As companies scale and expand internationally, one thing is clear: The future of work is global. One major key to global business success in 2024? Differentiating between international contractors and full-time employees — and knowing how each option can help you achieve your goals.
With a reliable Employer of Record (EOR) solution in place, you can hire quickly and compliantly anywhere in the world. Let’s explore the key differences between international contractors and employees — and how to leverage a global talent pool from day one.
International contractors vs. employees: What’s the difference?
A contractor is a worker that is self-employed or works through their own company providing services to other companies, generally for a specific project. Full-time employees, on the other hand, work on a regular basis for a single employer.
While contractors are paid for their services by a company, they are not on the company’s payroll, and are often hired for temporary, project-specific needs. In contrast, full-time employees are permanent team members of a company, on the organization’s payroll, and are entitled to specific employment-related benefits and protections.
While there is no global test to determine whether a worker is an independent contractor or an employee, most countries look at a similar set of factors.
| Characteristic | Independent Contractor | Full-Time Employee (FTE) |
| Control and independence | Works independently, controls their own schedule | Employer controls work schedule and how tasks are completed |
| Relationship duration | Typically engaged for a specific project or time period | Ongoing, indefinite relationship |
| Payment and benefits | Paid per project or per hour, no benefits provided | Regular salary and benefits such as health insurance and PTO |
| Tools and equipment | Provides own tools and equipment | Employer provides tools, equipment, and workspace |
| Integration with company | Limited integration, typically not involved in core activities | Fully integrated, part of the company’s core activities and company culture |
| Work location | Often works remotely, chooses own work location | Usually works at the company’s premises or designated location |
| Training and supervision | No training provided by the company, works with minimal supervision | Company provides training and closely supervises work |
| Workload and hours | Flexible hours, manages own workload | Fixed hours, workload managed by employer |
| Exclusivity | Free to work with multiple clients simultaneously | Usually works exclusively for one employer |
| Business risk | Bears the risk of profit or loss | Employer bears the business risk |
| Tax treatment | Responsible for own taxes, often receives a 1099 form (in the U.S.) | Employer withholds taxes, receives a W-2 form (in the U.S.) |
| Employment laws | Not covered by most employment laws | Covered by employment laws and entitled to protections |
Understanding the differences between independent contractors and employees, that vary by country, can help your company stay compliant and adhere to local laws.
For example, companies in the U.S. must focus on specific aspects of three main categories when determining worker type: behavioral control, financial control, and relationship.
What is an international contractor?
An international contractor, also known as a global independent contractor or a global contractor, is a self-employed person or entity who works for another organization on a contract basis, and generally for specific projects.
Independent contractors are provided the flexibility to determine how the work is performed, when it is performed, and where it is performed. International contractors often work outside their home country, or, in some cases, offer their services across multiple countries.
Independent contractors do not receive the same protections as employees under local labor or tax laws. Unlike full-time employees, independent contractors do not receive employee benefits such as health insurance, minimum wage, or paid time off under an independent contractor agreement. They are also responsible for their own taxes.
Independent contractors, commonly known as 1099 workers in the U.S., can include consultants, freelancers, remote developers, gig workers, accountants, writers, or even realtors.
What is a full-time employee?
A full-time employee works under the direction and control of the employing company, and the employment relationship is governed by employment laws. The working relationship offers full-time employees protection under local labor laws in their country, and full-time employees usually work for a single employer, whereas independent contractors may engage with several companies at once. Employees generally work specific hours, which are directed by the employer, and at a location that the employer determines.
Employees are considered permanent and integrated team members of a company, and receive a fixed salary and benefits from the employer. An employee is on the company’s payroll and the company withholds the appropriate taxes.
Contractors vs. employees: Which is best for your business?
Contractors are a cost-effective option for seasonal work or specialized projects, while full-time employees are ideal for long-term scopes of work and positions that are core to the company’s business activities.
| When to Hire a Full-Time Employee | When to Hire a Contractor |
| Long-term scopes of work | Seasonal or project-based work |
| Employer-designated work location required | Work location is flexible |
| Client-facing work | Specialized projects |
| Supervision is expected | Requires minimal oversight |
Why do companies hire independent contractors? How do you know whether to hire a contractor or a full-time employee? Let’s explore how to choose the best talent for your business today.
When to hire contractors
When it comes to global hiring, most companies choose to hire independent contractors because costs like taxes, benefits, and administration are significantly lower or because the company does not have a local entity to employ the worker. When should your business hire contractors, and how do you know which projects are best suited for contractor expertise? When deciding when to hire a contractor, ask yourself a few key questions:
- Is the work part of your company’s core business? Pay close attention to where you allocate contractor resources. For example, employers may not own copyrights unless there is a written agreement on intellectual property rights.
- Is this role for a short-term or seasonal project scope? Contractors tend to be limited to one project or task for each company they engage with. In most cases, the project ends with their deadline.
- Does this work require close supervision? Companies have less control over contractors since they are independent workers and manage their own time and how they perform the work.
Let’s explore a few project-specific use cases where hiring international contractors may be a better option for your business.
- Seasonal projects. Do you need additional seasonal help but don’t have the budget to pay someone year-round? If you could use additional help during peak business periods or seasonally, a contractor that is a flexible, remote worker is the best option.
- Specialized projects. Contractors have specialized skills, should be fully trained to perform a task, and have the tools to execute a project. This means that training is not required and productivity is immediate.
- Narrow-scope projects. Independent contractors offer the flexibility of hiring when needed for specific, smaller projects or tasks. Once the project ends, the contract does as well. Therefore, companies can avoid overstaffing.
When to hire full-time employees
When evaluating when to hire a full-time employee, consider how the position fits your business model, if the role is an ongoing need, and if the work is essential to your company. For example, professionals with a finance background and marketing expertise often support long-term needs of the business, while consultants or 1099 workers often handle short-term project goals.
Let’s explore a few key examples of when to add full-time employees to your international workforce.
- Client-facing work. Long-term employees often serve as more reliable contacts to build relationships with clients, stakeholders, customers, and colleagues. While contractors may come and go, full-time employees tend to be a more consistent resource for steadfast client relationships.
- Projects requiring supervision. Does the work require frequent oversight or communication? Hire full-time employees if your business requires more input on how, when, and where professionals work.
- Cross-departmental projects. Employees may be better suited to handle cross-functional projects that require interdepartmental teamwork. Particularly if the project work is on-site, employees tend to be more available and offer long-term institutional knowledge that contractors may lack.
- Long-term work. Will the work responsibilities span months or even years? Then a full-time employee may make more sense for your international hiring strategy. High-level positions like marketing or operations that handle higher level initiatives are great options for full-time workers.
Build your global workforce with G-P Meridian Contractor™.
Hiring exceptional talent regardless of location or employment type is key to global business success. As the recognized leader in global employment, our best-in-class Employer of Record and global employment products deliver everything companies of all sizes need to quickly and compliantly build global teams in 180+ countries.
If you need flexible talent, fast, G-P Meridian Contractor™ is the solution. Hire international contractors in just a few clicks — our Contractor offering lets you hire and pay anyone, anytime, anywhere with greater flexibility and complete confidence. And with our built-in Wise payment technology, you can make fast, accurate payments to contractors in your choice of currency.
Are you ready to unlock the power of global teams? Partner with G-P today to hire, onboard, and manage team members, quickly and compliantly, anywhere in the world, regardless of entity status.
