Employer of Record for Independent Contractors

Introduction

If you're considering hiring independent contractors, you're just in time. More than 16% of companies globally are exclusively hiring remote workers. Besides the many advantages of hiring remote contractors, perhaps the best part is that you don't have to manage them yourself. From onboarding to payroll management, you can partner with experts to do all the work for you. An employer of record (EOR) specializes in hiring employees and independent contractors for companies looking to scale. Why don't you take advantage of this service by partnering with an EOR like Skuad? Explore this guide to discover what an EOR is and how it can benefit your business.

Why you should partner with an employer of record

An employer of record partners with a company to employ, manage, and compensate workers. They help hire employees or contractors and act as their employers. An EOR typically performs crucial duties such as issuing and terminating employment contracts, managing payroll, and filing taxes. More importantly, employers partner with EORs to minimize risks.

Working with an employer of record for independent contractors can help you in many ways. Besides the obvious perks, here are more reasons why partnering with an EOR may be your best business decision yet:

Expand your workforce

One of the major differences between small, medium, and large businesses is the number of employees they have. An EOR can help you find some of the most skilled contractors to expand your workforce. Although contractors are not employees, they increase your overall staff strength. With multiple people working for you, you can execute more client projects within a short period.

Hire contractors without registering a business entity

Before hiring or commencing operations, employers must create and register their legal entity in virtually every region. Registering a business entity in a foreign country is one of the top challenges entrepreneurs face. This is especially more challenging when you don't understand the official language. You can drastically reduce this lengthy process by partnering with an EOR.

Reduce hiring cost

The hiring cost reduces significantly when you work with an EOR. An EOR typically covers the cost of hiring contractors. They also help you save time and resources.

Avoid misclassification

The risk of misclassification is higher when establishing a business internationally. An EOR has the expertise and experience to ensure that you avoid this issue. They manage independent contractors properly to ensure they perform their tasks according to the contract terms.

Take your business global

An EOR specializes in helping entrepreneurs or businesses operate overseas. Working with them presents an opportunity to take your business internationally. An EOR usually has the resources and knowledge of specific locations worldwide and employment laws. They can guide you to ensure that you have no issues with compliance.

Working with an EOR like Skuad can help you hire contractors in countries from Europe to Africa. We currently offer our employer of record services to businesses in over 160 countries. With our resources and in-depth knowledge of the regulations, you'll start hiring contractors in no time. Contact Skuad experts to learn how we can help you take your business global with world-class EOR services.

Independent contractor compliance practices

An independent contractor operates differently from an employee. They decide when and where to work, provided they honor their employment contract. Independent contractors also receive payments based on the projects they complete.

Unlike employees, they don't get extra benefits and only receive payments when they work. Many employers hire contractors to reduce hiring costs, pay low taxes, and fill temporary roles.

Misclassification

Independent contractors and employees are different individuals who may perform the same primary assignment. The terms of each person's employment and their benefits are different. Thus, employers should not manage or engage both persons similarly.

Misclassification is a punishable offense in many parts of the world. Punishment for misclassification varies. While some regions only fine perpetrators of this crime, others fine and give them a prison sentence. Although some employers misclassify workers for personal gain, others ignorantly engage in this malpractice.

Misclassification gives an employer an unmerited advantage over its competitors. It enables them to pay far less to complete more projects, thereby unfairly boosting profitability. It also makes the government lose revenue. These are some of the reasons why the government condemns this act in virtually every country.

How to avoid misclassification

Avoiding misclassification can be tricky but possible. To avoid misclassification penalties, you may do the following:

• Define your contractor's duties: The first step to avoiding misclassification is clearly defining your contractor and their responsibilities. Outline your expectations of them and access these expectations to make sure they are ideal for contractors. Use this as a guide, and you may never be in danger of misclassification.
• Reduce the number of projects your employees and contractors collaborate on: It's easy to misclassify workers by mistake when they work together frequently. Before you know it, you're demanding the same type of commitment from both parties. While barring employees from collaborating with contractors may seem unnecessary, it reduces their joint tasks.
• Review your operations: It's easy to fall back into old habits after a long time. Thus, make sure to review your operations from time to time. When you discover certain misclassification patterns, correct them immediately.‍
• Partner with an EOR: Working with an EOR is one of the best ways to avoid misclassification. They bear the risks, helping you avoid liability should misclassification occur. You can also learn more about how to avoid misclassification in this easy checklist.

Independent contractor payroll with an EOR

After hiring independent contractors, you want to ensure they receive their earnings when due. To simplify and properly manage this process, you establish a payroll. You figure out the net income and the necessary deductions in your payroll, then process the payment.

To ensure a smooth payroll process, you need the contractor's tax information and bank account details. You must also ensure that the contractor fills out the correct tax forms. Then, you can submit them to the local revenue service for processing.

Payroll laws are different globally. You must be up to date with the local law concerning payroll management to comply with employment law. Penalties for breaching payroll regulations can be severe. To avoid sleepless nights, partner with an EOR to provide you with payroll management services.

Working with an EOR like Skuad can help you comply with payroll laws. We ensure that you can make payments to your contractors regardless of their location with one click. At Skuad, you don't have to worry about exchange rates or your contractors getting their money on time. We process payments the moment you click the button.

Hiring independent contractors globally

The process of hiring an employee and an independent contractor is similar in some ways. However, the differences between both individuals impact how you hire them. Doing it right gets you on the right side of the law. That's why you need to be more creative with your contractor hiring process.

You may follow these steps to hire an independent contractor in compliance with labor laws:

Identify your needs

Only start hiring when you're sure where to place them. Examine your business, look for growth opportunities, and identify its crucial needs. You can identify the positions to fill when you understand your company's needs and goals. This helps you draft the job description and contractor profile that suits your business.

Look for talents

The COVID-19 global lockdown in 2020 changed how people conduct business and employ workers. About 78% favor fully working remotely than before the pandemic. Thus, there are more independent contractors than in previous years.

This makes partnering with an EOR for independent contractors relatively easy. From social media to online job websites, there's a plethora of places to find contractors. Place a job advert on the top job websites, clearly stating the employment terms and job description. You can screen and onboard the best fit for your business when you receive the application submissions.

Set up a contractor management strategy

Although contractors work independently with little supervision, you're still partly responsible for their productivity. Therefore, managing your contractors is vital to achieving the goals you've set for your company. Create a platform where you can save their tax and other personal information. Ensure to plan the distribution of tasks and training programs.

This management strategy should also address how you pay them. Managing independent contractors across various parts of the globe can be challenging. You can partner with an EOR to help you manage your independent contractors.

Make necessary monthly deductions and file taxes

While employers make tax deductions for employees, independent contractors file their taxes themselves. However, employers must ensure that their contractors pay taxes. Also, you must make certain deductions on behalf of employees and contractors.

The rates and type of contribution depend on the tax system of the region you do business. Ensure to provide the tax documents for your independent contractors. Have them fill out the documents and return them to you.

Start hiring independent contractors globally with Skuad's EOR service

Hiring contractors overseas can be daunting, but not if you work with an EOR. The advantages of partnering with an EOR range from expanding your business abroad to avoiding misclassification.

Some of the steps for hiring an independent contractor depend on your hiring location. You may need to study the labor laws of each country to learn how to carry out this procedure legally. This becomes even more challenging when there isn't enough information online or if you don't understand the official language.

Book a demo today and let Skuad take care of these steps for you. We provide superior contractor hiring services to help you start operating your business immediately.