Avoiding employee misclassification is more about action than intent. Treat a worker like an employee, and eventually regulators will see that worker as an employee — even if you never intended to create that relationship.

Your intent matters, of course. Many countries levy heavy penalties against companies found breaking the law intentionally. If you want to stay compliant, though, you have to follow through on your good intentions.

A guide to employee and independent contractor misclassification

More and more companies are recognizing the value of using independent contractors. You’re no longer bound by the talent in your area, and contractors can be easier to hire and pay. Win-win, right?

Unfortunately, hiring contractors carries an inherent risk of misclassification. In the United States alone, some estimates say nearly 10% of workers are misclassified and that 10-20% of businesses have misclassified an employee. Because your responsibilities to employees are much more substantial, misclassification can have serious consequences for your business.

So how do you minimize risk of employee misclassification while managing international workers? Keep reading. We’ve developed this guide to help you avoid misclassifying employees.

What is employee and worker classification?

Employee and worker classification refers to the status of the worker in the eyes of the local government. In most cases, workers are either employees (meaning the company holds more responsibility) or self-employed contractors.

Different countries have different definitions of employees and contractors for the purposes of employment law and taxation. When a business hires a worker, that business must classify that worker appropriately, using the proper documentation, and follow all applicable laws.

Employees are entitled to more benefits and protections than contractors. Depending on the country, these benefits may include:

Payroll and reporting are also handled differently for employees and contractors. For employees, employers are responsible for withholding payroll contributions (and sometimes matching contributions); paying payroll taxes; and paying into insurance programs.

Details vary from country to country. Remote’s complete Guide to Global Payroll Management has more information.

What makes one worker an employee and another a contractor? The answer depends on a series of questions, including a worker’s time, place of business, equipment, payment structure, and freedom to pursue other jobs.

In general, the distinction between an employee and an independent contractor depends on the level of control the business has over the worker. The more control a business exerts over how the work is performed and how the worker is paid, the more likely it becomes that the worker should be classified as an employee.

Each country will have its own guidelines. For example, according to the IRS in the United States, “[A]nyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.” Be sure to check the guidance for each country in which you use global contractors.

While rules may vary by country, you can usually guess whether an employee is misclassified based on the answers to the following questions:

Employees typically work on a schedule, with the business designating the hours and days to be worked. During that time, the employee is expected to devote all of their time to the business. Many employees work from 9 a.m. to 5 p.m., Monday through Friday. By contrast, a contractor can work whenever they want and take as many breaks as they want, as long as they deliver the product or service by the deadline.

Employees often work in a company’s office space or other defined property, while contractors can do their work from anywhere. However, remote work for employees was on the rise even before the global pandemic. Now, it’s common practice for employees to work from home or another location of their choosing. In these cases, a person working in a company office is more likely to be an employee, but an employee working outside that office is not necessarily more likely to be a contractor.

Employers typically provide resources for employees to do their work. These resources may include computers, cell phones, specialized software or subscriptions, and other necessary tools. On the other hand, contractors use their own equipment and subscriptions purchased at their own expense.

When an employer hires an employee, the expectation is that the product or service is done by the employee themselves. If the work must be done by the worker, they are an employee. By contrast, a contractor may be able to delegate work as needed.

Most employees are paid on a regular basis through a payroll system. As part of payroll, businesses deduct necessary taxes and make social contributions on behalf of the worker. Contractors, however, are paid without tax withholding, often based on invoices. Employees, on the other hand, do not have to submit invoices for their regular pay. Instead, they either receive regular distributions of their salary or clock in and clock out using an hourly system.

Here’s where things start to get tricky. In many countries, if a worker provides a service that is vital to the business, they are likely to be an employee. By contrast, contractors are often used to provide supplementary services, such as a marketing plan or website build. However, this can be subject to interpretation.

Think about it like this: if the company makes websites for clients and hires someone to make some of those websites, that person is probably an employee. If the company makes lightbulbs and asks a self-employed website builder to create a website for the company, that worker is probably a contractor.

The question of permanency can be the difference between an employee and a contractor. In some countries, a worker may be correctly classified as a contractor, then become an employee if the engagement with the company continues beyond a certain time frame. In countries with fixed-term contracts, workers often cannot sign multiple fixed-term contracts with the same employer. Instead, the employer must either terminate the relationship at the end of the term or offer the employee an indefinite position at the company.

What is employee and independent contractor misclassification?

Misclassification occurs when a business gives a worker the wrong designation, whether by mistake or on purpose. Although fines and penalties tend to be more severe for deliberate misclassification, businesses still face penalties for honest mistakes.

Unfortunately, many employers deliberately misclassify workers to get the best of both worlds. You are not required to pay taxes and insurance for contractors, and your employment contract can be much more flexible in favor of the company. It’s much easier to fire contractors, and payroll is much more straightforward without the need to calculate benefits or social contributions.

Even if you try to classify workers properly, you still might struggle. For example, you may have hired a contractor to do a small job for your company. And they may have done such a great job, you hired them for more jobs. Over time, the nature of your relationship may shift. Unless you’re doing regular classification reviews, you could overlook the fact that your old contractor is now technically an employee. 

Classification isn’t always straightforward. Local laws vary, and those laws change over time. For example, in 2021, the Netherlands changed rules regarding misclassification and increased enforcement of those rules. That means you need up-to-the-minute information to stay compliant.

Misclassification not only deprives workers of benefits and protections, but it also denies revenue to state and federal governments. Consequently, more countries are cracking down on the practice of misclassification, especially as the gig economy grows. Governments are ramping up enforcement, increasing penalties, and tightening legislation. You could be subject to many consequences, even if your misclassification was an honest mistake.

What are the risks of employee misclassification?

The risks of employee misclassification can be severe. Some consequences might include:

Penalties and fines: You may be liable for back taxes and associated penalties for paying late.

Back wages and benefits: You may be required to compensate workers for lost wages or benefits that resulted from the misclassification.

Legal issues: You may be vulnerable to lawsuits from groups or individuals harmed by misclassification.

Misclassifying employees can have hidden costs as well. Workers who discover they should have been employees instead of contractors may view the company unfavorably. Some workers may even stop working with the business and tell others to avoid the company.

You do not want to be known as a company that deprives workers of benefits and security. Even if you’ve made an honest mistake, the negative PR can seriously harm your company’s ability to compete.

How do I avoid employee misclassification as an employer?

If you have employees and contractors, you can avoid misclassification by learning the local laws that govern compliance where your workers live. For example, rules regarding 1099 misclassification in the United States are different from rules governing IR35 in the United Kingdom.

While every situation is unique, you can follow a few best practices to avoid employee misclassification:

Take advantage of government resources and self-check services.

Review your contracts with all self-employed contractors.

Train your managers on misclassification and encourage them to err on the side of caution when assigning work to contractors.

Convert contractors to employees if you discover that you have misclassified them.

How to calculate employee misclassification

Calculating compensation for employee misclassification is not an exact science. What works in one country might not work in another. Regardless of location, though, you must usually prepare to pay back employees for any benefits and social contributions they would have been entitled to had they been classified correctly.

If you discover you have misclassified an employee, you can estimate how much you will owe by considering a few factors:

How long has the employee been misclassified?

What would a person in a full-time position at your company performing similar duties earn?

What company benefits would you normally offer an employee of that seniority level?

How much would you have paid in taxes on behalf of the employee?

How much in taxes would the employee have been responsible for?

What are the government’s guidelines for misclassification penalties?

In addition to these questions, you must also consider whether you identified the misclassification yourself. If you did, you may avoid the harshest penalties and fines. If the government discovered the issue or if the employee lodged a complaint, however, you could end up paying the maximum amount.

How to correct employee misclassification

If you discover that you have misclassified workers, do not simply end the relationship and expect the problem to go away. You are still responsible for compensating the employee (and potentially the government) for benefits, taxes, and other perks.

You can correct employee misclassification only by making the employee and the government whole. That means paying whatever back taxes, benefits contributions, pension contributions, and fines may be associated with the issue.

You may be tempted to terminate the relationship with the employee and hope the problem goes away on its own, but that strategy can backfire badly. Governments are much harsher on companies found to have broken misclassification laws deliberately.

What are the penalties of employee and independent contractor misclassification?

Penalties for employee and independent contractor misclassification vary by country, but most countries follow a similar playbook. The company in question is responsible for paying fines, penalties, back taxes, and back benefits, both to the employee and to the government.

The penalties do not end there, however. In many cases, the contractors themselves could end up owing money to the government, which will seriously harm their impression of the company and could affect the willingness of others to work with the business. That kind of negative press may make it difficult to attract good freelancers in the future.

For more information, read Remote’s guide on the consequences of contractor misclassification.

Famous employee misclassification lawsuits

Several lawsuits should make companies think twice before misclassifying contractors. 

Dynamex Operations W. v. Superior Court: This case in California places the burden on the business to prove the worker is not an employee. In addition, this case outlined the “ABC” test, which determines whether the worker is sufficiently independent from the business to be considered a contractor.

Uber BV and others (Appellants) v Aslam and others (Respondents): Uber lost this court case in the U.K., which determined that its drivers are in fact “workers” and not independent contractors. The U.K. has a three-tiered hierarchy of working relationships, in which employees, workers, and contractors all have certain rights. 

Van Dusen et al v. Swift Transportation: This case, which lasted more than nine years, eventually saw Knight-Swift transportation pay out more than $100 million in damages to around 20,000 workers who were found to be misclassified as owner-operators. Businesses must consider the financial harm that can arise from a decade-long court case and a nine-figure settlement before treating classification concerns lightly.

Even if these lawsuits occurred in a different country or state, employers should heed their warnings. Laws can change quickly, and employers found to be in violation cannot continue to operate outside the law once the rules change.

An overview of independent contractor taxes and forms

In the United States, the forms to file related to independent contractor taxes have changed recently. Here are a few of the forms companies need to know:

Form W-9: This form collects information from the contractor, including name and tax identification number (TIN).

Form W8-BEN: This form determines the foreign status of non-resident aliens for the purposes of taxation.

Form 1096: This form acts as a cover sheet for forms pertaining to contractors that are physically mailed to the IRS. You do not need to file Form 1096 when filing digitally.

Form 1099: While employers of U.S. contractors previously had to file Form 1099-MISC, today those companies file a 1099-NEC instead. Short for “non-employee compensation,” Form 1099-NEC reports payments made to individuals not employed by the company.

Every country has its own unique requirements related to contractor classification and tax forms. Be sure to consult with a local legal expert in the countries where your contractors operate to ensure you file all taxes properly.

What are the complexities of managing contractors globally?

Although you may have a good grasp on your own country’s laws and statutes, it can be difficult to manage risk across multiple countries without the support of local labor experts. You must consider how:

The nature of your relationship with a worker may change over time.

Remote's complete guide to employee and contractor misclassification. Learn how to avoid misclassification and keep your business compliant.

Guide to employee and independent contractor misclassification

Employee and independent contractor misclassification: Expert guide

To hire independent contractors, you must address issues of compliance, classification, finance, and process. Paying independent contractors internationally is easy enough, but ensuring compliance can be more complicated.

Hands down, finding top talent is the best way to grow your business and satisfy customers. In the era of remote work, digital nomads, and the gig economy, you can build a powerhouse team regardless of where they live or work. The barriers to building a global workforce are lower than ever, giving leaders access to a talent pool that wasn’t possible even 10 years ago. 

But here’s the rub. Hiring an independent contractor who’s living in another country is not as easy as working with a local freelancer. If the best person for the role lives outside your home country, you face an unfamiliar set of labor laws and foreign tax requirements.

Understanding the pros and cons of hiring independent contractors, especially those in other countries, is essential for businesses looking for a little help. This complete guide will tell you everything you need to know about hiring independent contractors.

Hiring an independent contractor starts with classification and compliance. Once you know where you stand there, you can move on to more practical matters of payment and workflows.

This guide covers all the following subjects:

What are the benefits of hiring independent contractors?

How do I hire independent contractors compliantly?

When should I hire an employee instead of a contractor?

How do I set up contractor payments with automated contractor management software?

How do I create a contract for an independent contractor?

What are the penalties for misclassifying workers?

How to create a contract for an independent contractor

Practical considerations when hiring international contractors

A person is considered an independent contractor if they are running a business separate from yours and are able to pursue income from other businesses. Do they have autonomy from you? If yes, they are an independent contractor. 

There is a growing risk of penalties if you misclassify your employees as contractors. In the U.S., the IRS does not offer a magic formula to tell the difference. Instead, they provide a set of common law rules to help businesses differentiate between employees and independent contractors. These rules fall into three areas:

1. Behavioral Control — Do you have the right to control the outcome of the work and how the work is performed?

2. Financial Control — Do you have the right to direct financial and business aspects of the job? This can include things like:

Who invests in facilities and tools needed to perform services for your business

Whether the worker is working for more than one business

Whether the worker can realize a profit or incur a loss

3. Type of relationship — What terms are in place to govern the relationship? 

Is there a written contract describing the relationship? 

Do you provide employee-type benefits like insurance, paid vacations, or sick pay?

Are the services provided to you a key aspect of the business of the company? 

The U.S. Department of Labor uses similar guidelines, called an Economic Reality Test, based on six factors used by the Supreme Court to determine employment status.

You can source talent quickly anywhere in the world.

Hiring a contractor is quicker and easier than onboarding an employee.

International contractors can be more cost effective.

International contractors do not come with the same compliance challenges as employees.

Contractors do not require training or resources to perform their duties.

Benefits of hiring contractors include more control over your budget, greater speed in onboarding, and fewer legal hurdles to overcome — provided you do not misclassify employees as contractors, of course. 

Perhaps the biggest benefit to hiring independent contractors is they come ready for work. You are not required to provide equipment, supplies, office space, training, or benefits. Independent contractors are meant to be self-sufficient and a hassle-free way to supplement your team.

What are the drawbacks of hiring independent contractors?

Laws regarding contractor classification vary among countries.

Your intellectual property may not be protected as well.

Managing risk becomes more challenging when you hire in multiple countries.

Contractors can be expensive in the long term.

Contractors who would prefer to be employees may not feel valued by the company.

The challenge for businesses is understanding the complexity and differences in local labor laws, an undertaking that can quickly become overwhelming if you’re not a fan of administrative work. Managing risk across multiple countries is difficult without the support of local labor experts for independent contractor management services. Chances are, your HR department does not have a full complement of international lawyers to navigate the intricacies of contracts from multiple countries.  

If you want to scale and grow your business, hiring independent contractors can keep you nimble, as long as you can navigate the complexities involved with local labor laws in each country. 

When should you hire an employee instead of a contractor?

Employees provide companies with stability and help establish all-important company culture. In addition, employees are more loyal to their employers than contractors are to their clients, so employees tend to have longer engagements.

While employees do carry additional costs, such as benefits and paid time off, employing full-time workers is usually cheaper than paying contractors in the long run. Further, it is usually easier for companies to guarantee ownership of IP created by employees than by contractors.

Hiring employees does have drawbacks, though. If hiring in another country, the presence of employees could expose your company to permanent establishment risk. Hiring internationally also requires your company to open a new legal entity in that country or work with an employer of record.

Every business is different. Your reasons for hiring an employee or independent contractor can change over time. Consider the long-term benefits of an unlimited talent pool and balance those benefits against your appetite for risk, especially regarding compliance obligations.

If it makes sense for your business to hire international contractors, consider the practicalities of having foreign members on your team. 

How will you handle working hours across multiple time zones?

Will you encounter language barriers, and how will you overcome them? 

What type of project reporting will you require from your contractors?

Is there a minimum or maximum duration for contract workers in the country? 

Will you need to arrange for work permits or visas for people working abroad?

Will your company need a local presence or branch office to operate in the country? 

How do I hire international contractors compliantly?

Your company must abide by local labor laws when hiring international contractors. That means complying not only with the laws of your own country regarding contractors, but also the laws of the countries where your contractors work.

Change is constant in international business, with labor laws updated regularly. It’s not unusual to have worker protections in place that automatically change the employment status from contractor to employee after a certain amount of time has passed. What was initially legal can change over the duration of an engagement, and you may not receive any notification. That’s why it’s important to have a knowledgeable local partner everywhere you hire.

If your company turns out to be the only place a worker is engaged, there could be a serious risk of misclassification. 

You can unintentionally expose your business to any number of potential penalties and fines, even if you make an innocent mistake. 

You may experience IP risks if the country where your contractor resides awards ownership to the person who developed it rather than the company that commissioned the work. 

You may be responsible for deducting income tax, national insurance, or healthcare contributions, depending on the country.

For example, the United Kingdom requires companies who hire contractors to follow off-payroll working rules (IR35). You may also be required to pay a consumption tax on your contractor invoices, which you may or may not be able to recoup. Common consumption taxes include sales tax, goods and services tax (GST), and value added tax (VAT). 

Innocent mistakes are not viewed favorably by local authorities, especially mistakes by foreign companies. It’s crucial to keep up with changing labor regulations and taxation requirements for every country where you hire an independent contractor. Remote can help your business hire international contractors legally, easily, and quickly.

Yes, you can hire international contractors and build a remote workforce. It’s common practice for businesses around the world to work with contractors in other countries. That said, doing so is not free of risks.

Each country has unique employment laws full of nuance. If you’re hiring international contractors who reside in another country, you must comply with both USA laws and the laws of the other country. This extends to requirements for individual and company tax collection. 

Your HR department may be able to manage contractor compliance. Determine whether your internal team has the skills to accurately:

Identify the difference between employees and contractors according to the local definition

Know when it’s legally required to convert your international contractor to an employee

Protect your intellectual property and invention rights for the work done by the contractor

Understand the tax code in the foreign country as it relates to withholding and reporting

Develop relationships with tax consultants and industrial relation attorneys 

Advise contractors how to complete IRS documents like the W-8BEN form

Prepare agreements to meet updated legislation requirements

Onboard foreign contractors in a timely and efficient manner

Put systems in place to pay foreign contractors in their local currency

While it may sound complicated, do not let these guidelines discourage you from onboarding international talent. Contractors in multiple countries can be a powerful tool for your growth. The key is to guarantee your compliance by working with a trusted international independent contractor management service, like Remote.

Contracts for independent contractors should cover items including the services being rendered, the length of the agreement, intellectual property rights, and confidentiality. International contract management requires specialized knowledge for each country’s laws and tax systems. You cannot approach every country the same way. 

Make sure your agreement is legally valid in the country where the contractor resides. Every country will have different requirements, so be prepared to tailor your independent contractor agreements for each country where you hire.

Basic items to include in each contractor agreement include:

Length of the agreement, with clear start and end dates

Confidentiality or nondisclosure agreement

Contractor obligations to your business for things like liability insurance and indemnity

How to hire independent contractors: Expert guide and resources

If you’re like most business or people leaders, you’ve had to make changes in the way your business operates since March of 2020. Some of these changes may have been challenging, but others will have improved the way your teams work together, and helped your business to grow!

One of the most significant changes we’ve seen is the shift toward distributed teams and global hiring. Companies have realized there are huge advantages to hiring from a borderless talent pool. 

Unfortunately, the knowledge and resources necessary to craft benefits packages for international talent haven’t kept up with the speed of hiring in most organizations. 

Benefits are an essential part of the hiring equation. A well-planned benefits package shows your team members that you value and respect them. If some employees don’t get the same benefits as their peers because of where they live, the disparity can make them feel like they don’t belong in your organization, leading to issues with happiness and retention. Benefits challenges can also make you lose out on great talent in the hiring process. 

With your company expanding across the world, you need a modern benefits stack fit for a global team. At Remote, we’re obsessed with crafting the best possible employee experience for our team, which spans hundreds of employees across dozens of countries. 

I want to explain how we’ve built our modern benefits stack and how you can implement the right benefits framework to create a culture of empowerment, trust, and belonging.

For companies hiring only in local markets, the conversation around benefits hasn’t changed much in recent years. But for many modern companies, which are increasingly distributed, the need for better benefits to attract and retain top talent has grown. 

Until recently, many organizations have offered basic statutory and supplemental benefits for their local team members and the minimum statutory benefits required for compliance in other countries. Often, this is because they don’t have the right knowledge or resources to do more. However, that strategy creates two classes of employees, harming cohesion in the process.

Teams like Remote have been leading the way in practicing “fair equity,” which means making sure employees in every country have not only the statutory but also the supplemental benefits they need to thrive personally and professionally. 

To practice fair equity in your organization, start by understanding what benefits are important in the countries where you’re hiring. Your employees in Brazil or Germany may have different needs than your employees in the United States, depending on what social services may or may not be available.

Then, ask your individual employees what their needs are. This could be through ongoing surveys (not just once a year) or one-on-one conversations. The goal should be to discover which benefits you can offer to support everyone within your company, not just those who live in certain countries. When every team member feels heard and supported, your organization will be able to grow to new heights!

Once you’ve conducted some internal and external research to understand the needs of your employees, you can start constructing better benefits packages. 

But a modern benefits stack should also include supplemental benefits like:

Paid leave policies, including parental leave

Let’s drill down into some of these supplemental benefits and how they can work for your global organization.

In the new age of work, flexibility is one of the most important benefits you can offer your employees. Flexibility goes beyond simply allowing people to work from home, which is now more of a norm than going to the office each day. Instead, flexibility means that employees don’t necessarily have to work specific hours that suit their organization. They can work at the times that suit their own needs and lifestyles. 

Modern organizations should lean into asynchronous, flexible work and away from rigid Monday through Friday, 9-to-5 schedules for all workers. This is not only an incredible benefit but a necessity when you’re working with colleagues across many time zones.

Offering unlimited PTO has become a major point of conversation globally. Many tech companies offer this perk as a way to attract the best. However, simply offering unlimited PTO is not enough. You have to go a step further and be intentional about the way you structure and communicate your leave policies.

The first step is in understanding what’s required and what the cultural norms are around paid time off in the countries where you’re hiring. While the United States has no federal law requiring that employers give paid time off to their employees, 77% of employers in the US still offer some paid leave. In the European Union, employers are required to offer employees at least four weeks of paid leave, and many EU countries require more than the basic four weeks.

Due to these variances, offering a blanket PTO policy may seem like the best option for your global workforce. You still must be intentional with that policy, though, especially when you consider that employees in certain countries may feel uncomfortable asking for time off.

At Remote, we offer employees unlimited PTO with a 20 day minimum each year. Yes, employees must take at least 20 days off, no matter where they live! This time can be used to travel, spend with family, tend to obligations, or simply rest and recharge. We still encourage people to take more than the minimum, and we make sure employees in countries with higher minimums follow the law.

Policies like these are not just good for employees, but good for businesses. Vacations can increase performance by up to 80% in addition to showing employees they are valued and supported.

In addition to PTO, it’s also important to create locally compliant (in all the countries where you’re hiring) and comprehensive parental leave policies. That way, no one in your organization has to stress about managing work and personal finances when deciding to grow their family. 

Also consider paid leave policies for employees who are experiencing traumatic experiences. Policies with mental health in mind are more important than ever, especially as we continue to live through a global pandemic. Bumble is a great example of this, having offered all employees a week off to deal with stress, grief, and burnout during COVID-19. 

While the need for mental health and wellness benefits is more apparent than ever, the need has always existed. The pandemic simply brought it to light and helped us start these conversations in the workforce.

Showing your employees that you care about their wellness starts with flexible work and paid leave policies. But more than that, you must consider what tangible resources you can offer to your team, like local therapy or coaching services. 

At Remote, we’ve partnered with Modern Health to offer therapy, coaching, and self-guided mental health resources to our employees in dozens of countries. We also help our customers find the right mental health vendors for their international teams!

If your employees were working alongside you in the office, you’d equip them with a comfortable desk, chair, monitors, and other equipment to optimize their work experience. The need for these supplies doesn’t change just because an employee works from home.

Don’t assume your employees already have everything they need. Our interviews with employees who started working remotely due to Covid-19 showed us that one of the biggest challenges was not having a proper desk, chair, or other equipment.

Consider offering a home office stipend to help employees get the things they need to thrive in their work lives. At Remote, we offer equipment stipends for desks and chairs in addition to equipment like laptops, external monitors, keyboards, mice, and webcams. If an employee requires additional accommodations to work from home due to a disability or health issue, we help them with those needs.

The biggest challenges we see companies encounter when trying to offer modern benefits packages are knowledge of local regulations, internal resources to figure out what people want and need, cultural fluency, and of course, budget.

If you are a growing business with a tight HR and people budget, you may not be able to go above or beyond statutory benefits for now. However, there’s a huge business case to be made for increasing your budget when possible.

Global hiring can present many challenges, but when every employee feels supported, equal, and welcome, that’s when magic can happen. Remote is an example of this. Our global team helped us achieve a $1B+ valuation in under two years, and our people team works hard to give back and demonstrate that we’re all in this together.

If you’d like to learn more about working with Remote for your global hiring needs, our people and hiring experts are here to help your business offer the best in modern benefits.

What is the Modern Benefits Stack for 2021?

If you have employees and contractors abroad, you need to understand how the W-8 BEN form works. In this article, we’ll break down the basics of the W-8 BEN form to help you and your workers comply with the IRS rules.

A W-8 BEN form is a United States Internal Revenue Service (IRS) tax form used to determine the foreign status of non-resident aliens for the purposes of taxation. Its official name is the “Certificate of Foreign Status of Beneficial Worker for United States Tax Withholding and Reporting (Individuals).”

The IRS taxes all income paid by companies in the US. People residing in the US, those who hold a US Green Card, and those who spend the majority of the year in the US are subject to income tax. However, a non-citizen living outside of the US is classified as a Non-Resident Alien (NRA) and is taxed at a different rate.

Global Payroll and Benefits

Employee and independent contractor misclassification: Expert guide

How to hire independent contractors: Expert guide and resources

What is the Modern Benefits Stack for 2021?

What is a W-8 BEN form? A guide for US employers

What is a 1096 form? A guide for US employers

Written by • Preston Wickersham

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