As a business, there are only so many skills you can accumulate in-house. For most businesses, the primary requirement is to hire mission-critical individuals and cultivate skills most actively needed for success. For everything else, there are independent contractors and freelancers. This is just as true for large organizations with thousands of employees as it is for small to medium sized businesses. Thanks to the internet and most services becoming digital, you can now leverage the expertise and skills of independent contractors from around the world.
If you want to hire independent contractors the right way, this guide is for you. Also, it’s important to understand that in some countries, the term independent contractor and freelancer may be interchangeable, but some may categorize both differently, with different tax implications. So make sure (based on where you are located and where you are hiring from) to differentiate between an independent contractor and a freelancer.
Before hiring an independent contractor, ensure you know the compliance and regulatory implications associated with the category. It varies for countries, regions, and even trades. If you plan on hiring such a contractor from a different country, make sure you comply with the requirements of both countries, starting with yours. Even when you are hiring through a platform, they may not assume full liability, so make sure the whole process is compliant.
You should also know the necessary licenses and permits associated with specific jobs. For example, if you are hiring independent contractors for construction, catering, or other jobs that may require a license and a permit, ensure they have the requisite licenses and obtain the necessary permits.
An essential part of researching the right independent contractor for the job is to determine whether you would hire a local contractor or an international one. For some jobs, you don’t have a choice. Most physical jobs require local contractors. But for your digital needs or getting something manufactured or assembled, you can work with independent international contractors. It’s important to keep the time zones in mind when working with independent contractors based elsewhere. The research process should start with what you need and then identify the right independent contractor in that domain. Then you can sift through them based on the quality of work, reputation, and, most importantly, pricing. The research becomes more complicated if they need to work with sensitive or proprietary data.
Once you have a reasonable idea of how much it would cost to hire an independent contractor, you should run a cost-benefit analysis. Sometimes, hiring an employee (or multiple employees) temporarily (for a project) or long-term might be better than hiring an independent contractor. But this choice has to be analyzed from different perspectives, including cost, liability, time cost, resource requirements, urgency, etc. If it’s something far outside the domain and expertise of anyone on your team, then it may be difficult to grow in-house skills instead of hiring an independent contractor. It’s also a matter of complimentary connections and access to the market that an independent contractor brings along that employees might not be able to replicate. All of these factors should be taken into account when deciding whether it’s the best course of action to hire an independent contractor.
Screening the few short-listed independent contractors is a process you may want to devote adequate time and resources to because making the wrong choice can have disastrous consequences. Most companies have long-term relationships with their independent contractors, so you should screen them to ensure that they are a good cultural and value fit for your business. You should also assess them for their transparency, communication, and promises. If they are conceding to your every demand, that can be a red flag. Good independent contractors are honest and open about what they can and cannot do.
You should also assess them on their understanding of your business and what you are looking for. If they are serious about good, long-term relationships instead of just getting a contract, they would have researched you in detail and will have a good idea of what you are looking for.
Once you find a good match, you can start the process of hiring. If you are certain they are the type of contractor you can work with long-term, you may consider signing a long-term contract. It usually comes at a better price and offers more consistency. But if you wish to reserve judgment until you have worked with them, a shorter contract might be better. Ensure you are transparent about your needs, and the contract gives you the level of control you need in your relationship with the contractor. This includes clauses based on the quality of work, timely deliveries, communication, working conditions, etc.
Make sure you have an onboarding plan for your independent contractors. The depth and comprehensiveness of this plan would be proportional to their involvement in routine business operations or a specific project. If it requires your team/employees to be constantly in contact with the contractors, you should create an onboarding plan to ensure they can work seamlessly with you. This includes your communication protocols. However, if you are entirely outsourcing a job/part of a job to them, it’s a good idea to let them operate independently without looping them in unnecessarily.
Payment and Taxes
Another important aspect of hiring an independent contractor is how you pay them. It’s typically not a problem for local contractors. You can pay them in the local currency directly and follow the taxation protocols for independent contractors. However, when working with foreign contractors, you need to make sure everything is straightened out before the contract begins, starting with the payment medium. Some payment processes may take more time than others. You will most likely not withhold any taxes for foreign independent contractors but make sure you know what the law in your country and their country says about such payments. Engage Anywhere can simplify the process for onboarding, managing, and paying contractors around the world, schedule a free consultation to find out what solutions works best for your organization.
Hiring an independent contractor offers many benefits, including the ability to leverage skills beyond your scale and, in some cases, pass on liability (though it’s priced in the contract). But to ensure that you reap all the benefits, make sure you adhere to the best practices associated with hiring independent contractors.