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Hiring foreign independent contractors has become an increasingly attractive option for companies looking to bring on experienced professionals, thanks partly to the massive uptake of remote working in recent years.
An international independent contractor is an individual or group with scheduling flexibility and expertise in a field, providing an agile solution for an emerging project or given period.
Hiring foreign independent contractors offers many advantages, but it also carries some risks, especially those related to independent contractor misclassification, which can lead to legal complications and financial penalties.
If you want to hire foreign independent contractors, learn everything you need to know about these experts, such as their professional attributes, how to recruit them, the risks of misclassification, and how to eventually convert them into employees if necessary.
Contact us to find out how we can help with hiring foreign independent contractors for your company.
The advantages of hiring foreign independent contractors
Independent contractors are individuals or groups that offer a temporary service. As they are foreign professionals working from anywhere in the world, their offer is aimed at international clients from different sectors.
These professionals usually have specialized knowledge and flexible schedules. Hence, hiring foreign independent contractors is an agile solution for companies with projects requiring specialist knowledge or needing more staff for a short, clearly defined period.
Hiring foreign independent contractors rather than locals is particularly useful for many small to medium sized businesses, as they will bring valuable diversity to your company. You may find that they have new insights that provide you with a competitive advantage.
Contractors will likely charge more for their services than a full-time employee, but they usually provide their own work tools and do not receive the same benefits as a worker who is part of the company, such as training, paid overtime or vacations.
Companies hiring foreign independent contractors should know that the labor flexibility of these professionals allows them to work with a number of clients at the same time. This means that you won’t have as much control over them as you would with full employees, and limits should be agreed from the start in the contract.
Hiring foreign independent contractors: recruitment options
Any company with a global talent acquisition strategy interested in hiring foreign independent contractors has three basic recruitment options: via an employer of record (EOR), through a legal entity, or directly.
Via an EOR
An employer of record (EOR) is a fast and efficient solution for companies requiring foreign contractors. These providers are third parties with established entities and contracting networks that can efficiently connect their clients with autonomous workers.
Companies acquiring the services of an EOR will not have to worry about the paperwork and expenses associated with opening representative offices or subsidiaries in the countries where the contractors are based. The time and money they save can be invested in growing their business.
Hiring foreign independent contractors through an EOR also minimizes any legal problems, as these employers have extensive knowledge of local regulations and know how to differentiate between an employee and a contractor, one of the most common risks of working with autonomous experts.
Companies partnering with an EOR to recruit contractors maintain control over the projects they assign to these professionals, as the EOR is only responsible for hiring foreign independent contractors according to the business needs. In exchange for its services, the legal employer will charge a fee for each contractor hired.
Through a legal entity
Some companies with long-term international expansion plans that require many employees prefer hiring foreign independent contractors through their own local entity, such as a local branch or subsidiary.
This hiring option minimizes any problems related to local labor and tax regulations. However, setting up an entity and registering it compliantly with the local authorities is a costly and time-consuming process.
In addition to the resource investment involved in setting up a subsidiary or representative office abroad, companies must have extensive knowledge of local laws as well as the market and its potential. For this reason, organizations might want to engage the services of an EOR to handle employee recruitment while establishing an entity.
A legal entity is also a good solution for offshore contractor recruitment if companies want these professionals to join their distributed workforce as full-time employees when the organization grows and needs to take on full time staff.
Another alternative for hiring foreign independent contractors is to recruit these professionals directly. For direct recruiting, the interested company will have to know in detail the local regulations, from the types of contracts to the payment of taxes, if necessary.
To access independent contractors in a given territory, firms requiring their services will have to seek them out directly through online job boards or recommendations from other clients.
Not relying on an intermediary for hiring foreign independent contractors could result in savings for companies. Still, it also entails some risks, as finding independent professionals in other countries is a complex task.
Avoiding the legal problems associated with hiring contractors directly is possible, but employers must be fully aware of local laws. An EOR can also be consulted, especially for the correct classification of employees and contractors.
Misclassification, the risk of hiring foreign independent contractors
Hiring foreign independent contractors can be a quick solution for companies that need expert talent for a given project or period. However, there is a risk of misclassifying them as employees or vice versa, which can result in penalties and fines.
To avoid the legal implications of misclassifying international collaborators and expand a business without complications, companies should consider the following aspects when establishing an employment relationship with foreign professionals:
Contracts: professionals who work full-time for an employer usually sign contracts for a probationary or indefinite period. These contracts establish that the workers are on the payroll, have certain obligations, comply with a schedule, receive a monthly or biweekly salary, and enjoy particular benefits.
Contractors work temporarily, usually receive a one-time payment for their services —which may be higher than what a full-time employee would earn— and are responsible for their taxes and benefits, such as social security.
Control: in case of doubts about the classification of contractors abroad, companies may review the degree of control over the tasks assigned to these professionals. A contractor, a self-employed expert, retains a certain degree of control and independence in their performance. In contrast, a full-time employee is usually subject to more direct and constant review.
Flexibility: when working remotely, flexibility is vital, as it is part of employee retention strategies. However, contractors have higher work flexibility as they organize their own time and schedule, allowing them to collaborate on more than one project at a time. A full-time remote employee also has work flexibility but usually serves only one employer and works a minimum number of hours daily.
Tools: companies hiring employees usually provide them with the tools necessary to perform their duties. These can range from laptops and/or software programs to specialized machinery. This clause does not always apply when hiring foreign independent contractors since they could have their tools, which means company savings.
Permanence: another aspect to consider when hiring foreign professionals is the duration of the employment relationship. A full-time employee will likely have an ongoing, long-term employment partnership with their employer. As temporary collaborators, contractors offer their services for a determined period.
To avoid contractor misclassification, you need to check the local regulations of each territory where you wish to work with foreign independent experts or employees. If you are working with an EOR, simply follow their guidance. You can also consult our free tool to identify you level of contractor misclassification risk.
How to turn contractors into employees
Hiring foreign independent contractors can be a solution for companies that have embraced remote work and need skilled labor for a specific project. But, as the business grows, the working relationship between client and contractor might need to change to that of an employer and employee situation.
When hiring global talent, the labor regulations in each territory will determine whether they are independent contractors or employees. However, to ensure compliance, the simplest way to add contractors to a company’s international workforce as employees is through an EOR.
As a legal employer with established entities, an EOR will guarantee that the contractor is now an employee and therefore part of the payroll, enjoying all the benefits that this represents, such as bonuses, paid time off, and social security. The EOR will also sign a contract indicating the employee’s working hours, remuneration, and obligations.
The company will manage the working relationship with these new workers, assign the first tasks, and make them feel part of the organization. In the meantime, the EOR will assume legal responsibility for personnel administration on behalf of its clients.
Serviap Global helps you to hire foreign independent contractors
We started in Mexico in 2010 before expanding to Latin America and more than 100 countries worldwide. Today, we are a benchmark in international recruitment, especially in emerging markets.
Contact us to find out how we can help you.