Should You Hire an Independent Contractor or a Full Time Employee?

Companies that are expanding abroad or hiring remote foreign talent have a decision to make about which type of worker they need. If you are unsure about whether you should hire an independent contractor or a full-time employee, we have some guidance for you.

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Aug 15, 2018
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Companies that are expanding abroad or hiring remote foreign talent have a decision to make about which type of worker they need.  If you are unsure about whether you should hire an independent contractor or a full-time employee, we have some guidance for you.

One thing to keep in mind is that every country has different rules and definitions about employment relationships, and you will need to follow the laws of the country where the work is being performed.  The use of independent contractors is increasing, but along with this is greater government scrutiny of the elements of the work relationship, and the potential for misclassification.

Why Employers Assume Hiring Independent Contractors is Easier

At first glance, it does appear that hiring a contractor is the easy route.  The reasons are obvious: there is no commitment beyond the contract term, hiring is fairly simple and quick and there is no additional cost such as statutory payments, benefits, withholding or payroll taxes.

Also, once the project or term is complete the relationship ends, with no need to worry about termination, notice periods or severance payments.  A contractor can be re-engaged at any time as long as they are available, and their skills meet your current needs.  You don’t even need a local branch or entity to hire a contractor in most cases, and they can be paid remotely from the home office.  If you need someone for a short-term project and they work independently, a contractor can still be a good choice.

However, these advantages can obscure the very real risks of hiring contractors in some countries and for certain types of work roles…

Why Hiring Full Time Employees is Better

Many HR departments are coming to realize that despite the extra cost and administration of hiring full-time employees, it is a much better choice in foreign countries.  The primary reason is that you don’t have to worry about compliance with employment laws and can avoid misclassification of contractors under local labor standards.

Moreover, there is the real value of securing talented workers long term as employees, creating continuity and ongoing contributions to your business.  There are more administrative steps to take to hire an employee, and if you decide to use a DIY approach you will need to set a corporate entity of some type to run payroll in the host country. 

But these challenges can be mitigated by use of a GEO to hire the employee for you and take care of all the necessary employment steps…read more.

Shield GEO makes international employment simple. Our customers use Shield GEO to employ and payroll hundreds of workers in over fifty countries. Find out more.

Go to the profile of Tim Burgess

Tim Burgess

Director, Shield GEO Services Ltd

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