamber of Commerce, 34% of small business owners have unfilled job openings, and 47% say they can’t find qualified applicants. But direct hiring from the Philippines isn’t the solution. It’s a shortcut that hurts everyone involved. 

Smart business owners understand that when your company’s reputation and someone’s livelihood are at stake, the most expensive hire isn’t the one you pay a placement fee for. It’s the one that doesn’t work out. Choosing logic over luck when it comes to hiring means working with experts who’ve already solved the problems you haven’t even encountered yet. 

Don’t Gamble With Your Business and Someone’s Livelihood 

Every day you delay proper compliance is another day of unnecessary risk. Legal penalties don’t care about good intentions. Government audits don’t wait for convenient timing. And the worker you’ve hired deserves better than operating in a legal gray area. 

The choice is stark: spend a fraction more now to do it right, or pay exponentially more later to fix what you broke. One path protects your business, respects your workers, and positions you for sustainable growth. The other is a ticking time bomb. 

Stop taking shortcuts that put everyone at risk. Schedule your free consultation now and discover how proper global hiring protects your bottom line while giving talented professionals the stability they deserve. Your next great team member is waiting. Let’s bring them on board the right way. 

About the Author 

Anne Lackey is the Co-Founder and CEO of HireSmart Virtual Employees, where she helps businesses scale with full-time, highly trained remote staff. With decades of experience in business operations and systems, Anne is a recognized expert in virtual staffing, process efficiency, and team building.