Pros and Cons: Hiring Remote Contractors vs Employees
When your company is looking to add staff, one viable option is to hire remote workers located in foreign countries. Hiring abroad usually entails a few more steps than just hiring in your own country, and one of the first things to consider is whether you want to hire an independent contractor or an employee.
What’s the Difference Between Contractors and Employees?
A contractor is a self-employed worker, who manages their own business with one or more clients. They will work autonomously and get paid based on the contract terms and on project completion. On the other hand, an employee will work full-time for one company and will receive compensation and benefits according to an employment contract and applicable statutory entitlements.
Pros and Cons of Hiring Remote Contractors
You can hire contractors as needed on a project basis, on commission, or for a set amount of time, depending on your business needs. This makes staffing much more flexible with no commitment beyond the current contract.
- Reduced Cost
Contractors are less expensive to hire as no benefits are offered and there is no employer required social contribution as with employees. Overseas contractors may offer lower rates than workers in your own country, but with similar skill levels.
- Advanced and Niche Skill Set
Often contractors will have a specific skill set in their niche, where they have developed some advanced expertise. This can be due to an educational emphasis in their country, or talent acquired through experience at other companies.
- Easier Access to Overseas Talent
It is much easier to hire an overseas contractor, as the company does not have to set up some type of local employment. A contractor can be brought on right away once the contract and payment method are agreed to and finalized.
- Inconsistent Availability
Unless a contractor is given ongoing work, they may not always be available when you need them. They can take other projects for other clients or decide to go on a break without much notice. For this reason, it is better to keep a contractor consistently engaged and busy to secure their availability.
- Removed From Company Culture
Contractors will have less connection to the company culture and will work more independently. Because of this, they may not be as aware of your business direction or how your company handles items like communication, customer service, and team management.
- Less Supervision/Management
When you hire a contractor, you are paying for performance and delivery, and the contractor will typically use their own work methods and set their own schedule. This can make it difficult to coordinate projects with other staff members, or to predict time of completion.
Pros and Cons of Hiring Remote Employees
- Loyalty and Commitment
Typically, an employee is going to have a greater sense of loyalty to a company, since the company has made a commitment to the employment relationship. Foreign employees may be especially engaged if the position is one that they would not otherwise have access to with a local company.
- Management Over Workload and Schedule
An employer will exercise more control over an employee’s work life, and directly manage their time and work methods. This allows the employer to make role adjustments to suit the entire team, and to correct any performance issues in real time.
- Engaged with Company Culture
Because an employee is a full-time member of the company’s mission, they will have greater involvement with culture, business philosophy, and values. For some employees, this is just as important as the position to keep them engaged with the company long term.
An employee does bring a higher expense for a company, given the fixed salary and benefits offered. An overseas employer needs to keep in mind that benefits and entitlements can be much higher abroad than in the home country.
- Employment and Labor Laws
In most countries, labor laws favor and support employee rights over that of the employer, so it is necessary to have some way to learn of those rules and remain compliant. Foreign employees know their rights, and may not hesitate to make labor violation claims, bringing real problems for the employer.
- Need to Have a Legal Entity if Hiring Overseas
To formally employ a worker abroad, the company will need to have a legal presence in the foreign country in order to payroll the employee with some type of entity. Incorporating is costly and time consuming just to run a local payroll, although there are third party solutions that can simplify the process.
When Should Companies Hire Remote Contractors?
There are a few situations where hiring contractors is preferable, such as working on finite projects or where a role is only needed part-time. A company can also utilize contractors during times of uncertain budgets for staff, or where there is a transition/expansion phase approaching.
Most remote overseas contractors will work online in virtual roles, but there may be times where a business needs local sales agents or hands-on service reps to work on call in a foreign country. These just a few examples of how a contractor can step in to fill a useful role that does not require a full-time employee.
When Should Companies Hire Remote Employees?
Remote overseas employees can be hired to meet several types of business objectives, that will warrant the effort and expense. If a candidate has a hard to find skillset, it may be worth it to hire them as a full-time employee to secure their talent. Likewise, if your overseas roles are complex and require time to master, you don’t want to lose the time and effort put into training and development.
Compliance When Hiring Remote Contractors and Employees
When hiring either remote contractors or employees abroad, compliance should be a priority, although it is an easy area to overlook. In particular, foreign countries are concerned about the misclassification of workers, where a contractor is actually filling an employee-type role, but without benefits or labor protections.
Contractor Taxation assists our clients with overcoming potential non -compliance, ensuring that contractors are hired and paid in a manner that meets host country criteria. We have an experienced global network of umbrella companies and payment services to hire contractors smoothly in each country. If you have decided to hire employees, we also have GEO partners that can hire your remote workers through local employers of record and run a legal payroll in the host country.