One of the most important factors to consider when targeting successful overseas expansion is hiring the right staff to add to your team. Making smart recruitment decisions can elevate your company’s operations and help you make a memorable impact on the new market. Taking your company overseas is a costly endeavor, though. You may find yourself unable to hire new full-time employees at first. Hiring an international contractor can be time-saving solution, giving you the skills you need to complete projects and maintain client satisfaction without overspending on your budget.
International contractors do not fall under the same employment laws as employees or even local independent contractors. In this article, we walk you through the pros and cons of hiring international short-term staff. We also address any questions you might have about the process.
Contractor vs Employee: What’s the Difference?
The crucial difference between a contractor and an employee is that a contractor maintains control over all key aspects of their work.
If at any point the employer begins to exercise more control over a contractor’s workspace, work hours, or clients, then they may be in danger of treating them as an employee. This puts them at risk of misclassification penalties.
A key benefit of hiring contractors is that contractors take care of their own taxes, pension, sick leave, and vacation days.
When hiring an independent contractor, you only need to pay them for the services they perform. For example, contractors do not receive additional employee compensation, including severance pay. As a result, this can save companies a great deal of money, especially when in a new country and market.
However, employers must be sure that they aren’t simply treating employees as contractors to avoid paying essential benefits or compensation.
The Advantages and Disadvantages of International Contractors
Less Restrictions and Compliance Regulations
While each country has a different set of laws around hiring contractors, the rules are generally less restrictive than those for full-time employees. This reduces the amount of red tape and legal complications when hiring staff in a foreign country.
Choosing to add international contractors to your team gives you access to a wide range of talent and skills. While an employee typically performs specific long-term tasks, contractors are available short-term for any immediate project needs.
A Faster Entry into Every Market
To succeed in a new market, you need to understand the local business culture and best business practices. Working with international contractors who have firsthand knowledge of the culture and language can accelerate your path toward market success.
Less Control Over Performance
A contractor retains full control over their work schedule and environment, meaning that there can sometimes be a disconnect between the company’s vision and the contractor’s work performance. With international contractors, the physical distance between you and them can make the situation harder.
In many countries, you must establish a legal entity before hiring contractors. Some countries also have specific laws in place for hiring international contractors, and if you’re not familiar with these regulations you could run the risk of making costly noncompliance mistakes.
Increased Risk of IP Infringement
Most countries’ IP protection laws do not extend overseas. This could be a potential danger and you may need to take additional steps to ensure that your intellectual property is not misused or stolen.
International Contractors FAQ
Q: Can an intern be an international contractor?
A: No. Not only do interns fall under a separate categorization, but an intern’s work schedule and performance are supervised by the employer, and they receive training from their employer. This is the opposite of how a contractor operates.
Q: Are international contractor wages counted as business expenses?
A: International contractor wages are counted as compensation for the work the contractor has performed. Whether or not you are required to report this amount as a business expense depends on the country-specific laws around international contractors.
Q: Do foreign contractors have to pay taxes?
A: Yes. Since they are not full-time employees, they are responsible for filing their own taxes and social security deductions. Typically, a contractor is required to pay taxes in the country they live in. However, with cross-border employment, you may also be required to withhold certain taxes, depending on local laws for international hires.
Q: What is the best way to pay international contractors?
A: Payment schedules for independent contractors vary according to the agreement between the client and contractor. It may be hourly, per project, or using a down payment. Make sure that you clearly state payment dates and methods in the initial contract.
The Top Payment Methods for International Contractors
As an international money transfer network, using SWIFT to pay international contractors guarantees safe payment delivery. However, transfer fees can be quite high, especially when currency conversion fees apply.
Digital Transfer Services
PayPal, Payoneer, and Wise are just some of the many online wallet options to pay independent contractors. However, they may also have high exchange rates and transfer fees.
An increasingly popular option, cryptocurrency avoids typical payment transfers fees. Some countries may not recognize it as a valid form of payment, though.
If you hire independent contractors through a third-party organization like a PEO (Professional Employer Organization) or global Employer of Record (EOR), they will handle all aspects of payment, including covering any transaction fees.
Safely Hire and Pay International Contractors with INS Global
Navigating the rules and regulations around hiring international contractors can be a complex and time-consuming process. Without the benefit of legal guidance or experienced advice, you may feel overwhelmed by country-specific laws and requirements.
INS Global offers the services of a professional legal team that can not only ensure the compliance of all your contractors but will also keep you up to date on any new bills or laws that may affect your company staff.
Our PEO and EOR services can also take care of every aspect of finding and hiring international contractors. We manage HR services and payroll on your behalf, allowing you to focus on entering the new market successfully. Finally, INS Global has expansion services available in over 100 countries worldwide. This allows you to expand smoothly and quickly no matter where in the world you are.
So, contact us here today to learn more.