Global Employment Tax and Compliance Newsletter. 2025 Year in Review

This final edition of our 2025 Global Employment Tax and Compliance Newsletter marks a year where the wait and see period for post-pandemic regulation officially ended.

Across our jurisdictions, 2025 was defined not by a few loud, sweeping reforms, but by a systemic tightening of existing frameworks.

Governments have moved decisively to close the gaps between legislative intent and operational reality. We’ve seen statutory rights attach earlier in the lifecycle, employee classification boundaries tested with greater precision, and, , a shift toward data-driven, cross-border enforcement.

The updates in this edition reflect a new environment where compliance is no longer a periodic check-up. It has become a matter of upfront design.

In 2025, labour, tax, and immigration rules were applied with greater precision across jurisdictions.

The country updates that follow are a map of where that pressure will concentrate in the coming year.

United Kingdom: Employment Rights Act 2025

The Employment Rights Act 2025 received Royal Assent on 18 December and formalises a shift that has been building for several years: statutory protections now attach much earlier in the employment relationship, and employers are given less structural space to treat early tenure as a low-exposure period.

From April 2026, Statutory Sick Pay and specified family-leave entitlements will apply from the outset of employment, rather than being gated behind qualifying thresholds. This changes the practical sequencing of risk. Absence, leave planning, and entitlement administration now sit inside the onboarding phase, not after it. For employers, this removes the assumption that the first months of employment operate under a lighter statutory regime.

The Act also resolves, at framework level, the long-running debate around unfair dismissal. It does not introduce immediate day-one protection, but it does confirm that the current two-year qualifying period will be reduced via secondary legislation. The six-month threshold reflects a negotiated settlement between government, business groups and trade unions, and should be treated as a stable planning assumption rather than a transitional anomaly.

The Act compresses the distance between hiring and full statutory exposure. Decisions that were previously managed informally during probation now require earlier documentation, clearer expectations, and more disciplined process. This is particularly relevant in roles with short ramp-up periods, variable hours, or historically higher early turnover.

United States: Federal Overtime Exemption Reset and State-Level Salary Thresholds

In early 2025, a federal court vacated the U.S. Department of Labor’s 2024 overtime rule, cancelling the planned increase to the federal white-collar salary threshold.

The exemption floor reverted to $684 per week ($35,568 annually), reinstating the 2019 standard. The court held that the rule placed disproportionate weight on salary level over duties.

For employers, 2025 forced a practical decision: whether to retain higher salaries introduced during the 2024 rollout or realign roles to the lower federal baseline, while still complying with higher state-level thresholds that remain in force.

Mexico: Ley Silla Reform and Workplace Conditions Compliance

Mexico’s employer seating and rest provisions, known as the Chair Law (Ley Silla), took effect on 17 June 2025 and require employers to provide sufficient chairs with backrests and allow appropriate rest breaks where the nature of the work permits. The law also requires these terms to be included in internal work regulations by 14 December 2025.

As of December 2025, labour authorities can inspect workplaces and request documentation showing that internal rules have been updated to reflect these obligations. This enforcement milestone transforms seating and rest obligations from an ergonomic guideline into a compliance trigger across sectors.

Colombia: 2025 Labour Reform and Working Time Surcharges

Colombia’s comprehensive labour reform, approved on 25 June 2025, introduced multiple changes that affect employment relationships and labour cost structures. Law 2466 of 2025 replaces and amends parts of the Substantive Labour Code to strengthen worker protections and modernise contract and scheduling frameworks.

Key elements for employers include the default presumption of indefinite-term contracts, limitations on fixed-term and temporary contracts, expanded rights for telework and flexible scheduling, and strengthened anti-discrimination, harassment, and family-responsibility protections.

The reform also adjusts working-time and pay mechanics: weekly working hours are capped at 44 hours from July 2025 (progressing to 42 hours by July 2026).

Brazil: Payroll Tax Relief Winds Down

Brazil’s 2025 big employer change was not a new benefit or a new reporting duty. It was the start of the unwind of the long-running payroll tax relief regime (CPRB stands for Contribuição Previdenciária sobre a Receita Bruta, i.e Employer social security contribution calculated on gross revenue instead of payroll) for the covered sectors, with a defined, multi-year glidepath that employers must cost into 2026–2028 budgets.

Under Lei 14.973/2024, companies in the CPRB regime moved into a transition period where they contribute through a split model: a partial employer social security contribution on payroll returns, and the CPRB on gross revenue is reduced. The schedule is designed to ramp payroll-based contributions up year by year (5% in 2025, 10% in 2026, 15% in 2027), with the standard 20% payroll contribution returning in 2028 and the CPRB route falling away.

The same headcount now produces a different employer tax bill each year, even if salaries do not change.

Payroll configuration, budgeting, pricing, and workforce planning in Brazil all need to reflect that 2025 was the first year where the relief stopped being stable and started becoming a phased withdrawal.

Chile: Reduced Workweek Law and 44-Hour Compliance Phase

Chile’s statutory reduction of weekly working time reached a practical milestone in 2025. While the legal change began earlier, 2025 was the first full year in which the 44-hour limit applied across operations. Enforcement, audits, and time-tracking expectations followed.

With a further reduction scheduled for 2026, employers now have to align productivity assumptions, scheduling models, and pay structures to a permanently shrinking legal workweek.

France: Talent Passport Immigration Rules and Salary Threshold Changes

France implemented a material adjustment to its Talent Passport framework in 2025 through Decree No. 2025-539, effective from 29 August 2025. The reform did not expand access in principle, but it changed how eligibility thresholds are set and maintained.

Most importantly, salary thresholds for Talent Passport categories were decoupled from the minimum wage (SMIC) and replaced with a fixed annual reference amount (€39,582). This removed automatic inflation-linked increases and introduced greater cost predictability for employers planning multi-year hiring or renewals.

The reform also consolidated several sub-categories under the qualified employee route, simplifying classification and reducing ambiguity around which permit applies to senior technical and professional roles.

Netherlands: Enforcement of False Self-Employment Rules (DBA Act)

The Netherlands made 2025 the turning point on contractor risk by ending the Wet DBA (Wet deregulering beoordeling arbeidsrelaties, i.e. Act on the Deregulation of the Assessment of Employment Relationships) enforcement moratorium.

From 1 January 2025, the Tax Administration returned to normal enforcement on employment relationships, meaning organisations can be challenged where a contractor arrangement looks, in substance, like employment.

For employers, the operational change is simple: contractor engagement is no longer something you paper over with agreements. The relationship has to hold up in practice: control, integration, substitution, and how work is actually performed. The state’s own guidance is explicit that enforcement is back on, and the public-facing business portal frames it as a live compliance exposure for organisations hiring freelancers.

Poland: Digitalised Work Permit Process and Blue Card Reform

Poland implemented two employment-critical changes in 2025 that materially altered how foreign hiring is executed in practice.

From 1 June 2025, most work permit and residence applications moved fully into a centralised digital system. Paper filings were phased out, standardising submission formats and shortening processing visibility for employers. While this did not reduce documentary requirements, it changed enforcement mechanics: incomplete or inconsistent submissions now fail earlier in the process rather than being corrected informally.

At the same time, Poland implemented EU Blue Card reforms removing the labour market test for a broad range of roles and lowering experience thresholds for certain professions. This widened access for non-EU specialists while tightening the link between permit eligibility, job content, and salary structure.

Italy: Decreto Flussi 2025 and Employment Quota Planning

2025 marked the final year of the 2023–2025 three-year Decreto Flussi plan, with the government confirming that future access to non-EU labour would continue to be managed through tightly capped, pre-allocated quotas.

Throughout the year, employers were required to pre-file applications well in advance of the official click days, with digital pre-registration becoming a de facto gatekeeper for access to 2026 quotas. In practice, this shifted immigration risk earlier in the hiring lifecycle. Workforce planning, role definition, and candidate identification now need to happen months before work authorisation is available.

For employers, Italy has moved further away from reactive hiring. Non-EU recruitment increasingly depends on advance forecasting and disciplined use of quotas rather than ad-hoc sponsorship. This carries directly into 2026, where competition for allocations is expected to intensify and late-stage hiring decisions are less likely to be viable.

Singapore: Employment Pass Salary Thresholds and Hiring Eligibility

2025 was the first year Singapore’s higher Employment Pass salary thresholds applied in practice to new hires. Minimum salaries increased, with higher floors for financial services roles, and were enforced alongside COMPASS scoring rather than treated as a soft benchmark.

The practical shift was upfront design. Salary and role level now need to meet EP requirements before an offer is made. Packages that previously sat just above the threshold stopped working, and last-minute adjustments at application stage largely disappeared.

From 1 January 2026, the same thresholds apply to EP renewals, pulling existing foreign employees into the updated regime. Decisions made years earlier now surface as renewal risk, with limited scope to reframe roles after the fact.

Singapore’s 2025 update locked immigration eligibility directly to pay architecture and role definition. Foreign hiring now requires earlier, cleaner alignment between compensation design and workforce planning.

Malaysia: Mandatory EPF Contributions for Foreign Employees

Malaysia used 2025 to close a long-standing gap between local and foreign workforce cost structures. Following the 2024 Budget announcement, the government confirmed that Employees Provident Fund (EPF) contributions would become mandatory for foreign employees, ending the historic exemption.

The final framework set employer and employee contributions at 2% each, with phased implementation beginning in late 2025. While the rate is modest, the significance is structural rather than financial. Expatriate employment is now formally embedded into Malaysia’s social security system, aligning foreign hires more closely with local employment models.

For employers, the change affected cost modelling, payroll configuration, and assignment planning. Gross-to-net calculations for expatriates can no longer be treated as standalone or “special case” arrangements, and EPF compliance now sits alongside tax, immigration, and payroll obligations.

India: Labour Codes Implementation and Employer Compliance Baseline

India’s four Labour Codes have existed on paper since 2019–2020, but 2025 marked the point at which they shifted from theoretical reform to real execution. In November 2025, the central government issued the finalised implementation framework, clearing the way for states to operationalise the Codes through local rules.

The Codes consolidate wage definitions, expand social security coverage, formalise fixed-term employment, and standardise compliance across establishments. In 2025, several large states confirmed readiness timelines, making 2026 the first year in which employers must assume active enforcement rather than continued deferral.

For employers, the most material impact sits in wage structuring and social security. The new definition of wages narrows the scope for allowances to sit outside statutory calculations, directly affecting provident fund, gratuity, and bonus costs. Fixed-term employment is now clearly recognised, but tied to parity of benefits, removing its use as a lower-cost engagement model.

United Arab Emirates (ADGM): Employment Regulations 2025

2025 marked the point at which the UAE’s post-pandemic labour reforms stopped being treated as new and started being enforced as settled law.

At federal level, MOHRE enforcement activity in 2025 focused on correct application of Federal Decree-Law No. 33 of 2021. Inspectors prioritised fixed-term contract compliance, accurate working-time recording, lawful termination payments, and proper classification of employees versus contractors. Employers were no longer given leeway for legacy arrangements or partial migration from older unlimited contracts.

In free zones, Abu Dhabi Global Market (ADGM) amended its Employment Regulations effective April 2025. The changes clarified treatment of remote employees based outside the UAE, formalised Ramadan working-hour reductions, refined sick-pay entitlement, and tightened rules around secondment and end-of-service calculations. These amendments closed practical gaps that had allowed hybrid and offshore setups to operate with limited oversight.

European Union: Pay Transparency and Social Security Digitalisation

While Member States have until June 2026 to transpose the EU Pay Transparency Directive, 2025 was the decisive year for structural preparation. Because the first mandatory reporting cycle in 2027 will assess data generated during the 2026 financial year, employers have already been forced to address job architecture, grading logic, and pay governance.

The Directive’s ban on salary history inquiries and its requirement to disclose pay ranges in job postings change how pay is set and defended. Informal, market-led negotiation gives way to defined, gender-neutral pay structures that must be explainable across comparable roles.

For larger organisations, the focus has shifted to preventative equity: identifying and correcting pay gaps of 5% or more before they trigger mandatory joint pay assessments and the formal enforcement mechanisms embedded in the Directive.

OECD: Permanent Establishment and the 50% Benchmark for Remote Work

In late 2025, the OECD effectively moved the goalposts for international tax risk by releasing its most significant update to the Model Tax Convention Commentary on Article 5 (Permanent Establishment) in nearly a decade. This update addresses the grey areas of cross-border remote work that have persisted since the pandemic.

The 2025 guidance introduces a clearer analytical framework for when an employee’s home office or other relevant place (including holiday rentals) becomes a taxable presence for the employer. This is now determined by two cumulative tests:

• The 50% Temporal Threshold: As a general rule, no Permanent Establishment (PE) exists if an employee works from a remote location for less than 50% of their total working time over any 12-month period. This acts as a practical safe harbour for hybrid and occasional remote work.
• The Commercial Reason Requirement: If the 50% threshold is exceeded, a PE only arises if the employer has a genuine commercial reason for the employee to be in that specific jurisdiction. Crucially, the OECD clarifies that employee retention, talent attraction, or cost-savings, such as reducing office space, do not constitute valid commercial reasons.

Key Global Hiring Trends Observed in 2025

As we look toward 2026, the priority for global employers shifts from tracking individual in-country rules to ensuring that job architectures, payroll systems, and mobility policies are actually aligned globally.

1. Employment rights are attaching earlier
Across many jurisdictions, core employment rights are now triggered closer to the start of employment. Qualifying periods for sick pay, family-related leave, and dismissal protection have shortened or been reshaped. The early phase of employment is increasingly regulated rather than treated as a low-exposure period.

2. Pay and role structures are being made explicit
Pay setting is moving away from informal negotiation toward clearer role definitions, pay ranges, and comparability frameworks. Governments are asking employers to show how pay decisions are made and how roles relate to one another, rather than relying on market custom alone.

3. Remote work is being assessed through a tax lens
Remote and hybrid work is no longer considered only an HR or flexibility issue. Time spent, location, and the reason for working from a particular place are increasingly assessed against tax presence and permanent establishment concepts.

4. Enforcement is becoming cross-system
Authorities are relying more on consistency across data sources. Employment contracts, payroll records, social security filings, and mobility information are being viewed together, rather than checked separately. Mismatches matter more than missing paperwork.

5. Payroll accuracy is treated as a given
Correct wage calculation, classification, and application of local rules are increasingly assumed as baseline execution. Errors that were once treated as technical issues are now examined in the context of process, oversight, and repeatability.

6. Immigration pathways are more defined
Work and residence routes are becoming clearer in design, with more defined eligibility criteria and conversion steps. Immigration permission is increasingly linked to how roles are designed and filled, rather than handled as a standalone administrative step.

Looking into 2026

If 2025 taught us anything, it’s that global compliance has outgrown the spreadsheet. We are no longer managing a static list of rules; we are managing a living, interconnected ecosystem.

The year ahead will reward the architects — the leaders who treat employment, tax, and mobility not as separate silos, but as a single, unified engine for global growth.

The goal is no longer to be compliant enough to avoid a fine; it is to be robust enough to move at speed. When your systems are aligned by design, compliance stops being a friction point and starts being the foundation that allows you to hire, scale, and lead anywhere in the world.

Thank you for reading, for challenging the status quo, and for treating global employment as a strategic discipline rather than a back-office task.

We’ll see you in the inbox in 2026.