Independent Contractor

What is an Independent Contractor?

According to the US IRS, an independent contractor is an individual who maintains control over most of the key aspects of their own work.
This means that if usually an employer enters into an independent contractor agreement, they may only control the result of the contractor’s work and not the time or manner in which it is done. Independent contractors allow businesses an added level of flexibility and skill.

What’s the Difference Between an Independent Contractor and an Employee?

Having a clear understanding of how an independent contractor differs from a full-time or part-time employee is essential in order to establish compliance. The penalties and fines that arise from misidentifying an independent contractor in terms of taxes or employee benefits can be crippling, so you must be aware of the definitions before setting out to establish an independent contractor agreement.

In simple terms, independent contractors and employees differ in the following ways:

Employees

Independent Contractors

Operate at the instruction of a boss or manager

Operate independently

Work full-time or part-time for a single company

May work for multiple companies simultaneously

Are part of the company payroll and benefit structure

Aren’t part of a company’s payroll or benefit structure

Are the responsibility of the company in terms of tax and social security payments

Pay their own taxes and social security

Work where and when as directed by their company

Work as their choose (within the limits of the work agreement)

6 Advantages of Using an Independent Contractor

Lower Overheads

The main benefit of an independent contractor is that an employer is responsible for none of the same benefits or additional costs that full-time or part-time employment entails. The fee you pay for the services of an independent contractor is the only cost you have to budget for, meaning you save on employee benefits, taxes, and workspace costs.

Greater Flexibility and Scalability

Hiring an independent contractor is a lot simpler than a full-time employee, and their services are only retained for a project or fixed-period. This means there’s no costly downtime between projects, and you’re free to increase or decrease the level of your relationship or project scope upon forming a new agreement with the contractor.

The Opportunity for New Transferable Experience and Expertise

Independent contractors are often experts in their fields. During the course of their service, an adept manager can organize schedules to have their other employers absorb the contractors’ knowledge, skills, and experiences by having them work together.

Outside the Box Thinking

Global recruitment means access to new and varied ways of thinking and backgrounds. For a fraction of the time and cost it would take to hire full-time employees overseas, an independent contractor can work alongside your employees and challenge them to consider challenges from new and innovative perspectives as a result of their experience.

Greater Efficiency

Independent Contractors are just that, independent. They require fewer management hours, can work better by themselves, and typically require no extra training outside of any specific tools or software you may use within your company, thus saving you time.

Better Experience with Deadlines

Independent contractors are responsible for their own work. They’re proficient at meeting deadlines that may be difficult for your full-time employees. Rather than being dragged away from projects, an independent contractor works on the projects you give them during the hours you agree upon. This way you retain greater control over the way of work.

Lower Overheads

The main benefit of an independent contractor is that an employer is responsible for none of the same benefits or additional costs that full-time or part-time employment entails. The fee you pay for the services of an independent contractor is the only cost you have to budget for, meaning you save on employee benefits, taxes, and workspace costs.

Greater Flexibility and Scalability

Hiring an independent contractor is a lot simpler than a full-time employee, and their services are only retained for a project or fixed-period period. This means there’s no costly downtime between projects, and you’re free to increase or decrease the level of your relationship or project scope upon forming a new agreement with the contractor.

The Opportunity for New Transferable Experience and Expertise

Independent contractors are often experts in their fields. During the course of their service, an adept manager can organize schedules to have their other employers absorb the contractors’ knowledge, skills, and experiences by having them work together.

Outside the Box Thinking

Global recruitment means access to new and varied ways of thinking and backgrounds. For a fraction of the time and cost it would take to hire full-time employees overseas, an independent contractor can work alongside your employees and challenge them to consider challenges from new and innovative perspectives as a result of their experience.

Greater Efficiency

Independent Contractors are just that, independent. They require fewer management hours, can work better by themselves, and typically require no extra training outside of any specific tools or software you may use within your company, thus saving you time.

Better Experience with Deadlines

Independent contractors are responsible for their own work. They’re proficient at meeting deadlines that may be difficult for your full-time employees. Rather than being dragged away from projects, an independent contractor works on the projects you give them during the hours you agree upon. This way you retain greater control over the way of work.

Why and When Should Your Company Use Contractor Management Services?

You should consider hiring an independent contractor in several different circumstances:
  • For work that requires little supervision or is outside of the regular skillset that could be supervised by your managers or employees
  • For work that isn’t central to your business goals but needs to be done, such as cleaning or computer system management
  • For work on a short-term project or within a defined period
  • For work that requires specialist skills or expertise
Deciding to hire an independent contractor is not inexpensive. You should consider the necessity before embarking on such an agreement.
Remember, if you later want to have the independent contractor perform work outside of the original agreement, it will require you to amend that agreement or even form an entirely new one. Should you wish to retain the services of an independent contractor over a more extended period of time, it may be helpful or prudent to consider transitioning them into full-time employees to avoid compliance issues.

PEO vs. Independent Contractor

A PEO or global EOR services provider can hire and manage staff on your behalf, giving you the advantages of full-time employees with the flexibility and cost-efficiency of an independent contractor. By outsourcing your employees to INS Global’s PEOs around the world, you can hire and manage staff in your target markets while we take care of the necessary HR and complicated compliance requirements.
Contact our team of consultants today to learn about what INS Global’s PEO services can take care of your employment outsourcing needs.

Get Access to Expertise with INS Global

INS Global can provide a range of services designed to aid you in hiring and managing contractors in new markets around the world.
Our global independent contractor management services can help you find the best in overseas talent and manage every element of their employment, from contract formation to invoicing or salary payments. This way you benefit from the skills but avoid the related hassles.

FAQs

No, it is necessary to use a local entity abroad to comply with each country labor law.

Foreign companies can either set up a local entity in each country or use the services a local PEO (Professional Employment Organization) to hire the staff on-site directly.

The employer of record is the legal entity liable for the staff employed in a specific country. In practice, a foreign company can either open a subsidiary to become the employer of record of its abroad employees or use a PEO to act as the employer of record.

Liabilities may vary from country to country and include all the staff management responsibilities: labor contract issues, payroll management, and tax compliance, social security management, expenses claim declaration, hiring and termination procedures, etc.

In general, 1-month is necessary to have an employee based out abroad using an existing PEO as the employer of record. When incorporating a new subsidiary to be the employer of record, the delay varies from 4-12 months.

Discover More Solutions

Brands Who Trust Us

Our firm provides outstanding service to our clients because of our dedication to the three underlying principles of professionalism, responsivness and quality.