With the recent growth in its qualified labor force, Croatia offers wide-ranging opportunities for companies looking to hire internationally. When you need professionals to complete projects, independent contractors can be an ideal solution. Consider some key guidelines to finding the right contractors for your company’s needs.
Hiring independent contractors in Croatia
If your company seeks to hire independent contractors to handle specific tasks for your organization, understanding a few principles regarding worker classification is essential to avoid consequences that come with misclassification.
Independent contractor vs. full-time employees
It’s important to understand the distinction between independent contractors and full-time employees. Independent contractors may operate under their own separate legal entity, while employees are a part of the company and are under the company’s management and control. When you work with a contractor, you have a business-to-business relationship with them in exchange for their services.
Employees, on the other hand, work exclusively for a company carrying out day-to-day functions under the direction and instruction of the company. The employee is subordinate to the company and does not have the power to substitute or delegate the work to another person. Importantly, employees are entitled to receive a monthly salary regardless of the amount of work performed, while independent contractors receive payment when certain contract obligations are completed.
Penalties for misclassification
To avoid penalties and fines, companies should not misclassify employees as independent contractors. If you classify an employee as a contractor, your company could be held liable in court. Along with having to pay past-due social security contributions and benefits owed since the contractor’s start date, companies may also have to establish a formal employment relationship and add the independent contractor to their official payroll, as well as pay additional fines.
How to hire independent contractors in Croatia
It’s important to implement the right strategy when hiring independent contractors. Follow these 3 steps to ensure you find the best fit for your company.
1. Carefully conduct interviews.
Interviews with full-time employees often involve questions about character traits because these individuals will contribute to company culture. Independent contractor interviews are more similar to business transactions. Focus questions on skills and experience that can contribute to the project.
2. Create a service agreement.
Create a written service agreement with the independent contractor so there is a record of the terms agreed to. You will want to cover these details:
- Termination and extension conditions
- Services the contractor will provide
- Length of the contract
- Pay rates and arrangements
3. Know how to work with independent contractors.
Extensive training programs can signify employer control over project completion, but you may offer a brief introduction to your company for your independent contractors. An important step in engaging the services of independent contractors is understanding how to work with them. Independent contractors should not receive the level of control or supervision that employees do – they are generally free to perform the work according to their own schedule and methods.
How to pay independent contractors in Croatia
Independent contractors are not employees and are not registered on payroll. Therefore, payment invoices must be issued for the work agreed in the frequency dictated by the services agreement.
As contractors are not on payroll there is no automatic payment. Therefore, you must choose another reliable method to pay them. If required, you can use a secure money transfer provider to deliver compensation.
When you work with an independent contractor, you do not need to cover any social security or benefits contribution on their behalf. However, you should ensure you’ve correctly classified them and have both agreed to terms before finalizing your arrangements.
Terminating independent contractors
In most cases, your contract will naturally conclude at the end of a project or after a set duration of time.
It is recommend to include termination terms and processes in the services agreement to prevent legal challenges and manage expectations. If there are issues with a contractor’s willingness to complete service terms or meet performance standards, you need to have an agreed-upon method for ending the business relationship.
Turn to G-P when hiring independent contractors in Croatia.
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