According to the US IRS, an independent contractor is an individual who maintains control over most of the key aspects of their own work.
This means that if usually an employer enters into an independent contractor agreement, they may only control the result of the contractor’s work and not the time or manner in which it is done. Independent contractors allow businesses an added level of flexibility and skill.
Having a clear understanding of how an independent contractor differs from a full-time or part-time employee is essential in oder to establish compliance. The penalties and fines that arise from misidentifying an independent contractor in terms of taxes or employee benefits can be crippling, so you must be aware of the definitions before setting out to establish an independent contractor agreement.
In simple terms, independent contractors and employees differ in the following ways:
Operate at the instruction of a boss or manager
Work full-time or part-time for a single company
May work for multiple companies simultaneously
Are part of the company payroll and benefit structure
Aren’t part of a company’s payroll or benefit structure
Are the responsibility of the company in terms of tax and social security payments
Pay their own taxes and social security
Work where and when as directed by their company
Work as their choose (within the limits of the work agreement)
You should consider hiring an independent contractor in several different circumstances:
For work that requires little supervision or is outside of the regular skillset that could be supervised by your managers or employees
For work that isn’t central to your business goals but needs to be done, such as cleaning or computer system management
For work on a short-term project or within a defined period
For work that requires specialist skills or expertise
Deciding to hire an independent contractor is not inexpensive. You should consider the necessity before embarking on such an agreement.
Remember, if you later want to have the independent contractor perform work outside of the original agreement, it will require you to amend that agreement or even form an entirely new one. Should you wish to retain the services of an independent contractor over a more extended period of time, it may be helpful or prudent to consider transitioning them into full-time employees to avoid compliance issues.
A PEO or global EOR services provider can hire and manage staff on your behalf, giving you the advantages of full-time employees with the flexibility and cost-efficiency of an independent contractor. By outsourcing your employees to INS Global’s PEOs around the world, you can hire and manage staff in your target markets while we take care of the necessary HR and complicated compliance requirements.
Contact our team of consultants today to learn about what INS Global’s PEO services can take care of your employment outsourcing needs.
INS Global can provide a range of services designed to aid you in hiring and managing contractors in new markets around the world.
Our global independent contractor management services can help you find the best in overseas talent and manage every element of their employment, from contract formation to invoicing or salary payments. This way you benefit from the skills but avoid the related hassles.
The Wine GroupDirector Global Strategy
China MobileBA Project Director
Price Water HouseSenior Associate Advisory