Hiring independent contractors from across the globe can be a great business strategy, especially if you need expert skills to complete a big project. However, sometimes you may need to convert your contractors into permanent members of staff. And that’s the process we’ll be walking you through today.
It’s important to note that this process can be a highly sensitive one, so it’s essential that you approach it delicately and professionally to avoid complications and legal repercussions. Below, we’ll outline how you can do that, but before we do, let’s quickly define what a contractor is vs. an employee.
What’s the Difference Between a Contractor & an Employee?
While the definition of “independent contractor” varies from country to country, it typically refers to a skilled worker that’s independent of the client company and doesn’t go on payroll. Instead, they invoice the company for their work. Usually, they’re paid to do a specific job for a defined period of time. For example, you may hire a contractor to help build your new website over a period of six months or design a new feature for your customers.
On the other hand, an employee is a permanent member of an organization. They are employed through an employment contract, go on the company’s payroll, and are entitled to statutory benefits such as paid time off and leave.
It’s important to classify your workers accurately based on the definitions set out in local laws. So why might you want to switch a contractor to employee status?
Why Convert Your Contractors?
Here are some of the most common reasons for converting contractors into permanent members of staff:
Avoid Misclassification & Associated Penalties
The laws and regulations surrounding contracting differ from country to country. Even within one country, these laws are continually subject to change. If you think that you might be at risk of misclassifying a worker (i.e., treating someone who is legally an employee as a contractor), it might be best to convert them to employment. After all, misclassification can lead to lengthy legal action and hefty fines - or an extended headache in the middle of your next funding round.
Expand Their Role Within Your Company
If you’ve identified great potential in a contractor, keeping them on and expanding their responsibilities could be good for your business. However, a contractor’s role is often limited to specific projects. So if you want to further tap into that talent, converting them to an employee might be the right move to help you achieve those long-term business goals.
Retain Great Talent
While contracting offers unique advantages for workers, employment provides greater stability, legal protection, better integration into the team, and more comprehensive benefits. So if your contractor wants to become a permanent member of your team, it’s important that you’re able to offer that option. Otherwise, you may risk losing them to your competition.
Protect Your Intellectual Property
Your company’s intellectual property is invaluable, so it’s important to protect it. However, it can be difficult to obtain intellectual property for work carried out by independent contractors. So if you’d like to strengthen those protections, converting your contractors into employees can allow you to do that.
How to Convert International Contractors to Permanent Employees
If one of the above reasons resonates with you, there are two ways you can convert your international contractors to employees compliantly:
Let’s take a closer look at both.
Converting Contractors with a Local Entity
In order to employ talent directly, you need to have a local entity in the country where they’re based. So, to employ someone based in France, you must have a local entity in France, for example. However, establishing a local entity is a big commitment, so if you don’t already have one in place (and don’t intend to set one up imminently), we recommend skipping down to the next section about EORs.
If you do have a local entity in the hiring country, here are the steps you’ll need to take to convert your contractor:
- Negotiate the worker’s salary, working hours, and benefits, ensuring that you meet the minimum requirements outlined in local employment laws and regulations. Poor negotiations can end badly for both your business and the contractor, so it’s important to approach them sensitively and without added pressure or haste. Making your offer as competitive as possible from the start will help ensure your contractor is happy to proceed.
- Draft an employment contract that complies with local laws and takes into account the agreed-upon terms you’ve discussed with the contractor.
- Once you’ve both signed the contract, it’s time to onboard your employee. This may require collecting certain documents and verifying their right to work.
- As part of onboarding, you will also need to enroll them onto your local payroll system and benefits programs.
Most importantly, you need to ensure that you complete all these steps in full compliance with local laws and regulations. If you need assistance with this, it can be helpful to work with a legal professional or outsource certain HR functions to a Professional Employer Organization (PEO).
Converting Contractors with an EOR
If you don’t have a local entity in the country where your contractor is based, working with an EOR is likely the best solution. EORs already have local entities in the hiring country, so they can legally employ talent on your behalf.
However, it’s important that you find the right EOR provider to navigate this complex and sensitive process. If you choose a partner that doesn’t provide a high-quality, human-centered experience, you could end up with a dissatisfied (or disgruntled) contractor and risk legal complications.
The good news is that converting your contractors through Omnipresent’s EOR is quick, easy, and cost-effective, with the perfect balance between automation and human touch. Here’s the process you can expect from us:
- We’ll run individual salary calculations based on local benchmarks to ensure you’re making a competitive offer your contractor is happy to accept.
- Next, we’ll ensure that your preferred contractual terms are compliant with local laws and regulations, and we’ll outline any supplementary benefits we can provide to make your offer even more competitive.
- Then our dedicated support team will organize an introductory consultation to answer any questions your contractor has about the process, giving them peace of mind as they proceed.
- Once your contractor is happy, our experts will take care of drafting the employment contract, onboarding them via our user-friendly OmniPlatform, and enrolling them onto payroll and benefits compliantly.
- From then on, you and the employee will receive expert support from our team to ensure an excellent employee experience and compliance throughout their employment.
In summary, our expert-led process enables your team member to have a smooth transition into their new permanent role within your organization, helping them and your business to excel.