Benefits — 4 min
For years, companies have been waking up to the benefits of remote independent contractors.
There are more than 1 billion contractors working all over the planet right now, and that number is only likely to grow as more businesses realize the benefits of bringing remote contractors onto their teams.
Working with global contractors means companies are no longer restricted to working with local talent. Any business can hire anyone, from anywhere, and have that person start working immediately, thanks to global contractor management services. However, if you have never hired, managed, or paid someone in another country, onboarding your first remote contractor can seem tricky.
To work with remote contractors, you must understand the legal and financial implications of these business relationships. Rely too much on a contractor, and you could run into issues of misclassification.
How can you pay workers in a country where your company has no legal presence? How do you deal with time differences, paperwork, and a remote company culture? What about the risks of legally misclassifying a worker in a different country? Can you convert international contractors to employees later? We'll answer all of these questions in this guide.
Fortunately, hiring remote contractors doesn’t have to be an ordeal. This guide will take you through the nuances of working with international contractors, from finding the talent to staying compliant.
An independent contractor is any person who works for a company without being subject to that company’s control. A remote contractor is an independent contractor who does not work at a location owned by the company, often in a different country. They can be as close as the same town, in another state or province, or halfway around the world and fulfill the role of an independent contractor.
Working with remote contractors can present some challenges. The most obvious one is that you’re not face-to-face with them every day, which can make management and communication tough. International contractors may be on the other side of a big time difference, may have language differences, and might live in countries where labor laws are different from those in your own country. So how can you manage a remote international contractor?
Here are a few tips for managing remote contractors in other countries:
There’s a common cliche about remote teams: “It’s impossible to overcommunicate with a remote worker.” That’s not exactly true, though. No contractor wants you up in their business every second of every day. Contractors are independent by definition, which means they likely have work lives beyond their connection to your company.
Still, most people tend to under-communicate, which can lead to problems. When you manage a remote team, the casual communication common in an office environment doesn’t happen as easily. It’s important to schedule regular updates with your contractors, preferably through asynchronous channels, so both parties are always on the same page.
“Regular” is the key word here. You want your remote workers to understand what you need from you so they can do their work effectively. Don’t under-communicate or overwhelm — set communication expectations for yourself and your contractors, then live up to your side of the deal.
You pay contractors because they already know how to do something well, which means you can typically step back and work asynchronously without excessive oversight. But what’s asynchronous work, or “async?”
Async means a few things. The obvious part is not working with other people at the same time. More importantly though, async is a way to get more done with fewer interruptions based on a few key ideas:
The expectation that everyone on a team should take action creates a feeling of trust. You hired your remote contractors for a reason, and you should trust them to do the job, make appropriate choices, and take action. If you can’t trust your contractors, you either need to set clearer expectations or find new ones.
Asynchronous work relies on one thing to function efficiently: documentation.
Documentation is anything written down in a place where other team members can read it, learn from it, and build upon it. When you’re working with a remote team, everything that doesn’t contain sensitive information should be publicly accessible. This creates a base of knowledge the entire team can draw from. We believe strongly in documentation at Remote, so we have an entire chapter in our handbook about it.
You may not want to provide your contractors with full access to your entire library of documentation, but you don’t have to. Share important pages and documents on an individual basis and lean on that documentation to work more efficiently with your remote contractor team.
Managing a remote team can be a challenge, especially one with a mix of contractors and employees. With that in mind, we have a collection of guides that will help you manage your team no matter where they live:
Dealing with international labor laws can sound daunting, especially if you want to work with people from multiple countries. However, it’s not as scary as it sounds.
Most organizations don’t have the resources to manage the HR of hiring a global team by themselves, but global employment services make it possible for companies of all sizes to employ global teams. For contractors, the process is actually quite simple — despite certain challenges.
Not all counties define “contractor” in the same way. Some, like France and the Netherlands, require freelancers to be registered. Others examine each relationship to ensure that the contractor is truly free to work without excessive company oversight. In some countries, like Israel, a tribunal might reclassify a contractor as an employee. Tax forms for U.S. contractors can be tricky.
Penalties can be stiff if a worker you hired as a contractor is legally an employee. In Germany, for example, a company can face criminal liability if it fails to make social security contributions. Individual managers can also be held civilly liable. Criminal liability is also a possibility in the U.S., as are tax audits, labor audits and fines under state and federal law.
Despite the hangups of international labor laws, the process to work with contractors in other countries is straightforward. Find the person you want; negotiate a rate for the work; don’t create overstep your bounds as a client; then pay your remote contractors.
Getting money across international borders can seem difficult at first. Depending on the country, you may need to pay the contractor in a certain currency, which can mean dealing with exchange fees. Many international contractor payment services charge their own fees on top of those — Remote, of course, charges no additional fees for international contractor payments.
The process to pay international contractors is simple. First, you must select an international contractor payment service. Next, you must check the rules of contractor payments for the country where your contractor operates. Do you need to send funds to a government-approved bank, for example? Or in a specific currency? Once you know the rules, you can send the payment. The process for doing so varies by provider, but the concept is easy enough. The most important thing is to pay your contractors legally, in full, and on time to establish a good relationship.
First things first: you probably should not provide your contractors with a regular salary. Make sure they are sending invoices for you to pay. This extra step may seem unnecessary, but it can help protect you from accusations of misclassification, which we will cover later in this guide.
With that out of the way, let’s talk compensation. You and your contractor should negotiate payments before beginning any work. There are a few ways to pay a freelancer:
Setting a specific rate can be tricky. Consider what you would pay a local worker for the same work; the cost of living in the freelancer’s area; any expected benefits; and the going rates for contractors in the industry. Most contractors set their own rates, but you may have room to negotiate.
Yes, but your company is likely not liable for making any payments on their behalf. In the U.S., contractors must make estimated tax payments on their own. You’re responsible for claiming them as contractors and filling out the applicable forms, but they pay their own taxes.
The U.K. requires companies hiring 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 taxes (GST), and value added taxes (VAT).
Failing to comply with local laws regarding contractor misclassification can seriously affect your business. You may be subject to fines and penalties, which could even include a stop-work order for your company in that country.
Some countries may forcibly reclassify contractors under different circumstances. In Spain, for example, you may be responsible for providing benefits to contractors who work with you for a long period of time or who derive most of their income from their work with you. Given that labor laws change constantly, it’s important to have a knowledgeable local partner everywhere you hire.
Remote workers typically come in two flavors: contractors and employees. The U.K. differentiates between employees, workers, and contractors, but in most cases, people are either employed by a company or not.
There’s a big difference between the two. Contractors are hired to provide specific services, often for a fixed period of time or on a deadline. Contractors sign a contract with a client and work for an agreed rate. Depending on the laws of their country, they may need a business license to operate as a remote independent contractor.
Employees, on the other hand, work directly for the company, usually for regular hours. You can tell them how to do their job and provide them with benefits and equipment.
Not sure whether your contractor is really a contractor? Consider these questions:
If you’ve answered yes to the above questions, you probably have a contractor-client relationship. Otherwise, you may have a misclassified employee on your hands, which can lead to problems.
As mentioned earlier, remote workers are either contractors or full-time employees. It's very important to make sure your workers are correctly sorted into the right category.
If you classify someone as a contractor who should be an employee, your company could face fines and penalties from the governments involved. In some cases, poor classification can even lead to questions about who actually owns the work produced. Imagine the headache if your contractor in another country claims to own IP they developed for you. Fighting an intellectual property battle in foreign courts can be a difficult and expensive proposition, even for large companies.
Our guide on the penalties of misclassifying contractors outlines more of the dangers of misclassification. However, if you are diligent with your compliance, you will never need to worry about facing fines or other punishments.
Before you make your next contractor hire, think about these questions:
Onboarding a remote contractor from another country doesn’t need to be complicated. A partner like Remote can make it easy for you to hire, pay, and manage your contractors all over the world, with no hidden additional fees or surprises.
Check out our international contractor management services today. You can sign up in minutes and begin onboarding and paying your international contractors right away.
If you have questions, reach out and let us know! We would love to help you navigate all of your international employment needs.
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