If you work with any kind of independent contractor or freelancer, you may be familiar with third-party organizations that offer payroll and HR services for non-official employees. Currently, referring to these services as wage portage may not be so common. However, the term is becoming increasingly popular as a middle road between a full-time employee and a self-employed contractor.
Largely, a wage portage contract allows entrepreneurs and independent consultants to enjoy employee benefits while still retaining full control over their operations.
Below, we explain how wage portage works and how it could benefit you. We also discuss potential problems to look out for, and why INS Global can be your perfect wage portage partner.
Wage Portage: What Is It?
Wage portage, or wage porting, is the English version of the French term “portage salarial”. In France, this is a popular form of co-employment and HR outsourcing solution.
While often discussed alongside other forms such a PEO, EOR, GEO, employee leasing or umbrella company, it mainly deals with independent contractors.
Unlike a regular independent contractor relationship with the client, a wage portage company provides the worker with a regular salary and benefits while still giving them full autonomy over their work activities.
Like a sole proprietorship in some countries, this type of contract creation allows professionals to build strong relationships with many customers while benefitting as an employed person.
In a wage portage relationship, the contractor has complete control over client management including the compensation rates they expect to receive. The contractor pays the wage portage company a contract management process fee for all aspects of payroll, tax withholding, etc.
Officially the contractor is a employee of the wage portage company. This lets the contractor enjoy employee benefits and social security benefits like a typical employee, while still operating as they wish.
How is Wage Portage Used by Other Worker Types?
Wage portage is not available to just any kind of self-employed worker. The worker will need to demonstrate that they have expertise in their field and can competently fulfill the client’s requests.
However, this distinction makes it potentially useful for different types of organizational structures and business entities. In particular, those wishing to have their employees protected awhile working on projects overseas without a company structure.
In this way, a worker can form a contract with a wage portage provider in their target market to make use of their established company structure and continue to receive employee benefits.
Who are the Parties in a Wage Portage Contract?
A wage portage contract is a tripartite contract. The three parties are:
The wage portage company
The client company and wage portage company will sign a contract, and the contractor signs with the wage portage company. This means that the client does not directly pay the contractor. Instead, the contractor receives their salary from the wage portage company.
The wage portage company also handles all complex contract tasks. These include:
- ensuring legal compliance
- figuring out tax withholding and social security percentages
- drafting up contracts and contract management
- invoicing payment from different clients
- and more
All of which are financed by the fee paid to the portage company by the client.
This allows the contractor and client to focus on delivering results without hindrance or delay in the chain of command. It also gives the client the ability to bring on contractors without worrying about management time.
Finally, the contractor can also receive counsel and solutions from the wage portage company if any administrative issues arise.
The Pros and Cons of Wage Portage
Besides the advantages mentioned above, there are more reasons why wage portage is a strong choice for both the contractor and the client, including:
Better Insurance Coverage
With a wage portage company, the contractor can receive a level of health insurance coverage and job security that they wouldn’t have if they simply operated as a self-employed worker. In some countries, social security or Medicare may be cheaper, easier, and more secure for employed workers.
They can even receive pension credits from the portage company. This promotes security and allows the contractor to devote all their time and energy to your assignment.
Broader Scope of Service
A portage company allows a contractor to work for global clients easily and without worry of compliance errors. Through an outsourcing service like this, contractors retain their flexibility while avoiding many of the hassles of forming their own sole proprietor company.
Cross-border work can be completed smoothly, which gives you, as the client, increased access to talented and skilled professionals from all around the world.
Less Hassle for the Client
Because the wage portage company handles every aspect of contract, payroll, and other services, you don’t have to spend time figuring out if the contractor you’ve hired is legally secure or in line with local regulations.
When you sign a contract with a wage portage company you are guaranteed skilled workers who are compliant with every aspect of local labor laws.
There are some drawbacks of a wage portage contract, though, for example:
Higher Administrative Costs
Because the contractor needs to pay the portage company a management fee, the contractor will not receive the same amount of compensation from the client as normal.
Depending on how many clients the contractor has this could end up being a costly expense.
Potential Limits on Availability
Wage portage companies do not take on just any self-employed worker. As said above, the contractor needs to demonstrate a high level of skill and experience. This could limit the talent pool for the kind of worker you are looking for.
Wage Portage FAQ: Taxes, Pay, and More
Q: What kind of taxes does a contractor under wage portage have to pay?
A contractor with a wage portage contract only has to pay income tax like any other employee. They do not have to pay corporate tax or other taxes typically associated with company entities.
Q: Will a wage portage company remunerate work expenses like transportation, meals, etc.?
If a contractor invoices their work costs, the client can clear these with the portage company to compensate the contractor.
Q: Are contractors with a wage portage contract entitled to unemployment benefits?
Yes, but this is typically dependent on the duration of time the contractor has been with the portage company.
Q: What about pension plans?
Contractors under a wage portage contract receive the same benefits as a regular employee. Because of this, their pension contributions are also deducted from their salary as normal.
Partner with a Reliable Wage Portage Company like INS Global
When you sign a contract with a wage portage company you want to make sure the company is properly registered and legally compliant so that there are no liability issues in the future. INS Global has been operating for nearly two decades. Our services are available in over 100 countries worldwide (including the United States).
Our staff team has the local knowledge and expertise you need to expand services to new countries effortlessly. Through our PEO, global Employer of Record Services, recruitment outsourcing, payroll management, and more, you can expand safely and effortlessly worldwide.
Finally, we want to make sure that you and your employees who work abroad are legally secure in every way. That way, you can explore new horizons simply and safely.
Contact us here today to learn more.