Hiring Contractors

How to hire independent contractors

A overview of how to hire independent contractors.
July 15, 2022
Hiring manager speaking to a contractor via video chat.

Today’s workplace demands a high level of flexibility and adaptability. Even if your employees are open to learning new skills to tackle projects, there are times when hiring an independent contractor for a specific task is a better option. Contractorss bring their own expertise and resources, saving you the time and expense of training and investing in equipment for a short-term project. If your company has such a project on the horizon, it’s important to understand the intricacies of the contractor-organization relationship to ensure all workers are treated fairly within the legal boundaries of their designated role.

Not sure if you should bring on your next all-star as a contractor or employee? Wondering if you need to convert an existing contractor to full-time employment? Find out using our Contractor vs. Full-Time Analyzer.

Why hire independent contractors?

When companies have short-term projects and temporary assignments, they turn to independent contractors instead of putting more on their employees’ plates. Bringing in contractors is often more cost-effective than hiring new employees, especially when there’s a clear end date for the project. Independent contractors often receive a fixed fee and are generally not eligible for benefits, so it’s easier to budget for the hire.

Independent contractors vs. employees

Although independent contractors serve a vital function within an organization, there are some key differences between these workers and in-house employees. The Internal Revenue Service (IRS) outlines three categories that differentiate these two relationships:

  • Behavioral control: Contractor retains the right to direct how work is done.
  • Financial control: Contractor assumes financial aspects of a project, including relevant expenses and ownership of profits or losses.
  • Relationship of the parties: Contract outlines the agreement between the worker and organization, including the duration of work and any benefits.

Independent contractors have a level of autonomy that employees do not, since employees must abide by company policies, including work standards, meeting attendance, and mandatory training. They must also be compensated accordingly through salary, benefits, and reimbursement for work-related expenses. Additionally, independent contractors can work with multiple organizations as clients, while employees work for one company at a time.

Understanding these differences is more than a matter of semantics—getting them wrong can also be a significant liability. Misclassifying workers affects the taxes they owe and can deprive states of the revenue they need to pay for public services and benefits. Contractors might end up paying more than they owe, and employees might not be paying enough. Employers can also stand accused of tax evasion or underpayment if they’re counting workers as contractors inappropriately. Our worker misclassification tool is designed to help businesses avoid costly mistakes that can tarnish their reputation among potential hires.

Hiring international contractors

The benefits of hiring internationally

If you’re already hiring remote employees internationally, you may also want to expand your search for independent contractors. Not only do you gain access to an even larger talent pool, but you may even find that onboarding them is faster and more affordable than committing to a full-time permanent hire. Depending on the project, hiring someone in another time zone can increase coverage and shorten turnaround times, giving you more budget flexibility.

The challenges of hiring internationally

As with any business decision, there can be some drawbacks to hiring independent contractors abroad. Aside from the risk of misclassifying workers, you may have concerns about bridging a currency exchange or language barrier.

Even expectations around communication can complicate the contractor dynamic. Granting contractors access to company email and chat programs makes asynchronous communication easier, but sending frequent instructional messages can raise the question of whether a contractor is being treated like an employee.

It’s also important to consider the sensitivity of any data and intellectual property (IP) the contractor has access to while they work. Similarly, there’s the question of who has legal ownership of the data and IP they produce. Your contract needs to clearly spell out confidentiality guidelines, who owns the resulting work, and which country disputes will be settled in. Since contractors can work with multiple companies, including potential competitors, the goal is to protect your data and IP.

How Oyster can help you onboard international contractors

When an international contractor is the right choice for your project, let Oyster take the guesswork out of onboarding and payments. Our contractor platform has the tools you need to engage workers from over 180 countries, manage invoices, and pay in local currency all over the world. We handle all the compliance and data protection behind the scenes so you can focus on finding the perfect independent contractor and establishing a productive working relationship.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.

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