What he's doing is not legal, and legally tax avoidance, in a lot of European countries. What he's describing is known as a disguised employee/employment, and

What he's doing is not legal, and legally tax avoidance, in a lot of European countries. What he's describing is known as a disguised employee/employment, and they or all their workers (probably their workers if they're operating as 'companies') might suddenly find themselves open for massive tax bills for unpaid employment taxes in their country. On top of that, this setup is open for the disguised employees being able to sue the company for unpaid holiday + benefits. Probably never get noticed at that scale though. And can't say for certain as he hasn't listed the country, but if this was happening in the UK, I'm 90% certain it'd be classified as tax avoidance in the UK, and all the 'employees' would be on the hook for something like 14% employer national insurance contributions. The big problem HMRC would have is that no-one's paying the employer NIC, and as his employees are officially the companies, they'd be on the hook for it.