Top talent lives everywhere. Hiring these international contractors has its pros: access to specialized expertise, diversity of ideas, savings on benefits and entitlements, and more.
Nonetheless, working with contractors from other countries can be a slippery slope if you fail to do your homework. Rule No. 1 is not assuming that the rules regarding contractors in the United States apply everywhere else. In fact, they rarely apply elsewhere in the world.
There’s a lot to learn about working with international contractors. Start with these six lessons:
1. Pay the Piper
One of the challenges of hiring international contractors is paying them. Wire transfers are expensive. Peer-to-peer payment services like PayPal and Venmo aren’t available in many countries.
So, how can you make sure your contributors get paid? With a global payroll partner.
These companies aren’t just for paying employees. They know local labor laws, so you don’t need to spend your own time and energy figuring them out. Some also provide tools to help you manage contractor invoices and tax remittances.
Get those things wrong, and you may upset more than your contractors. Local authorities aren’t likely to look the other way because you’re having logistic issues.
2. Check References
Verifying the identity and credentials of a foreign contractor can be tough. But you need to vet them carefully before hiring one. Assets like your intellectual property are at stake, not to mention your company’s brand and client relationships.
If you can’t interview the contractor in person, conduct a video interview. The camera makes it difficult to read body language, but it’s better than audio only or no interview at all. Record the interview for later reference.
Ask each applicant for their references’ contact information, including past employers and clients. Then, actually contact them to find out if they’re really the contractors you need. You should also verify university degrees and certifications.
3. Draft Contracts Carefully
A well-crafted contract that conforms with local employment laws is critical. Beware that in some countries, the relationship with the contractor carries more weight than the contract itself.
A wily contractor could pursue action against you in an attempt to obtain employee benefits. French employment laws, for example, are heavily skewed toward providing contractors with employee protections. The rise of the gig economy has increased benefits and rights of contractors in France.
In the UK, the relationship between the employer and contractor holds at least as much weight as the contract. Similarly, in Spain and Peru, laws state that if a contractor is working for only one client, they are an employee.
A determination by a foreign authority that your contractor is a de facto employee will force you to pay up. You can end up owing things like back taxes and unemployment insurance. You might also owe for paid time off — and incur interest and penalties on all of the above.
Your written agreement with an independent contractor should include some key clauses. These include nondisclosure/confidentiality, indemnity, IP transfer, notice, and dispute resolution. Just don’t rely on those alone.
Make sure your contractors have other clients. Don’t provide them with office space or supplies. Make sure they’re free to do their work on their own time, notwithstanding project deadlines.
Oh, and don’t forget about domestic requirements. Foreign independent contractors retained by U.S. companies and working abroad need to complete IRS Form W-8BEN.
4. Foster Connectivity
If you rely on independent contractors in your global business strategy, they need to be a part of your culture, not apart from it. There’s always a chance these contractors could start working for the competition and take your customers with them.
Even though contractors are not employees, it’s important to build connections beyond the transactional. For example, you could invite them to employee events or offer them training opportunities. Doing so should help make them feel more like part of the team, not just a corollary provider of services.
If your contractors are completing work for or alongside your employees, facilitate meetings between them. Not only will you improve the product or service you provide, but you’ll build bonds that engender loyalty.
5. Consider Conversion
Even if you begin a working relationship as a contracted one, you can change your mind. Sometimes, it might make good business sense to convert a contractor to an employee.
Say you hired a contractor in the beginning to save on employee benefits but you’re now doing thousands of dollars in business together. Given that most contractors earn wages beyond their employed peers, it might be time to reassess their status. Benefits might pale in comparison to the premium wages you’re paying.
Take into account labor laws and team fit, too. Are you a contractor’s only client? Are they working full time for you on a long-term basis? Officials and existing employees might not see them as a contractor. Check with a local HR consultant if you’re in doubt.
If you like their work and want them to stick around, full employment, even on a temporary basis, might benefit everyone concerned.
6. Give and Ask for Feedback
Employees tend to stay in closer communication with their managers than contractors do with their points of contact. Some contractors submit their deliverables and move on, even if they have opinions or concerns about them.
When in doubt, ask: Do they enjoy working with your employees? What suggestions for improving the product and process do they have? Do they feel like your project timelines, compensation, and quality expectations are aligned?
Remember, feedback is a two-way street. Encourage employees to provide regular feedback to the contractors they work with. Make sure they field questions promptly and respectfully. Ask them to point out contractors who submit work above or below their quality expectations.
Never hire a contractor with a blind eye, and don’t assume everything is peachy simply because it seemed so at first. International contractors deserve and require every bit as much attention as those in your home country. Working relationships change and so must your approach to managing them.