How to manage independent contractor payments
Making contractor payments can drain your team’s resources, especially when you’re paying international contractors. Each new contract increases your workload. Staying compliant with relevant international legislation is almost impossible for any team focused on fast growth.
Paying independent contractors requires an accurate and scalable system before onboarding your first candidate. That includes keeping contracts compliant with labor and taxation laws in every country where your contractors operate. For example, in the United States, you must also collect and automatically generate appropriate tax forms for your contractors.
If you hire contractors in multiple countries, you need an easy way to pay invoices, in multiple currencies, without incurring hefty bank fees or conversion costs. Automating payments will future-proof your process, especially if you’re in a growth mode and bringing people on quickly. Automation also adds time-saving efficiencies when managing invoices with different payment terms.
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Onboard, pay, and manage contractors anywhere in the world.
What is offered within independent contractor management and payroll services?
Working with an independent contractor management services provider like Remote will allow you to eliminate repetitive admin, minimize the chance of human error, and focus on the most important parts of your strategy.
Managing payroll for contractors is an important feature you should expect from service providers, but it’s one of many features to seek out. Legally compliant contract templates, facilitation of international payments, and withholding and paying taxes in multiple countries are equally as important.
It sounds like a lot — and it is — but working with a trusted service provider like Remote alleviates complexity and minimizes risk. You get back so much time to focus on your own business instead of becoming an expert on labor regulations and tax laws in multiple countries.
Not all solutions are the same so it’s worth learning about the most useful elements of independent contract management and payroll services. Contracts tailored to local labor laws – and making faster, easier global payments – are only the starting point.
Help and advice from experts keep you nimble in making critical operating decisions. You can use Remote’s guidance to understand the nuances of onboarding contractors in more than 170 countries and get access to on-demand visa and immigration support.
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What are the benefits of using independent contractor management and payroll services?
Any growth-focused business is constantly seeking efficiencies that reduce costs and mitigate risks. Remote’s contractor management software is designed to address these needs.
Contractor payroll solutions provide cost-saving benefits by reducing or eliminating sizable fees for bank transfers and currency conversions. You can automatically pay contractors in their local currency without having to worry about exchange rates or manual currency conversions.
Pre-configured contract templates when hiring independent contractors abroad can minimize your risk of violating local labor laws. Misclassifying contractors – or not converting contractors to employees in a timely manner – can attract expensive fines and penalties in many countries and, in some cases, your authority to operate can be revoked.
Investing in independent contractor management services gives you time to focus on growing your own business. You don’t have to immerse yourself in governance and compliance issues related to contractor payments or international contract administration. Remote’s one-click payments let you pay contractors at a moment's notice in more than 100 different currencies. Easily manage invoices and payouts using our intuitive platform.
What are the challenges of managing independent contractors?
Collecting and processing invoices from independent contractors is a laborious process. Every contractor operates as an independent business, which can leave you mired in paperwork and in a constant state of chasing and approving invoices. A contractors management service can simplify the process and give your team an easy way to submit invoices and an equally easy way for you to approve and pay them. Contractors and employers who use Remote have a super easy way to manage invoices.
As your team grows, another challenge is staying compliant with local labor laws. If your team is spread across multiple countries, your ability to maintain compliance becomes that much harder. Labor laws change frequently, so you must commit to being in a constant state of learning to maintain compliance over time.
Managing tax requirements and processing the relevant tax forms is an ongoing challenge if you don’t have contractor payment services. It’s worth noting that no two countries share the same tax code, and many countries have a tax year that differs from the calendar year. Keeping track of withholding obligations and when to file and pay taxes across multiple countries is incredibly complicated.
Despite best efforts, making unintentional errors when it comes to contractor management isn’t difficult. Few countries give credit for good intentions no matter how much effort you put into minimizing misclassification risk. It’s another reason why independent contractor management software like Remote is crucial to providing peace of mind to entrepreneurs and small business owners.
What are the stages of the contractor management and payroll process?
We’re experiencing a massive shift in how workers and employers are approaching work. Two-thirds of companies intend to increase remote work options for their employees. More than one-third of the global workforce work as contractors. This trend was accelerated by COVID-19 and the benefits to remote work are now widely accepted. Access to this huge chunk of global talent will fuel faster growth for your business. Efficient contractor management allows you to move fast, stay agile, and find specialist skills quickly.
Secure local expertise and advice
Before you engage an independent contractor, you must understand local labor laws and tax codes to keep your contracts compliant with the specific requirements of each country. A partner like Remote will support you with localized HR knowledge, including when and how to pay contractors, when and how to withhold local taxes, and how to create locally compliant contracts. At a minimum, retain HR, legal and tax expertise you can consult when needed.
Develop compliant contracts
Unfortunately, it’s impossible to use a universal contract for each country. You are solely responsible for ensuring you are complying with local labor laws by having contracts that are legally recognized. This protects you from legal action in the event there’s any kind of dispute with your contractor.
Stay compliant on taxes
Taxation is addressed in your contracts, but you’ll need to ensure you collect the required tax forms from your contractors as part of your onboarding process. In addition, you must report and pay taxes in each country where you have contractors, as required by the local laws.
Process invoices and pay contractors
Employers must be able to receive and pay invoices in a timely manner. Collecting invoices is the first step, and this becomes cumbersome when you work with multiple contractors. If you’re working with foreign independent contractors, you’ll need a way to manage currency exchange and pay people in different countries.
Review contractor classification laws
Most countries make a clear determination between contractors and employees. In some countries the status of a contractor changes automatically based on things like longevity of contract or whether the worker has only one employer. This situation poses risk to companies who do not review contractor classification on a regular basis and the situation is complicated for international relationships, as relevant laws vary so much between countries. Generally misclassification is determined based on who controls the behavior of the worker, the financial aspects of the work, and the terms of the relationship.
A simpler solution for contractor payments
Remote takes the guesswork out of global contractor invoicing and payments.
Faster Integrations. Remote's contractor and full-time employee platforms communicate seamlessly.
One-click payments. Approve or reject invoices in a single click. You can pay in batches or manage each invoice individually.
Fee-free local currency Pay your contractors in their local currency with zero exchange fees.
Hire global contractors with Remote
Onboard, pay, and manage contractors anywhere in the world.
Watch video: Remote Contractor Management
Take advantage of hiring and paying contractors for anywhere around the world. Remote's contractor management services make it easy for you and your contractors to manage contracts and payments.
Frequently asked questions: independent contractor management services
An independent contractor is someone running a business separate from yours. They are not your employee. They can generate income from other clients or businesses. An independent contractor controls how and when they work, manages the finances and expenses of their own business, and does not receive employee benefits from you like paid time off or insurance.
Independent contractors are legally responsible for the work they provide and are liable for the costs of correcting any errors or defects in their work. They provide a quote for the work you want them to perform. The quote can be based on a project or on an hourly rate. Once the work is complete, the contractor invoices your company to receive their compensation.
An independent contractor has complete autonomy from your business, except for the work they have agreed to perform. They provide their own equipment, tools and other assets required to complete their work. Contractors assume commercial risk for the quality of their work.
An employee does not have independence from your business and is expected to perform the job duties how, when and where you want. They receive from your company regular income and benefits, which can include paid time off for vacations and public holidays, sick leave, health insurance and disability insurance. The employee takes no commercial risk, and your business is legally responsible for the work they do and the mistakes they make.
Payroll management for contractors starts with the ability to receive invoices and pay them out in a timely manner. If you’re working in one country, like the USA, the process can be streamlined to pay all invoices in a single currency. Next, you’ll want to ensure you understand the payment terms from each contractor so you can schedule payments accordingly. Alternatively, you may prefer to dictate payment terms so you can process all your invoices to best manage your cash flow. Payment terms can be stated in your contract. Common payment terms are 14 days, 30 days, and 45 days.
Developing a contractor onboarding system will ensure you haven’t skipped any important steps in payment, which could lead to delayed payments and damage your relationships with contractors.
Employee and contractor misclassification occurs when the terms and conditions of your relationship with a worker violate local labor laws. In the case of foreign contractors, labor laws vary from country to country and can change during an engagement. For example, if your contractor works with you exclusively, or works with you over a long period of time, their classification may automatically change from being a contractor to being an employee. You may or may not be notified when this occurs.
Misclassifying employees as contractors can attract unwanted fines and penalties. In addition, you may be required to reimburse the employee for things like social benefits, retirement contributions and taxes.
Paying international contractors is much the same as paying a local contractor but with the added complexity of multiple currencies and the expense of foreign exchange and international bank transfer fees. Regardless, international contractors expect to be paid in a timely manner and expect you to absorb the costs related to foreign banking.
If you work with independent contractors from several countries, you must determine how you’re going to deal with foreign exchange, how to transfer money between countries and whether you’re required to pay in a certain currency. These expenses can add up quickly, so finding a global payroll services provider is a good way to mitigate these expenses and simplify paying international contractors.