Laws and regulations that categorize some workers as independent contractors. In the US, some states have a series of tests/procedures to determine who comes under this category. Other countries use a variety of factors to classify contractors vs employees.
Independent contractor compliance refers to the laws and regulations that categorize certain workers as independent contractors versus permanent employees. What classifies an independent contractor will vary from country to country so it is important to be aware of the local employment laws wherever you are looking to hire from.
There are many rules and regulations to follow when building out a team of independent contractors. For example, did you know that independent contractors pay taxes in the countries where they live and work, not the taxes of your company’s home country? As the employer, you are responsible for understanding the tax laws and keeping your business compliant and the first step is ensuring you are classifying your employees correctly.
Misclassification happens when workers who should be considered employees are treated as independent contractors. Misclassification can have dire consequences for businesses, including penalties and fines. It is crucial to remain compliant when hiring independent contractors, also known as freelancers.
Compliance refers to the employee-employer efforts to prevent misclassification.
Benefits: Independent contractors often receive benefits and protections associated with employee status. Benefits may include minimum wage, overtime pay, workers' compensation, and unemployment insurance.
Rights Protections: Compliance protects employees' rights to a safe and non-discriminatory work environment as well as access to benefits like healthcare and retirement plans.
Benefits: When employers compliantly classify independent contractors, they are avoiding the risk of potential penalties and legal issues and government audits.
Reputation Building: Remaining compliant also boosts brand reputation, showing potential employees and clients that you conduct business in an ethical manner. This will enhance trust among all your stakeholders, which can ultimately influence revenue and overall brand recognition.
Ensure you’re correctly classifying workers with an Employer of Record service like Borderless. Whether you're working with contractors, employees, or some mix of both, Borderless can help you keep track of who's who while staying on top of compliance, payroll, and taxes.
Go Borderless in over 170 countries and do business right in the right place for you.
