What Is a Global Contractor?

Global hiring continues to thrive as one of today’s most prominent business trends. And it’s no wonder — up to 35% of executives say identifying skilled talent in their current markets is a problem. To address this challenge, companies can hire global contractors to access specialized skills across borders and support international business success. This strategic approach helps employers secure top talent for temporary projects, streamlining the hiring process.

A best-in-class Employer of Record (EOR) offers the tools to compliantly engage both global contractors and employees. With the right EOR, employers can efficiently hire and manage global teams, without needing to establish foreign subsidiaries or local branches.

What is a global contractor?

A global contractor, also known as an international contractor or foreign independent contractor, is an independent professional who offers services to companies across different countries. For example, a software developer contractor based in Toronto working for a tech startup in Denmark may be considered a global contractor.

Global contractor vs. employees: What are the differences?

Global contractors are not employed by the companies they provide services to. Permanent employees, on the other hand, are formally hired under an employment contract, are subject to local employment laws, and receive specific entitlements such as health insurance, paid leave, and in-kind benefits.

Global contractors work independently, providing services to one or more companies under a contractor agreement or contract. They manage their own tax obligations, which saves employers from dealing with local taxes and regulations. In contrast, employees are long-term hires, work under company supervision, and receive a regular salary. 

While companies do not withhold taxes from independent contractors, they are generally responsible for handling employees’ tax forms and regulatory compliance.

Unlike employees, independent contractors are not entitled to any termination compensation such as severance. Contractors typically provide their own equipment, while employees receive the necessary tools, resources, and training from their employer. Global contractors manage their own time and schedule, whereas employees follow the schedule outlined in their employment contract.

Why hire a global contractor?

International contractors provide flexibility, enabling companies to promptly scale their global workforce for new or upcoming projects – without permanently hiring employees. Once the project is complete, employers can easily return to their usual number of Full-Time Equivalent (FTE) employees. 

For example, companies may engage global contractors with specialized skills that are not available in-house. Instead of hiring a permanent employee who may require ample skills training in a particular niche, a global contractor offers cost-effective, efficient talent with the exact expertise needed.

Global contractors are typically hired for short-term projects, providing employers with a cost-effective solution to access top international talent. By engaging global contractors, employers avoid intricacies related to international employment, like local payroll, tax laws, providing local benefits, and establishing new legal entities. Contractors manage their own taxes, schedules, equipment, and workspace, which further reduces the employer’s costs.

What are the benefits of hiring global contractors?

By hiring global contractors, companies can easily access top talent worldwide, reduce hiring costs, scale their workforce for specific projects, and simplify international compliance. Global employment products like G-P Contractor™ enable you to leverage these benefits by hiring and paying contractors in over 180+ countries.

Some benefits of hiring global contractors include:

1. Access to top global talent: Companies can tap into a larger talent pool and leverage specialized expertise for specific projects, unlocking new growth opportunities. Additionally, global contractors offer cultural insights that employees might lack when entering new markets.
2. Cost-effectiveness: Contractors work on a project basis, often proving more cost-effective than hiring full-time employees for short-term project needs. This business strategy, supported by a best-in-class Employer of Record (EOR) solution, helps companies save on onboarding, taxes, and HR management, and eliminates the need to establish new business entities.
3. Flexibility and scalability: Employers can rapidly adjust their workforce size based on project demands without committing to permanent hires. This flexibility allows companies to scale up or down quickly in response to changing needs or project requirements. Hiring contractors across different time zones also facilitates 24/7 productivity and support.
4. Simplified compliance: Employment laws do not apply to independent contractor relationships. Contractors also manage their own taxes and do not receive benefits, reducing HR and payroll complexities for companies. A quality EOR can further streamline contract generation and payment processes with tools like automatic invoicing and powerful tracking features.
5. Reduced oversight: Contractors require minimal supervision, enabling management teams to concentrate on key long-term projects. Reduced supervision frees up internal resources and enables companies to pursue a broader range of growth opportunities.

What are the risks of engaging global contractors?

While hiring global contractors offers many benefits, it also exposes companies to several risks, including:

1. Worker misclassification: Misclassification is the act of wrongly labeling employees as contractors, which denies them their legal protections and mandatory benefits. In the context of employment, a company may also misclassify a worker as an independent contractor rather than an employee. Companies may face misclassification issues or claims if they attempt to control aspects such as the contractor’s schedule, work hours, or location. This error can potentially lead to legal penalties.
2. Managing contractors across countries: Engaging global contractors comes with several challenges, such as coordinating multiple time zones, exchange rates, mitigating payment delays, and navigating cultural differences.
3. Quality control: Companies have less direct oversight with contractors than with full-time employees. This limitation affects the use of traditional employee management practices, potentially impacting performance.

How to mitigate the risks of hiring global contractors

To mitigate risks and ensure compliance with global contractors, employers should consult legal experts specializing in international employment. Partnering with a top-tier Employer of Record (EOR) offers companies access to a dedicated team of HR and legal professionals, streamlining the entire global employment lifecycle.

Executives seeking to hire global contractors can also benefit from G-P’s Globalpedia. This resource offers a comprehensive database of international labor laws, providing essential insights into the regulations of specific countries.

If a global contractor exceeds expectations, a company might find it beneficial to transition the worker to a full-time, permanent role. Converting contractors to employees offers several benefits, including facilitating talent retention, improving quality control, and establishing official presence on a global scale. 

Break down barriers and hire globally with G-P.

Whether you’re looking to engage global contractors, hire internationally, or convert a contractor to a full-time employee, G-P’s industry-leading global employment products and EOR solutions are backed by the largest team of in-country HR and legal experts to streamline each step of the global employment lifecycle. Avoid the complexities of local payroll, tax laws, and the need to establish foreign entities. Build teams anywhere, tap into the fullest of human potential, and unlock global business success with G-P today.