A (short) guide to hiring & paying remote contractors

Remote work is having its moment. Since 2010, the remote workforce has grown by 400% in just one decade. Currently, more than 55% of global companies now offer remote work.

A survey by Buffer in 2019 revealed that 99% of people would choose to work remotely, at least part-time, for the rest of their careers, 77% of workers found remote working more productive (CoSo Cloud) and 83% said that remote working makes them happier at their jobs (Owl Lab).

A remote workforce also opens the borders to the best talent globally. Companies can save up to $11,000 USD annually for each worker working remotely compared to onsite, and there are many positive environmental benefits as workers are no longer tied to large urban cities nor would require excessive commuting.

Hiring remote contractors allows you to create an agile workforce by tapping into specialization and expertise from across the globe.

Independent remote contractors offer savings on costs, by negotiating rates directly, as opposed to companies paying agency costs. They also offer specialized skill sets, higher standards of work, expanded relationship building, a higher degree of professionalism and accountability than temporary staff.

While there are numerous benefits to this flexibility you need to ensure the contractual relationship is clearly defined. A strict criterion is enforced to determine if an individual is treated as a contractor, not an employee. An independent contractor should freely determine their performance and working time and not be deemed personally dependent on the employer.

Remote contractors are employed to perform specific portions of work, and as it’s defined in the contract, a stipulated work product, the scope of the work, a date for delivery, the negotiated currency and exchange rates as well as any necessary non-disclosure agreements (NDA). Remote contractors will be responsible for reporting their own income and complying with their country’s tax laws and social security obligations as a self-employed independent entity.

Most major countries around the world are engaged in two-way tax treaties. In most instances, the contractor will be familiar with their local small business obligations in the country where they operate and can therefore specify which laws will apply to their agreement.

Over a certain threshold, remote workers may be obliged to register for and charge VAT. And while salaried employees are entitled to benefits such as paid holiday leave and social insurances, remote contractors do not usually receive these and will charge an hourly rate to compensate.

The finite nature of a remote contractor’s work means their contract can be completed or terminated reasonably quickly, with no ongoing obligations. Parties should agree on specific circumstances either can effectively terminate the contract and an applicable notice period required for termination, as projects can often start and finish fast, and workers need to factor this into their negotiations.

Companies must also exercise caution in the lengths of contracts issued, as lengthy contracts could tip a worker into a tax residency bracket or ‘false self-employment’, and make them, and your company liable to local tax or legal ramifications.

Does it sound overwhelming? It absolutely doesn't have to be! Tools such as Lano make compliance and payments really easy.

Lano’s onboarding takes the risk out of misclassifying a contractor under the complex criteria and risking ‘false self-employment’ under strict German labour laws, by using standardized digital documents and centralized contractor information.

The centralized payment dashboard provides one-click contractor payments in more than 170 countries in multiple currencies in a single click and an automated payment status message service.

The indelible trend towards remote working has created an on-demand, motivated and highly productive set of workers across the globe with vast skill sets and expertise. The use of remote contractors can take advantage of this home-ready workforce, offering great flexibility and choice to find the best person to perform specific tasks and project work.

Lano’s platform takes the headache out of compliance, contracts, and payment, with automated, centralized services that lets you establish a diverse, agile team of self-motivated individuals, with cost, time and sustainable benefits to your company and the environment.