As your company grows, you may hire globally to meet new demands and business goals. Many employers turn to independent contractors to complete projects and improve internal processes. Learning about independent contractors and your responsibilities can help you drive success in new countries.
Hiring independent contractors in Italy
Independent contractors can offer a range of specialized skills for your company, but you must understand various conditions to ensure a fair and legal relationship.
Independent contractors vs. employees
According to the Italian Civil Code, an employee is defined by:
- Commitment for remuneration
- Cooperation with a company and their business activities through manual or intellectual activity
- Operation under the control of the employer, including organizational, directive, and disciplinary powers
Independent contractors often cooperate with a company and commit to remuneration, but their operations should not be under the employer’s control or instructions. Other distinguishing features of an independent contractor include:
- Freedom in working hours and workspace
- Assumption of business risks, such as paying for personal equipment to complete projects
- Project-based work over ongoing responsibilities that contribute to the company regularly
Penalties for misclassification
Misclassifying employees as independent contractors interferes with their entitlement to statutory benefits and various employment protections. In the event of misclassification, an employer will be required to pay past-due social security contributions, damages, and fines associated with the misclassification. Employers may also have to establish a formal employment relationship and add the worker to their official payroll.
How to hire independent contractors in Italy
The contractor process should involve 3 key steps.
1. Carefully conduct interviews.
Interviews with 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 your questions on skills and experience that can contribute to the project.
When creating your advertisements for the job, make it clear that you’re searching for an independent contractor to attract the right individuals. You can also use your ads to describe the project, the duration, and practical skills for completion.
2. Create a service agreement.
Companies should create a contract for service with their independent contractors. This service agreement should lay out any terms of the professional relationship and ensure clarity between both parties. Terms to include are:
- Project scope and duration
- Pay rate and arrangements
- Termination terms
3. Know how to work with independent contractors.
Extensive training programs can signify employer control, but you may offer a brief introduction to your company for your independent contractors. After establishing your service agreement, you can introduce your contractor to key players in the project and essential workflows.
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 Italy
Payment arrangements will depend on the terms established in the service agreement. Many contractors will request a lump sum for completing the specified project, or upon certain project milestones, but there may be other stipulations to work with.
Employers are still responsible for deducting income tax from independent contractor pay, and their remuneration will also include Value Added Tax (VAT). However, employers are typically not responsible for making social security contributions for these individuals. Generally, independent contractors will pay their own social security contributions.
Terminating independent contractors
Termination of the independent contractor relationship will be governed by the terms of the service agreement. Companies can outline termination terms and procedural requirements in the service agreement.
Turn to G-P when hiring independent contractors in Italy.
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Contact us to learn more.