Future of Work Study 2025: Digitalisation, HR Outsourcing and the Future of Work
We are proud to share the latest study of our valued member, Free Trade Europa – an independent think tank promoting the social, economic and political benefits of openness, liberalisation and free trade for governments, companies and citizens, co-authored by Freelance Movement.
The “Future of Work Study 2025” presents key insights into HR outsourcing, the rise of Employer of Record (EOR) services and the increasing role of digitalisation in workforce management. From an SME perspective, these developments are particularly significant, as they offer both opportunities and challenges in navigating the modern employment landscape.
For many SMEs, expanding into new markets is a daunting task due to the complexities of international labor laws, tax obligations and compliance requirements. Establishing a legal entity in a foreign country can be costly and administratively burdensome, making EOR services an attractive solution. By acting as a third-party intermediary, EOR providers take on the responsibility of legal employment, payroll management and regulatory compliance, allowing SMEs to hire talent globally without the usual risks and overhead. This enables smaller businesses to scale more efficiently and compete in international markets without needing extensive HR infrastructure.
HR outsourcing has also evolved beyond administrative functions, offering SMEs access to advanced digital tools that streamline payroll, compliance and employee engagement. Cloud-based platforms and AI-driven HR solutions are becoming essential in managing a modern workforce, particularly as SMEs increasingly rely on remote employees and freelancers. The ability to integrate such technology without significant investment gives SMEs a competitive edge, ensuring they can operate efficiently while maintaining compliance with evolving labor laws.
However, the study highlights regulatory challenges that SMEs must consider, particularly within Europe. Compliance with employment laws, data protection regulations such as GDPR, and the newly introduced EU Platform Work Directive will impact how businesses engage with outsourced HR providers. Ensuring that EOR partners adhere to ethical standards and legal requirements is critical, as non-compliance could expose SMEs to financial penalties or reputational risks. The report also emphasises the importance of due diligence in selecting EOR services, advocating for stricter screening processes and a Code of Conduct to promote transparency and accountability within the sector.
As the EOR market continues to grow, SMEs stand to benefit from increased competition among providers, leading to more tailored and cost-effective HR solutions. Outsourcing HR functions allows SMEs to focus on core business activities while ensuring they remain agile and compliant in an increasingly complex regulatory environment. By leveraging these services, small and medium-sized enterprises can not only reduce costs but also access world-class expertise and technology, leveling the playing field with larger corporations.