Hire Contractors in Armenia

Armenia is a part of West Asia with a dynamic business environment. Yet, most companies are hesitant to implement innovative technologies. 

A recent World Bank report indicated that over 60% of Armenian companies have not yet adopted digital transformation. This deficiency makes it essential to have skilled talent that will be able to drive innovation and efficiency.

Contingent contractors in Armenia—freelancers, independent contractors or contractors with proprietorship—provide specialized skills without lifetime obligations. You can hire contractors in Armenia to remain competitive—expand operations, implement new technologies, and enhance productivity without the overhead of permanent staff. 

However, contractors pose challenges, such as legal compliance, processing of payments, and misclassification risk. The Agent of Record (AOR) solution enters the picture. 

It streamlines this for businesses, allowing you to hassle-free employ, handle, and remunerate contractors in Armenia while completely compliant with local labor law.

This article will discuss the major challenges of employing contractors in Armenia and provide a step-by-step process for onboarding, managing, and converting them into full-time employees. 

We will contrast direct hiring vs. hiring through Skuad, emphasizing compliance risks and effectiveness. Further, we will elaborate on how Skuad makes hiring, paying, and comp easier—enabling companies to grow without a local presence.

How to Hire Contractors in Armenia

Hiring independent contractors in Armenia requires going through legal, administrative, and cultural factors to guarantee compliance and successful cooperation. Below is an in-depth guide to help you:

A. Legal requirements

• Make sure the position you're hiring for qualifies as an independent contractor under Armenian law to prevent misclassification risks.
• Prepare a well-drafted contract that provides the scope of work, terms of payment, confidentiality provisions, and conditions for termination.

B. Sourcing contractors

• Use Armenian local job boards like Staff.am, Job.am, iJob.am and professional networks like Armenian Professional Society (APS), Armenian Network of America, Inc., and ANCA Professional Network (ANCA-PN) for efficient contractor outsourcing in Armenia.  

C. Compliance and documentation

• Make contractors aware of their tax obligations in Armenia. Though contractors pay their own taxes, it's advisable to maintain payment records and other related documents.
• Comply with local data protection regulations when dealing with contractor data.

Hiring contractors through Skuad AOR

Hiring an Agent of Record in Armenia (AOR) such as Skuad may streamline things:

• Skuad allows for rapid onboarding, enabling contractors to begin work immediately.
• Skuad ensures that contracts and engagements comply with Armenian labor regulations, minimizing misclassification risk.
• Skuad takes care of the Armenia payroll process—paying contractors, and performing timely and compliant payments.
• By knowing the laws and customs in local environments, Skuad offers advice suited to Armenian circumstances.

How to pay contractors in Armenia

Here are different ways you can pay your contractor in Armenia:

• Direct bank transfers in the local currency (Armenian Dram) are prevalent. Make sure you have the contractor's correct banking information.
• Platforms such as Payoneer can be used to make international payments effectively.
• Using AOR solutions is convenient as it will help you stay compliant with local payroll laws and save on administrative hassles.

Moreover, you must ensure the following through managing contractor payments on your own: 

• If paying from a foreign account, note currency exchange rates. It is recommended that you specify the currency and address any fluctuations in the contract.
• Contractors normally pay their own taxes. Check if there are withholding rules applicable for foreign companies paying Armenian contractors.

Keep proper records of all payments and contractor tax in Armenia for compliance and future audits.

Hiring Contractors Directly vs Hiring Contractors via Skuad

By engaging contractors through Skuad, you can save time, mitigate compliance risks, ensure quicker processing, and simplify payroll & tax administration while concentrating on their core activities:

Cost of Hiring Contractors in Armenia

Let’s summarize the responsibilities of various cost components involved in hiring Armenia contractors:

How to Convert a Contractor into an Employee in Armenia

Converting a contractor into a full-time employee in Armenia requires a number of legal and administrative procedures to meet local labor laws. A step-by-step guide is presented below:

1. Evaluate the need for conversion

• Identify if the contractor's job falls under an employee category (e.g., prolonged work, regular working hours, exclusivity, and company direction).
• Evaluate the risks of misclassification and check compliance with Armenian labor legislation.

2. Prepare an employment contract

• Draw up a compliant employment contract that details salary, benefits, working hours, and other conditions of employment.
• Add statutory items such as paid leave, notice periods, and social security contributions.

3. Register the employee with the authorities

• Register the employee with the State Revenue Committee of Armenia for taxation and social security reasons.
• Ensure correct income tax (20%) and social security contributions (5%) are withheld from salary.

4. Modify payroll & benefits

• Transition the contractor onto the company's payroll system.
• Offer compulsory benefits, such as paid leave, sick leave, and pension contribution.

5. Inform the contractor & manage documentation

• Negotiate the transition with the contractor and confirm agreement.
• Issue a formal offer letter and get the contractor to sign the employment contract.

6. Modify work arrangements

• Establish working hours, duties, and reporting lines according to employment standards.
• Enforce Armenian labor code compliance, for example, payment for overtime and workplace rights.

7. Enforce termination rules (if necessary)

• When replacing the contractor agreement, legally terminate the contractor contract.
• See that all due payments under the contract are paid before making a transition.

Rather than dealing with the transition independently, you can utilize Skuad or other Employer of Record (EOR) services to deal with compliance, payroll, and administrative tasks, thus making the conversion smooth and risk-free.

Challenges of Hiring Contractors in Armenia

Hiring contractors in Armenia has special challenges regarding legal compliance, access to talent, cultural considerations, and financial issues. Below are the main challenges you may encounter:

1) Skills shortages & specialized talent gaps:

• Although Armenia boasts an expanding tech and engineering talent pool, locating highly specialized individuals in specialized niches is challenging.
• International firms with remote opportunities create stiff competition for hiring independent contractors in Armenia.

2) Legal & compliance complexities:

• The Armenian Labour Code prescribes employment relationships, and the Civil Code regulates the agreements on independent contractors in Armenia.
• You must consciously differentiate between independent contractors and employees to prevent misclassification risks. 
• Authorities will decide on contractor relationships based on the following criteria:
  • Level of control over contractors’ work schedule.
  • Use of equipment and tools to perform work. 
  • Level of integration into the operations of the company

• You may be subject to fines and penalties for wrongfully misclassifying workers as contractors to save on statutory employee benefits compliance costs.

3) Work ethic & business expectations

• Work culture differs from Western conventions, with different communication patterns, response times, and deadline expectations.
• You might be asked to make changes in management style by Armenia contractors who value flexibility over formal corporate hierarchies.

4) Payment processing & financial considerations

• Cross-border payments come with banking charges, currency fluctuations, and taxation implications.
• Proper compliance with local tax reporting for contractor salary in Armenia is required to keep legal risks away.

5) Remote work & management challenges

• U.S. or Western European companies might find themselves delayed in communication because of the time zone of Armenia (GMT +4).
• Maintaining productivity and quality without immediate supervision could be tricky without appropriate contractor management and monitoring systems.

Here is where you should adopt innovative HR solutions like Agent of Record in Armenia, which can help you navigate the complexities of hiring contractors while ensuring compliance and efficiency with Armenia labor laws.

Hire Contractors in Armenia with Skuad

Skuad EOR and AOR services make it easier for you to hire contractors in Armenia—offering a hassle-free platform to employ, compensate, and manage independent contractors while being fully compliant with Armenian labor laws.

With Skuad, you can onboard any contractor rapidly, manage international payroll seamlessly, and reduce legal risks without having to establish a local entity. As a reliable Employer of Record (EOR) that serves more than 160 countries, Skuad makes it easy for organizations to scale their team without worrying about complying with local employment laws.

Whether you're engaging a single contractor or creating an international remote workforce, Skuad handles the complexities so that you can confidently expand your business.

‍Book a demo today.

FAQs

Can I hire a foreign contractor?

Yes, you can hire a foreign contractor or create an international remote workforce with AOR (Agent of Record) solutions from Skuad. It gives you the advantage of automating contractor management—from onboarding, tracking contractual terms, setting payment milestones, etc.

How much tax do freelancers pay in Armenia?

Freelancers pay a flat 20% on their income in Armenia. The tax year ends on 31 December and tax returns are due on 1 May. 

What is the minimum wage in Armenia?

The national minimum wage in Armenia is fixed at €167.5 per month. You can use contractor management software to track project milestones and automate payments to multiple contractors at a time. 

Is it cheaper for a company to hire a contractor?

Hiring contractors for specialized work for a short term is cost-effective for most businesses. Contractors give companies flexibility in terms of statutory compliance—benefits, terminations, and more.