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Hiring contractors offers a wide range of benefits, with convenience and cost-effectiveness chief among them. But paying international contractors can be a headache to the extent it prevents some companies from properly exploring and tapping into global talent pools.
Contractors tend to be highly experienced professionals who work on a limited-term or project-by-project basis. Their experience means that they generally charge a premium for their services, but can still work out to be cost-effective because they entail lower employer costs.
Note that the lower tax burden associated with independent contractor hiring has seen many countries begin to crack down on the misclassification of employess as contractors, with companies receiving sometimes severe financial penalties for classifying employees as contractors when their working conditions means they should receive all benefits associate with full-time employment.
That means, if you are currently working with international contractors or planning to hire them, but are unsure if their working conditions comply with local criteria, you should check your misclassification risk and potentially consult with an expert.
Why hire international contractors?
International contractors are professionals or entities who are hired by companies to perform specific tasks or projects, usually either in the country where they are based or on a remote basis. Hiring contractors provides flexibility for businesses to access global talent without the need to establish foreign entities.
Unlike full-time employees, international contractors typically work on a temporary contract and are generally free to set their own schedule. They are also usually expected to provide any tools or equipment needed to perform their role, as well as normally being free to contract for multiple companies at a time.
Generally people become contractors after building up many years of experience in their profession, meaning they have the knowledge and experience needed to perform their roles effectively. That high level of expertise means that good international contractors don’t come cheap, but the higher rate they charge is offset by the efficiency with which they work and lower costs to employer.
Those costs are lower because international contractors don’t receive a range of benefits that in-house team members do, such as pension contributions or the 13th salary annual bonus that is obligatory in many countries.
2 great options for paying international contractors
While international payments are straightforward nowadays, paying international contractors correctly means doing so in full compliance with local laws, including guaranteeing that any employer costs are met.
That is something a standard fintech or digital remittance platform will not be able to do, meaning that using them without the involvement of a an accountant who understands the applicable laws could risk legal complications or financial penalties for non-compliance.
With that in mind, two main options for paying international contractors compliantly are available.
1) Paying international contractors through an international contractor service
An international contractor service is a provider that can find, recruit, and pay contractors on your behalf, allowing you to avoid setting up a foreign entity, while enjoying the flexibility of working with a provider capable of scaling rapidly to meet your evolving needs.
An international contractor service will also manage the payroll and take care of other administrative matters, guaranteeing compliance with local laws, including prompt and proper payment of salaries and bonuses, as well as shouldering the vast majority of responsibility in the case of a non-compliance issue arising.
In the event you need assistance with sourcing international contractors, a global service will also be able to use its established local recruitment network to identify outstanding candidates, and even carry out interviews and make final decisions on who to hire, based on criteria you provide.
2) Setting up a subsidiary
Setting up a subsidiary means establishing a legal entity in the jurisdiction where you plan to hire contractors and then hiring them directly. This approach means you will also need to to either hire the personnel needed to source and administer those contractors, or outsource this work to third parties.
Given the time and costs involved, setting up a subsidiary and building the infrastructure and a team with the expertise to support a local operation is generally a good choice if you are certain of your commitment to that market.
Finding the right provider
If you are looking for help with hiring and paying international contractors, finding the right partner will likely start with pricepoint. But having a clear idea of your needs andmaking sure they are properly catered for is also critical.
Because the scale, timeline and location of your plans, as well as the type of professionals you are hiring, will likely influence your choice. If, for example, you are seeking to hire contractors for tech roles in a specific country, you may wish to work with a provider with particular standing in that market, or one that has a track record of hiring and administering the specialism you seek.
Meanwhile, if you are planning to hire contractors as a first step into a market, with the intention of establishing a permanent presence, choosing a global contractor service is wise, because that provider can assist you on the next step of that process is also wise.
If that trajectory also involves expansion into further new markets, once more you will likely want to choose an EOR that has the capacity to support you in those countries, too, rather than one that is specifically focused on a single country.
Serviap Global can help you hire in over 130 countries, with our portfolio including EOR services, contractor hiring, recruitment process outsourcing (RPO), and more.
