It definitely is the case in the EU. Where did you get the idea it isn't?

In my country, which is in the EU, having someone work for you without a contract is a crime. Because by not having a contract you're denying them rights such as pension contribution, paid vacation, health insurance etc.

Plus you have to pay taxes on salary, so if you hire them "on a handshake" as it were, you're probably doing tax evasion too.