How to Turn International Contractors Into Employees

While hiring contractors can be useful, it is occasionally necessary to convert them to employees. Here's how to do it in a compliant manner.

Hiring independent contractors from around the world can be an excellent business approach, especially if you require specialized talents temporarily to execute a project. However, you may need to turn your contractors into permanent employees depending on the length and manner of their engagement with your company. That is the procedure we will walk you through today.

It is crucial to realize that this process can be extremely sensitive, so treat it with caution and professionalism to prevent issues and legal ramifications. We'll explain how to do so further down, but first, let's define a contractor versus an employee.

What Is the Distinction Between a Contractor and an Employee?

While the meaning of "independent contractor" varies by country, it often refers to a skilled worker who is not on the payroll of the client company. Instead, they invoice the corporation for their services. They are usually paid to accomplish a certain work for a set amount of time. For example, you may employ a contractor to assist in the construction of your new website over a six-month period, or design a new feature for your clients.

An employee, on the other hand, is a permanent member of a company. They are hired under an employment contract, are paid by the company, and are entitled to statutory benefits such as paid time off and sick leave.

It is critical to appropriately classify your employees based on the definitions set forth in local regulations. So, why would you want to convert a contractor to an employee?

Why Should You Convert Your Contractors?

The following are some of the most typical reasons for transforming contractors into permanent employees:

Avoid Misclassification and the Penalties That Come With It

Contracting rules and regulations range from one country to the next. Even within a single country, these regulations are always changing. If you believe you may be misclassifying a person (i.e., treating someone who is legally an employee as a contractor), you should convert them to employment. Misclassification, after all, can result in protracted legal action and huge fines - or an extended headache in the middle of your next funding round.

Increase Their Role in Your Organization

If you see exceptional promise in a contractor, keeping them on and expanding their duties could be beneficial to your company. A contractor's job, on the other hand, is frequently limited to certain projects. So, if you want to tap into that skill further, turning them to an employee may be the best choice to assist you reach your long-term business objectives.

Retain Top Talent

While contracting has its advantages, employment provides more stability, legal protection, stronger team cohesiveness, and more extensive benefits. So, if your contractor want to become a permanent member of your team, you must be prepared to provide that option. Otherwise, you risk losing them to your competition.

Safeguard Your Intellectual Property

Your company's intellectual property is valuable, thus it must be safeguarded. However, obtaining intellectual property for work done by independent contractors might be difficult. So, if you want to improve those safeguards, changing your contractors to employees can help.

If any of the aforementioned reasons apply to you, there are two legal ways to convert your overseas contractors to employees:

  • Incorporating a local entity
  • Using an Employer of Record (EOR) provider like Xpandium.

Changing Contractors to a Local Entity

To hire personnel directly, you must have a local company in the nation where they are based. To employ someone in Poland, for example, you must have a local organization in Poland. However, establishing a local corporation is a significant investment, so if you don't currently have one (and don't expect to create one up soon), we recommend considering a moving on to the following section regarding EORs.

If you have a local entity in the hiring country, follow these steps to convert your contractor:

Negotiate the worker's salary, working hours, and perks while adhering to the minimum criteria established in local employment laws and regulations. Poor negotiations can be disastrous for both your company and the contractor, so approach them with caution and without undue haste. Making your initial bid as competitive as feasible will help ensure that your contractor is willing to proceed. Create an employment contract that complies with local regulations and takes into account the terms agreed upon with the contractor.

It's time to onboard your employee after you've both signed the contract. This may necessitate gathering specific documentation and establishing their right to work.

You will also need to enroll them in your local payroll system and benefit packages as part of the onboarding process. Most importantly, you must guarantee that all of these actions are carried out in accordance with local laws and regulations. If you require assistance, you may wish to consult with a legal professional or outsource specific HR functions to a Professional Employer Organization (PEO).

Using an EOR to Convert Contractors

Working with an EOR is generally the ideal answer if you don't have a local company in the country where your contractor is based. EORs already have local subsidiaries in the hiring country, allowing them to lawfully hire talent on your behalf.

However, it is critical that you choose the correct EOR supplier to guide you through this complex and sensitive procedure. If you work with a partner that does not give a high-quality, human-centered experience, you may wind up with an unsatisfied (or disgruntled) contractor and suffer legal repercussions.

The good news is that transitioning your contractors using Xpandium's EOR is quick, simple, and cost-effective, with the ideal blend of automation and human touch. Here's what you can expect from us:

  • Individual pay estimates will be performed based on local benchmarks to ensure you're making a competitive offer that your contractor is willing to accept.
  • Following that, we will confirm that your selected contractual terms are in accordance with local laws and regulations, and we will detail any additional benefits we can provide to make your offer more competitive.
  • Then, our experienced support team will arrange an introductory session to clarify any questions your contractor may have regarding the process, providing them with peace of mind as they move forward.
  • Once your contractor is satisfied, our professionals will design the employment contract, onboard them using our user-friendly OmniPlatform, and enroll them in payroll and benefits in a compliant manner.
  • Our team will then provide you and the individual with experienced support to ensure an exceptional employee experience and compliance throughout their career.

In summary, our expert-led procedure ensures that your team member has a smooth transition into their new permanent role within your organization, allowing them to succeed as well as your business.

With Xpandium, you can create the best teams on the planet.

Xpandium helps forward-thinking businesses to compliantly hire the best people from around the world. So, if you wish to turn a contractor into an employee, we can help.

We handle compliance, onboarding, payroll, and benefits for you using cutting-edge technology and 24/7 expert assistance. This allows your HR team to concentrate on developing a highly engaged and productive team that produces outcomes.

Do you want to know more? Contact us for a free consultation.

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