Compliance risk of paying India devs through Wise or PayPal

Real question. What is the actual compliance risk of paying Indian developers as contractors through Wise or PayPal?

Most agency owners I know do this and assume it is fine because they are not the employer. The dev is responsible for their own taxes. The money flows legally across borders. Done deal.

Here is what I have learned is actually at risk:

Indian tax authorities can reclassify contractors as employees if the relationship looks like employment. Fines for the foreign company and the dev.

US clients can refuse to work with you if they audit and find no proper employment structure.

The devs themselves have no benefits, no job security, and often leave at the first better offer.

IP assignment clauses in freelance contracts are weakly enforceable in Indian courts.

We moved our team to Wisemonk last year, specifically because the freelance model was keeping me up at night. They are the legal employer, devs get proper contracts, we stop worrying about this.

How are others thinking about this risk?