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Hiring international independent contractors can be a strategic option when expanding your company to other countries or setting up teams abroad.
However, it is important to understand both the benefits and risks involved, as well as the differences between independent contractors and full-time professionals.
As the name suggests, an independent contractor, often referred to as an IC, is not a direct-hire, but rather someone who provides their services for a particular project or period of time.
Hiring an independent contractor can be particularly attractive when doing business overseas, because of the reduced commitment involved.
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However, there are also a number of risks to consider before choosing to hire independent contractors overseas.
Below, the benefits and risks are highlighted, while some insight is also provided into the characteristics that differentiate international independent contractors and full-time professionals.
Serviap Global assists clients with finding and hiring people in over 100 countries worldwide. Contact us today to find out more.
What are international independent contractors?
International independent contractors are self-employed people who operate independently according to an established contract.
While they often effectively operate like full-time in-house employees, in legal terms they are essentially working for their own company, which is providing services to the employer.
As such, an international independent contractor is not on the payroll of the company they work for, and in some cases maybe be providing their services to other companies, too.
The length and type of contract that an international independent contractor signs will depend on the work they are being hired for, and while it could last for just a few months or even weeks, they may also be employed on a long-term basis.
Because an international independent contractor is not on the payroll, they do not receive many of the statutory benefits of direct-hires, such as bonuses and other perks. However, that will often mean they charge more for their services than a employee would for doing the same work.
Benefits of hiring international independent contractors
Among the benefits associated with hiring independent contractors overseas are the following:
Cost-effectiveness: International independent contractors typically do not receive benefits such as health insurance, paid time off, or a retirement plan, leading to cost savings for the company.
Expertise: International independent contractors often have specialized skills and expertise, providing companies with access to high-level knowledge and skills.
Flexibility: International independent contractors can be hired for specific projects and are not required to work a set number of hours, providing the company with greater flexibility.
Risks of hiring international independent contractors
While hiring independent contractors overseas carries many benefits, it is also important to take the following risks into account:
Legal compliance: Companies must ensure that they are complying with local laws and regulations related to independent contractors, including tax laws, employment laws, and labor laws.
Liability: Independent contractors are not protected by the same legal protections as full-time employees, and the company may be liable if they are injured while working.
Quality control: Monitoring and ensuring the quality of work produced by independent contractors can be challenging, as they are not subject to the same level of supervision as full-time employees.
How to hire international independent contractors?
One of the most popular choices for hiring independent contractors overseas nowadays is to work with an employer of record (EOR).
An employer of record essentially hires overseas professionals on behalf of their clients, with the EOR hiring them through a legal entity in the country where the contrator is based.
That is particularly attractive for anyone who doesn’t already have a contractor lined up, because an EOR should have an established recruitment network capable of quickly identifying strong candidates for the role required by the client.
Another major draw is the fact that an EOR will guarantee compliance with all local laws, meaning that the client need not worry about legal inconveniences, financial penalties, or loss of reputation, which can accompany non-compliance.
One of the biggest compliance issues that an EOR helps clients overcome when hiring international independent contractors is contractor misclassification, which many governments are increasingly cracking down on and is explained in further detail below.
Note that an employer of record will be able to hire professionals on a contractor basis, or as direct employees, and in either case the person hired will report directly to the client, while the EOR will take care of any administrative needs associated with them.
Understanding contractor misclassification
When someone wants to expand a business abroad and is looking for the best talent, they must know the differences between hiring contractors abroad and onboarding employees. Misclassifying an employee as a contractor could result in penalties and fines.
The table below highlights some of the key differences between independent contractors and a full-time employees:
|Independent contractor||Full-time employee|
|Status||Work for themselves and are not employees of the company||Considered employees of the company and are protected by employment laws|
|Schedule||Determine their own schedule and set their own hours||Work set hours and are expected to be available during these hours.|
|Tools||Responsible for providing their own tools and equipment||The company is responsible for providing the tools and equipment needed to perform their job|
|Payment||Paid based on the project or task, not by the hour, week, or month||Paid either an hourly wage or a salary|
|Benefits||Not entitled to benefits such as health insurance or paid time off||Entitled to benefits such as health insurance, paid time off, and a retirement plan|
It is important for companies to correctly classify independent contractors to avoid the legal consequences that come with misclassification.
To ensure that independent contractors are not misclassified as full-time employees, companies should:
- Review their agreement with the contractor to make sure it clearly states that the contractor is an independent contractor and not an employee
- Ensure that the contractor sets their own hours, provides their own tools and equipment, and is paid based on the project or task rather than by the hour
- Avoid supervising the contractor in the same manner as a full-time employee and allow them to work independently
- Not provide benefits such as health insurance or paid time off to the contractor.
Serviap Global can help you hire independent contractors overseas
Serviap Global helps clients build an international presence by hiring top talent in over 100 countries worldwide.
We provide international PEO / EOR services, meaning that we can either hire professionals through a standard EOR arrangement, or as international independent contractors.
In either case, those professionals report directly to you, while we take care of any local administrative and compliance matters in the jurisdiction where they are based.
We also offer global talent acquisition services to assist clients with finding ideal candidates to hire directly.
As a PEO/EOR with over a decade of experience, we have experts in the target territory to help you learn the local market and culture.
We are a family-run business that started in Mexico in 2010, before expanding throughout the world. While our vision is global, we are committed to the sort of service excellence and individualised treatment that comes with working with a local provider.
Contact us today to find out more about how we can assist you with global hiring.
Or book a call with a sales executive working with companies based in your region.
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