Businesses using overseas contractors need to consider country-specific employment regulations and keep updated on any developments in employment law (eg the 2016 ruling that Uber drivers should be classed as 'workers' rather than 'self-employed contractors').
In the UK, there are important distinctions between employees, workers and self-employed contractors which determine the applicability of various employment laws (eg entitlement to minimum wage and holiday pay). Businesses wanting to use contractors in other countries need to be aware of how the different employment statuses are classified to avoid trampling on local employment laws.
Even if employment law issues do not arise, other disputes can crop up, and these can be more difficult to resolve due to differences in legislation between the contractor's country of residence and relevant UK regulations. There can also be a clash of business cultures (eg delays in work submission or payment being more acceptable in one country than another) which can lead to legal disputes. Further jurisdictional complications can arise if litigation ensues; namely determining which court (one in the UK or the contractor's country) should hear proceedings.
For more information on issues relating to the jurisdiction of a contract, read Jurisdiction and international contracts.