The offshore revolution just got a reality check: Is your business ready for the aftershocks? [GUIDE]

The allure of cost savings has driven countless Australian businesses to engage offshore talent. The promise of skilled labour at a fraction of local wages has seemed like an unmissable opportunity, a key competitive advantage in a tight economic climate. But what if that advantage just became your biggest legal liability?

A recent landmark decision by the Fair Work Commission has sent ripples through the remote work landscape, particularly for Australian businesses engaging workers overseas. Joanna Pascua, a Filipino paralegal working remotely for a Brisbane firm, successfully argued she was an employee and entitled to Australian workplace protections, despite never setting foot on Australian soil.

Why employers have been looking offshore 

Australian employers often look offshore for employees to access a wider talent pool and potentially reduce labour costs, especially given the current economic climate and the expense of Australian wages. This practice allows businesses, particularly Small-to-Medium Enterprises (SMEs) that may not be able to afford local salaries, to find skilled workers for roles that might otherwise be difficult or expensive to fill domestically. But the cost-saving may be about to change with this recent ruling. 

On top of the increasing risks of legal claims, including class actions, for back pay and other entitlements for misclassifying offshore employees as independent contractors, businesses often struggle to find the best way to attract talent. Traditional job board usage can vary across countries, it can be expensive to advertise across multiple markets and it can be even harder to set up in each region and comply with local laws. 

Australian SMEs can mitigate these growing compliance risks by leveraging an Employer-of-Record (EOR) like Employment Hero’s Global Teams EOR service. 

An EOR acts as the legal employer, handling all the complexities of international employment, including payroll, taxes, benefits, and adherence to local labor laws in the employee’s country.This means that businesses using Global Teams EOR can confidently onboard, manage, and pay employees across the world without worrying about the potential legal liabilities highlighted by the recent Fair Work Commission ruling. It simplifies global hiring while ensuring full compliance, allowing you to focus on growth, not legal pitfalls. 

Concerned about the compliance of your offshore contractors or employees? Talk to our Global Teams Experts today.

What happened in the Pascua v Doessel Group case

Joanna Pascua was a paralegal in the Philippines, working for Brisbane-based Doessel Group. She was paid AUD $18 an hour and labelled an “independent contractor”. But the FWC saw through the label and looked at the real relationship.

Here’s the rundown:

• Fixed hours and schedule: Ms. Pascua worked a fixed 8:30 am – 5 pm AEST, Monday to Friday, just like an employee.
• Payment: She was paid a flat hourly rate, not for specific projects or outcomes. The FWC pointed out that genuine contractors usually quote more than the minimum wage, which her AUD $18 rate wasn’t.
• Exclusivity: Her hours were exclusively dedicated to Doessel Group, unlike a true contractor who can work for multiple clients.
• No delegation: She couldn’t delegate her work, a key characteristic of an independent business owner.
• Integration: She used the firm’s systems, had a company email, attended meetings, and was presented as part of the legal team. She was “serving in the business,” not just to it.
• Control: The firm controlled how she did her work, providing daily instructions and even expecting her to use a specific phone system.

The “Grey Market” just got a lot less grey

For years, a “grey market” has flourished, especially among small Australian businesses, where offshore individuals are engaged as “contractors.” This arrangement often bypasses Australian industrial laws, wage standards, and social protections. The argument has been simple: if they’re not in Australia, Australian laws don’t apply.

Joanna Pascua’s case shatters that assumption. The Fair Work Commission ruled that despite being located thousands of kilometres away, Ms Pascua was indeed an employee, fulfilling all the daily grind expectations of an Australian worker. This means she was entitled to minimum work standards, including a wage of at least $24.87 an hour, significantly more than the $18 an hour she was being paid.

Your business could be on the hook for:

• Unpaid wages: If your offshore “contractors” are reclassified as employees, you could be liable for back pay to meet Australian minimum wage standards.
• Unfair dismissal claims: Like Ms Pascua, your offshore workers could challenge dismissals under Australian law, even if they’re not physically here.
• Class actions: Lawyers are already flagging the potential for collective legal claims, including class actions, against Australian businesses from offshore workers.
• Gender pay equity and anti-discrimination claims: Australian protections extend to these areas, opening up new avenues for claims.
• Reputational damage: Beyond the legal costs, the public perception of “exploiting” workers, even unintentionally, can severely damage your brand.

Compliance risks with offshore employees

The recent Fair Work Commission decision in the Pascua case has changed the game for Australian businesses employing remote workers overseas. The former “grey area” is now under the spotlight, revealing significant legal and financial risks for businesses that misclassify their offshore employees as contractors. Don’t get caught out. Discover the hidden dangers, including: 

• Hefty back pay and penalties: Potentially owe thousands in unpaid wages and superannuation. 
• Unfair dismissal claims and class actions: Face legal battles and collective claims from offshore workers. 
• Criminal charges for wage theft: New laws mean deliberate underpayments can lead to massive fines and even imprisonment. 
• Serious reputational damage: Protect your brand from public scrutiny and negative press. 
• Increased regulatory scrutiny: Prepare for heightened attention from bodies like the Fair Work Ombudsman and ATO. Protect your business’s future and ensure you’re doing right by your people.

Download the full guide for further insights on compliance risks and how to avoid them or talk to one of our Global Teams EOR experts today to get a free Employee Vs Contractor Misclassification Risk Check. 

It’s time for a serious HR health check

This ruling is a wake-up call, putting Australian companies “on notice” that engaging offshore workers is not an easy loophole for avoiding Australia’s workplace protections. The line between an independent contractor and an employee has always been complex, but this decision extends that complexity across international borders.

Are you confident your offshore arrangements would stand up to scrutiny? Ignoring this could lead to significant financial penalties and legal headaches. It’s no longer just about cost-cutting; it’s about compliance, ethical employment, and safeguarding your business’s future.

Don’t wait for a claim to hit your desk. It’s time to review your offshore contracts, understand the implications of this new precedent, and ensure your employment practices are robust, compliant, and fair – no matter where your talent resides.

Download our Offshore Employment Guide for Employers or talk to one of our experts today. 

The information in this article is current as at 2 August 2025, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. Some information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.