Ensure independent contractors are engaged in compliance with the law
Contractors, sometimes called ‘independent contractors’, are an increasingly significant component of the workforce. Contractors provide a flexible work resource for many enterprises that do not wish to be locked into the obligations of a regular employment contract or agreement. New Horizons Global Partners supports businesses that engage contractors, as well as the contractors themselves, to ensure working arrangements are cost-effective, efficient and tax-compliant.
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How New Horizons Global Partners supports companies engaging contractors
New Horizons Global Partners specializes in Global Professional Employer Organization (Global PEO) solutions. As a Global PEO, New Horizons becomes responsible for all tax, payroll and compliance for your former contractors, no matter where they are based in the world.
What is the process for New Horizons to onboard existing contractors?
New Horizons will enter into an engagement contract with you based on the number of contractors that you would like to onboard.
The existing contractors are then provided with written employment contracts, compliant with employment law in their country of residence.
Conversion to Employee
The workers are then taken on board as employees on the payroll of New Horizons.
New Horizons provides ongoing payroll, tax withholding, benefits administration and compliance services for workers.
Are there risks to engaging contractors?
For many businesses, engaging a contractor, rather than an employee, may feel like a simple and straightforward staffing arrangement. However, there are risks that apply to engaging contractors, especially where that contractor is based overseas:
- Permanent establishment
- Contractors based overseas can, in some circumstances, be interpreted by tax authorities as a ‘permanent establishment’ of your enterprise. This can make you liable for corporate income and/or turnover tax in that country
- Lack of control
- Usually, contractors are free to work with your competitors. In addition, negligent work by contractors may not be covered by liability insurance
- Employee misclassification
- It is possible that, despite intending to engage an individual as a contractor, that the authorities and courts view the arrangement as one of employment. Misclassification may make your organization liable for extensive overdue payroll taxes, unpaid benefits and fines.
Frequently asked questions
Sometimes these terms are not used in consistent ways. In strict legal terms, all these individuals operate under a contract (whether that is written or not). However, the term ‘contractor’, sometimes ‘independent contractor’ is often used to refer to an individual who works primarily for one organization at a time, but not under the same degree of control from the organization as an employee.
The term ‘freelancer’ is often used for an individual who works for many different organizations at the same time.
An ‘employee’ is someone with a range of rights, protections and obligations as defined under the special employment laws of that country.
In some cases, yes. It depends on the nature of the relationship between the company and the worker. In some situations, this could be considered ‘employee misclassification’, and not permitted under the law.
New Horizons uses a cloud platform to manage ongoing employee data. This ensures that all personal and payment data is kept secure, and that you have access to that data as necessary.