Global hiring has become easier than ever, thanks to the growth of outsourcing solutions that allow companies to recruit overseas professionals without setting up a foreign entity. One of the most popular options is hiring international contractors, seasoned professionals who work on a project-based and freelance basis.
International independent contractors are generally responsible for providing their own tools and equipment and are not usually eligible for a wide range of benefits that in-house employees receive. So, while they will charge a bit more for their services, that is offset by the lower cost to employers associated with hiring them and the lack of need to provide equipment.
Hiring international contractors directly is possible, but in many cases, it makes sense to work with a provider with an expert who understands local employment regulations and the job market, meaning they can help you identify the best professionals for your hiring needs.
A provider can also help guarantee that you avoid contractor misclassification, which can result in legal complications and financial penalties. The advantages of hiring international contractors are explained in more detail below. There are also some ideas on how to identify a supplier to help you.
Working with international contractors: benefits
Working with international contractors benefits companies in several ways, as these professionals are hired to carry out specific tasks according to the needs of their clients. The main advantages include:
Cost-effectiveness: although contractors usually charge a slightly higher rate than a full-time employee for performing the same activity, they do not incur additional company expenses, such as benefit payments, taxes, and vacations, resulting in cost savings for businesses that use their services.
Expertise: international contractors have specialized knowledge, high-level skills, and experience in their field. By working with them, companies can access this expertise, making them more competitive and helping them achieve their organizational goals.
Flexibility: self-employed workers set their schedules to collaborate on more than one project at a time and with more than one employer simultaneously. By having flexible schedules, they can deal with demand surges more easily than employees on fixed hours.
Liability: hiring international employees comes with many obligations, such as managing payroll and the benefits these employees must receive by law. While there are still legal responsibilities with contractors, there are fewer to deal with.
Working with international contractors: risks
Companies wishing to work with international contractors should be aware of the risks involved in this collaboration, such as those described below:
Misclassification: Contractor misclassification risk, where contractors end up taking on the status of employees is a serious legal issue. It is necessary to draw up the contract very carefully, especially in areas such as the collaboration duration, the activities to be performed, and the employee payment based on the project or task rather than by hours or days.
Compliance: in addition to correctly classifying contractors, companies working with these independent employees must ensure that they are complying with local labor and tax laws. Firms should hire legal advisors or use an outsourcing service provider to work as legal employers and avoid any legal complications.
Control: international independent contractors work at their own pace and time and are not subject to the same level of supervision as in-house employees. For this reason, ensuring the quality of their work can be difficult. Companies aware of this situation will seek to work with those contractors with more experience and proven results on previous projects.
Temporary personnel: international contractors are temporary collaborators who do not usually develop loyalty or commitment to their employers, so they seek to perform with those who offer them the best opportunities. When companies need committed personnel, they hire full-time staff to give continuity to a project rather than constantly looking for temporary workers.
5 tips for minimizing risks when working with contractors
1) Review local legislation
A thorough knowledge of local regulations is the first step to ensure the correct classification of workers, as each territory has specificities regarding acquiring international talent, whether on a permanent or temporary basis.
2) Sign clear contracts
Labor contracts must be carefully drafted, as they must specify the work to be performed by the contractor, the project duration, the payment for their services, and other obligations of the employer and the temporary worker.
3) Evaluate the level of control
It is essential to know the level of control exercised over the contractor’s performance because this means the professional may be able to demand the same rights as a full-time employee. Remember that these workers are characterized, among other things, by their autonomy.
4) Keep all records
It is always a good practice to keep meticulous records related to the signing of contracts, the establishment of agreements in an employment relationship, and the payment receipts issued to contractors. In case of an audit or review by the authorities, you will have the necessary evidence to avoid legal problems or possible fines.
5) Be informed
Minimize any risks related to the hiring of contractors by staying up to date with any new local labor regulations in any territory where you want to expand your business. You can do this with a legal team within your organization or through an external consultant.
Looking to work with contractors? Find a supplier
Companies that work with contractors can hire them directly through their legal entities. While legal issues are minimized, they will need an entity in each territory where the freelancers are based, a significant investment of resources and time.
However, finding contractors can be simpler and faster when acquiring the services of a personnel provider, such as an employer of record (EOR), also known as a professional employer organization (international PEO), for its co-employment services.
An EOR has robust recruitment networks wherever it offers its services, seeks freelancers on behalf of its clients, hires them through its entities, and assumes all legal responsibility as the official employer. Thus, working with a provider minimizes any risk of classification and the possible related legal implications, from fines to termination of operations.
This third party also has extensive knowledge of the local market, its traditions, and the areas of opportunity for foreign business, so it can offer valuable insights to the companies that hire its services.
An EOR is also a cost-effective contractor-sourcing solution. While these providers will charge a fee for each freelance employee hired, this expense will be less than opening a legal entity to hire freelancers, plus the assurance of legal compliance.
