No matter where you are, or who you are, if you’re hiring independent contractors, you can’t ignore—willfully or otherwise—the laws defining employee classification.
The repercussions can be severe. Consider:
- United States lawmakers are calling for a federal Department of Labor investigation of an HR startup over its use of independent contractors.
- A country club in Singapore was ordered to pay $416,924 SGD in social security contributions that should have been paid to a gym instructor over the course of their 18 years with the club.
- A U.K. window company was responsible for 13 years of back holiday pay after a court ruled that a worker should have been classified as an employee.
We understand the appeal of hiring independent contractors, especially internationally. When you’re growing quickly, testing markets, or seeking specialized talent, contractors can help you complete key projects to reach your goals.
But a big part of hiring and managing contractors globally is making sure you’re compliant with the local laws for classifying workers. It isn’t easy—after all, labor laws and regulations vary by state, territory, province and country, and they change often. The very nature of independent contractors means they could live and work anywhere in the world. Which they do, meaning you have to abide by the laws of wherever they call home.
Understanding contractor compliance
The crux of independent contractor compliance is ensuring you aren’t treating your freelancers like regular employees. If a contractor’s responsibilities or scope of work are similar to that of an employee’s, they should be classified as such and receive the entitlements, benefits and wages required by the local employment laws. Otherwise, you’re putting your organization at risk of employee misclassification.
Some questions to help you evaluate whether you have an employee or independent contractor include:
- Pay: Are contractors paid for time worked rather than per project?
- Equipment: Does a contractor use your equipment or tools to complete a job?
- Exclusivity: Does the contractor only provide services to your organization and for an extended period? Have you required the contractor to sign a noncompete agreement or are they free to work with multiple clients?
- Management: Do contractors report directly to someone on your team, and is their day-today work managed by one of your supervisors?
- Expenses: Do your contractors have expense accounts or company credit cards?
A “yes” answer to one or more of these questions indicates potential misclassification—along with the risk of far-ranging penalties that come with the violation.
Related: Assess your risk with our Employee Classification Tool
Managing independent contractors compliantly
If independent contractors are the best fit for your projects or business objectives, how you manage them plays a big role in ensuring compliance. And a sure-fire way to get the management aspect right—especially if your contractors are located around the world—is by partnering with a global workforce solutions provider like Safeguard Global.
We know about the complexities of hiring and managing all types of workers in all regions of the world (after all, we’ve been helping organizations hire global talent for over a decade). Our latest offering is specific to contractor management, giving you the ability to hire, onboard, pay and manage your independent contractors in a single platform—quickly and compliantly.
With our global contractor management solution, you can:
- Use your own existing contracts or select from a library of prewritten, compliant contracts drafted by our HR experts (coming soon!).
- Manage invoices and pay contractors on time (did you know 74% of independent workers are paid late?), in the local currency and in the method the contractor prefers.
- View a unified invoice for all contractors and process contractor payments all at once.
- Evaluate and ensure compliance and gain valuable insights into contractor labor costs to determine the best path forward for your hiring needs.
And you can gain peace of mind knowing that all these features are backed by the local-market knowledge and expertise of our in-country HR and payroll teams.
Supporting your workers every step of the way
Whether you have one contractor or dozens, in one country or many around the world, we can help you manage and pay them compliantly—so you stay on the right side of employee classification rules.
As your needs change, we can also help you evaluate what other worker types may be best for your organization, such as direct hires or outsourced through an employer of record, and help you there, too.
Our global solutions advisors are ready to answer your questions and walk you through the best options for your employment needs. Schedule a call today.
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