Working With Digital Nomads: What You Need to Know About Compliance

While most remote workers tend to stay put in one location, a growing wave of professionals is breaking free from geographic constraints and embracing the digital nomad lifestyle—using technology to work from anywhere while experiencing new cultures and landscapes.

According to MBO Partners’ 2024 State of Independence report, 18.1 million American workers now identify as digital nomads. This marks a 4.7% increase from the previous year and an impressive 147% growth since 2019. These numbers tell us something important: digital nomadism is becoming a major part of our workforce reality.

Giving this emerging trend, companies must remain diligent in ensuring compliance with tax laws and other legal requirements when collaborating with these globe-trotting professionals. Here’s what to know:

What the Digital Nomad Workforce Means for Today’s Companies

Many companies now work with both full-time employees and independent workers including digital nomads. These professionals can give your business more flexibility, access to skilled professionals, and lower employment costs.

So, who exactly are these digital nomads? They’re professionals who work remotely using technology while often traveling to different locations. They tend to be well-educated and skilled in areas like computer programming, web design, marketing, engineering, and creative work.

Some digital nomads move frequently, chasing new experiences every few weeks, while others might settle in one place for months at a time. What unites them is their passion for adventure, travel, and cultural exploration.

Explore: MBO Partners’ Latest Digital Nomad Research

Risks Related to Hiring Digital Nomads

Working with digital nomads and other independent contractors can be challenging if your company isn’t prepared for tax, legal, and compliance issues. Many companies don’t have policies specifically addressing digital nomads, and a surprising 14% of digital nomads with traditional jobs say their employers don’t even know they work this way.

Meanwhile, another 18% of digital nomads have permission to work remotely but without any formal policy in place. This lack of structure can create confusion about tax obligations, data security, and legal responsibilities, potentially putting both your company and the worker at risk.

Discover: How to Work Successfully With Digital Nomads

Workforce Compliance When Working With Digital Nomads

To avoid risks, businesses should follow labor laws and tax rules when hiring digital nomads, especially those working as independent contractors. Unlike full-time employees, independent contractors decide how, when, and where they work.

If your independent contractors work remotely while traveling, they are usually responsible for following tax and legal rules based on their location. However, local regulations can vary widely, and some countries have specific visa or tax requirements for remote workers that could impact both the contractor and your company.

As mentioned before, many companies hiring digital nomads lack formal policies and instead rely on informal agreements, which can lead to compliance issues. Without clear guidelines, you risk misclassification, tax penalties, and legal disputes, making it essential to establish structured policies that protect both parties.

Check Out: What’s Driving Continued Digital Nomad Growth?

Creating a Digital Nomad Policy for Your Workforce

To hire digital nomads effectively, your company should develop clear policies and procedures that address legal, financial, and operational considerations. Some best practices include:

• Having a written contract for all digital nomads: Clearly outline project scope, payment terms, confidentiality agreements, and compliance with local laws to avoid misunderstandings.
• Requiring appropriate insurance coverage: Ensure digital nomads have necessary liability or health insurance to protect both parties from unforeseen risks.
• Requiring independent contractors, including digital nomads, to sign a code of conduct: Set expectations for communication, cybersecurity, data protection, and professional behavior.

Along with these steps, your company should also clarify tax obligations, establish secure payment processes, and define guidelines for time zones and availability. A well-structured approach ensures smooth collaboration while allowing your business to tap into the diverse skills and perspectives digital nomads bring to the table.

Learn More: Best Practices and Guidelines for Creating a Corporate Digital Nomad Policy

MBO Partners Supports Your Workforce With Independent Contractors Including Digital Nomads

Managing compliance for your workforce, including digital nomads, comes with challenges. MBO Partners makes it easier by helping companies—including many Fortune 500 organizations—hire across a range of roles while staying compliant.

Our contingent workforce solutions including Employer of Record (EOR) and Agent of Record (AOR) services cover payroll, taxes, and legal requirements, ensuring companies that work with digital nomads meet compliance standards while accessing top talent. Whatever your workforce needs, MBO Partners connects you with digital nomads and independent professionals who have the skills and expertise to support your organization.

For more expert advice on working with independent contractors, follow MBO’s blog for valuable updates and insights. We cover essential topics, including workforce compliance, AI technology, and more, to help you navigate the challenges of the modern workforce.