Welcome to the Playroll blog
Contractor Management
Manage your contractors with expert advice on setting up contractors agreements, misclassification risk, and more.
Copied to Clipboard
Welcome to the Playroll blog
Manage your contractors with expert advice on setting up contractors agreements, misclassification risk, and more.
Employee misclassification is the incorrect categorization of a worker as an independent contractor when they should be classified as an employee due to the true nature of the relationship, regardless of the type of contract they had entered into. This misclassification occurs when companies fail to meet legal criteria that distinguish employees from contractors.
Why is this problematic?
Employee misclassification is particularly challenging because the criteria for determining employment status vary between countries and states.
For example, a worker classified as a contractor in the US may be seen as an employee in the UK based on local labor standards. Because these rules can be complex, many businesses rely on expert assistance to ensure compliance across different jurisdictions.
To avoid misclassifying employees as independent contractors, you first need to know how to distinguish between them. Here are the key differences:
Employees have income tax automatically deducted from their wages, while contractors are responsible for their own tax filings.
Employees follow strict guidelines from their employer on how and when to perform their tasks, while contractors have more flexibility and autonomy.
IP created by employees typically belongs to the employer, while IP created by contractors remains their own unless specified in contracts.
Employees are entitled to mandatory benefits such as health insurance, unemployment insurance, and workers' compensation, while contractors usually do not receive these same benefits.
Employees are also generally entitled to protection from discrimination and harassment, whilst contractors may not be afforded the same level of protection.
Correctly distinguishing between employees and contractors can get surprisingly complex: several tests exist for this reason, for example the Economic Reality Test test in the U.S.
There are, however, some common hallmarks of misclassification. Here’s your checklist of the most common questions that government authorities use to determine misclassification. If you’ve hired a contractor and find your answers aligning with the characteristics of an employee, it’s a red flag that they may be misclassified:
There are several risks to employee misclassification, whether unintentional or not – though the repercussions tend to be most severe if government authorities find that a business has intentionally misclassified workers or committed fraud.
Some of the repercussions can include:
Whilst any industry is susceptible to employee misclassification, some industries have longer standing practices of misclassification than others or it’s generally more common.
For example, businesses in sales, IT, high-tech, hospitality, entertainment, logistics and construction industries should be especially aware of misclassification risks.
Penalties for employee misclassification differ between countries but can include financial fines, tax penalties, and reputational damage. For example:
The IRS imposes heavy fines for unpaid payroll taxes, along with penalties for failure to provide benefits like health insurance or workers' compensation. The Wage and Hour Division of the U.S. The Department of Labor also actively pursues claims. For example, you can be subject to a $50 fine for each unfiled Form W-2, or charged a percentage of wages.
Companies may face penalties under the UK’s Employment Rights Act, including paying back-pay for lost wages, holiday pay, and missed pension contributions.
Penalties vary but may include large fines, repayment of lost unemployment insurance benefits, and damage to the company’s standing with labor unions.
Several notable legal cases highlight the consequences of misclassifying employees:
There are several measures you can take as a business to avoid the pitfalls of misclassification. These include:
Ensuring compliance and the correct classification starts at the recruitment and onboarding stages. When hiring contractors, make sure your contractor agreement is set up correctly in line with local labor laws. It should cover, amongst others (see checklist above):
In a worst-case scenario, a robust contractor agreement can be used in your defense in legal cases – assuming you truly haven’t misclassified the worker.
Whilst the content of the contractor agreement is important, employers should still be aware of the “substance over form” principle, discussed above, and determine if it is applicable in the countries in which they hire individuals.
Employment laws are constantly evolving, especially in the context of remote work.
Spend time researching local regulations for the regions you’re interested in, before taking the next step and hiring an independent contractor or employee.
Regularly review the status of all your workers to ensure they are correctly classified. Make sure this forms part of your standard policies or procedures, and assign ownership of the audit to a specific person or department so these checks don’t fall through the cracks of your business.
If a contractor's role has evolved to more closely resemble that of an employee, consider offering them a formal employment contract. This can also hold the following benefits:
It can take significant time and resources to stay compliant as a global business when hiring remote workers. That’s why many businesses choose to use global employment services like Playroll, that have experts on-hand to help you make sense of local labor laws and stay fully compliant when hiring across borders.
I always feel completely calm and safe with Playroll, which is very important to me and the people we employ. I have complete trust that everything is done by the law.
.png)
Violeta Cirkovic, HR Generalist, Two Desperados
Employee misclassification can get complicated, but it doesn’t have to be a bottleneck to scale your global team.
Playroll can help businesses sidestep employee misclassification risk by ensuring compliance with employment laws in over 180 countries. No matter what type of worker you want to hire, Playroll’s team of experts will do the heavy-lifting to ensure your workforce is correctly classified and compliant – freeing you up to focus on your business growth.
Book a free chat with our team and get a compliance consultation, to ensure your business is not at risk of misclassification.
Read Time
October 4, 2024
Learn how to avoid employee misclassification and correctly classify independent contractors. Ensure compliance with this comprehensive guide for global employers.
In the landscape of American economic transformations over the last decade, the pivot from traditional employment to independent contracting stands out. This shift is marked by a growing number of full-time employees opting for the flexibility of freelancing over the confines of the 9 to 5 grind.
The year 2020 was a tipping point, witnessing three out of ten full-time workers transition to freelance roles. This surge has led to an estimated 59 million Americans embracing independent contracting, collectively earning around US$1.2 trillion.
Despite market contractions during the pandemic, projections indicate a continued expansion of the independent workforce—with the rest of the world following suit.
The earnings that independent contractors make—combined with the high number of people participating in nontraditional employment—reveal that independent contracting is becoming an increasingly important part of a 21st-century economy and labor market. Additionally, the significant earnings workers have made through the gig economy show that it can be a driver of future economic security.
Independent workers are self‐employed, freelancers, or independent contractors. These incorporate solo self‐employed, laborers whose work relationships are governed by a market‐based arrangement under contract rather than employment law.
Independent contractors are not employees and do not employ others in their provision of labor, skills, and knowledge. The focus is on actors who are neither bound by the control of an organization nor subject to mutual obligations as seen in an employment relationship. While independent work primarily concerns relationships between individuals and organizations, this extends to those in work relationships where a third‐party vendor contracts a labor market intermediary, digital platform, or project network organization.
What some call the gig‐economy can come under the umbrella term of independent work through independent contracting.
When it comes to independent work, there is no employment relationship; independent contractors are not legally classified as employees or workers, and therefore not subject to entitlements such as a minimum wage, statutory sick pay, maternity or parental leave, minimum notice periods, protection from unfair dismissal, and statutory redundancy pay.
The allure of independent contracting is undeniable, with many drawn to its promise of flexibility, autonomy, and a more harmonious work-life balance. This mode of employment allows individuals to tailor their work environment and schedule to their personal needs, offering the freedom to work from virtually anywhere and to allocate time for family.
Satisfaction levels among independent contractors are high, reflecting the value they place on autonomy and the benefits it brings. Research indicates that 80% of independent contractors report being very or somewhat satisfied with their work situation, significantly surpassing the national satisfaction rate of 53.7% among traditional employees.
Taxation presents another advantage for independent contractors, offering access to a range of deductions unavailable to their traditionally employed counterparts. These tax benefits not only enhance financial efficiency, but also contribute to the overall attractiveness of freelancing as a viable and lucrative career path.
However, the independent contractor model is not without its drawbacks. For example, in Australia, food delivery riders—emblematic of the gig economy's workforce—often find themselves without the employment rights afforded under the Commonwealth Fair Work Act.
Furthermore, despite the growing reliance on independent contractors, there appears to be little appetite from the federal government to introduce regulatory changes aimed at improving the work rights of gig economy participants. This reluctance to address the legal and social protections of independent workers highlights a challenge in balancing the flexibility and autonomy of freelance work with the need for fair and equitable treatment within the labor market.
As the debate continues, the call for a more open regulatory environment becomes increasingly pertinent. Advocates argue that fostering a framework that prioritizes the rights and contributions of independent contractors will not only benefit the economy at large, but also provide essential income security and economic stability for workers navigating this modern employment landscape.
In a move that reflects the evolving nature of work and the growing recognition of freelance labor, the state of New York has recently enacted significant amendments to its Labor Law, set to take effect in May 2024. The Freelance Isn't Free Act introduces a series of requirements and protections aimed at bolstering the rights of independent contractors within the state.
Drawing from a similar legislative framework previously implemented in New York City, this statewide extension underscores a broader push towards securing fair treatment and equitable working conditions for freelancers.
The Freelance Isn't Free Act broadens its protections to encompass a wide range of freelance workers, defining them as any individual or single-person entity engaged by a hiring party under independent contractor terms. It stipulates that any service contract meeting a minimum threshold of US$800—either per assignment or cumulatively over four months—must be formalized in writing. This mandate aims to clarify the expectations and obligations of both parties, ensuring that freelancers are afforded the same legal safeguards as their traditionally employed counterparts.
Furthermore, the law delineates specific exclusions, such as sales representatives and licensed professionals, while also outlining the requirement for written contracts. This structured approach not only protects freelancers from exploitation but also mandates record-keeping practices by employers.
In the evolving landscape of work, the formulation of an independent contractor contract is not merely a formality but a foundation for clear, mutually beneficial relationships between service providers and their clients. The transparency of contract terms concern the nature, location, scope, and compensation for work.
Gig workers are often compensated based on short-term performance, with compensation models including market-wage adjustments, individual incentives, and bonuses. Platforms like Upwork and Fiverr use compliance-based pay practices, appraising gig workers against strict pre-set standards. Such models prioritize flexibility, allowing for surge pricing or premium rates during peak demand periods, aligning compensation with market dynamics and worker performance.
It should go without saying: fair and competitive rates, beyond just monetary compensation, contribute significantly to contractor satisfaction and loyalty. Transparent negotiation processes, reflecting both market standards and individual contractor performance, can help establish a solid foundation for long-term collaborations.
The distinction between independent contractors and employees extends into the drafting of fixed-term contractual agreements. It's imperative that these contracts are formulated with clarity, specifying any termination of an independent contractor agreement clauses that might influence the calculation of damages in the event of premature contract cessation.
This careful drafting is essential not only for upholding the contractor status but also for safeguarding against misclassification, ensuring that governing law principles are adequately reflected, and that provisions of this agreement are understood by all parties.
High rates of contentment among independent contractors is underscored by the considerable number of workers transitioning from traditional roles to embrace freelancing full-time, challenging the notion that independent contractors are systematically exploited by larger corporations. The data suggests a strong preference for the freedoms and opportunities provided by independent contracting, underscoring a need for policies that support, rather than restrict, this employment model.
Despite its reported benefits, the burgeoning trend of independent contracting has not been universally welcomed. Legislative efforts in several states, most notably California's AB-5, have sought to curtail the freedoms associated with independent contracting, casting a shadow over the gig economy and sparking widespread job losses and income reductions.
Clamping down on independent contractors could force millions of people out of an employment structure of which they approve. It would also show an ignorance of the shifting employment landscape.
Employers can turn independent contracting into a strategic advantage by embracing the flexibility, specialized skills, and cost efficiencies that independent contractors bring to the table. This approach allows businesses to swiftly adapt to market demands, scale their operations up or down without the burdens of traditional employment structures, and access a global talent pool.
To effectively leverage this model, companies should focus on creating clear, comprehensive contracts that define the scope of work, deliverables, timelines, and payment terms. This clarity ensures that both parties understand their obligations and expectations, reducing potential disputes and fostering a positive working relationship.
Moreover, by integrating independent contractors into their talent strategy, employers can bypass the substantial costs associated with workers compensation insurance and employee benefits, typically required for full-time employees. Instead, resources can be redirected towards investing in project-specific talent, innovation, and growth initiatives.
However, this strategy requires a nuanced approach to ensure legal compliance, particularly concerning worker classification and tax obligations. Employers must carefully navigate these areas to avoid the risks of misclassification and ensure that the use of independent contractors aligns with both local and federal regulations.
Thoughtfully engage with independent contractors through Playroll, which helps businesses gain operational agility and access to specialized expertise. Position your company advantageously in a competitive marketplace—book a demo today.
Read Time
March 5, 2024
Working with contractors has many perks. For one, you don’t have to pay tax and statutory benefits as an employer, and it can be an efficient way to approach project-based work, or quickly get access to in-depth expertise.
But if you find yourself using a contractor’s services long-term, converting them to a full-time employee could be the right move to ensure compliance and avoid risks like contractor misclassification. An Employer of Record like Playroll can help you simplify this process, and make sure all your workers are correctly classified and working compliantly.
Here’s your guide on why and how to convert contractors to full-time employees, the easy way.
When deciding whether you need a contractor or a full-time employee for your business, you first need to understand how the law distinguishes between the two types of workers. This is especially important to avoid the legal and financial repercussions of contractor misclassification.
There are many key legal differences and business requirements at stake. These tend to be practiced around the world, but each country may have its own particularities.
We’ll use the U.S. as an example when it comes to country-specific details here:
For employees:
For contractors:
For employees:
For contractors:
For employees:
For contractors:
For employees:
For contractors:
For employees:
For contractors:
Independent contractors can help your business flourish without changing your whole operation. It makes sense to hire contractors if you need to urgently complete short-term projects, or if you require expert input or skills that will be difficult to source.
Here are some of the best ways to hire contractors for your business:
Transitioning from relying on freelancers to employing full-time staff is a significant shift in business strategy. If you find yourself ticking many of the boxes below, it might be time to consider converting a contractor to a full-time employee.
You can convert a contractor to an employee in two ways. If the worker is local, your HR team and the contractor will have to complete the necessary admin that’s relevant for that country. For example, in the U.S. this involves filling out form W-4, which determines the amount of federal income tax to withhold from an employee's paycheck. Additionally, your new employee will complete form I-9 that acts as verification that they can work in the United States.
But if you’re dealing with global workers, it gets complicated and expensive if you don’t have a legal entity in the country.
It doesn't have to be a cumbersome process, though. One of the best alternatives is to use an Employer of Record (EOR). These services handle global compliance, payroll and all the HR admin on behalf of an organization. They allow companies to hire employees in new markets without having to establish an entity, by leveraging the EOR provider’s networks instead.
With a good EOR provider, like Playroll, the process of converting a contractor to an employee is straightforward. We will simplify the transition process, handling the administration on your behalf, and ensure full legal compliance when you’re adding your new team member to the platform.
Contact our team to learn how we can simplify contractor conversions to streamline your HR efforts and keep you focused on your business.
Contractors are not bound to any specific company, so they can work on their own terms and for as many clients as they want. But that means they are not protected by labor laws and don’t have the full benefits that employees have.
A 1099 employee is another term for an independent contractor or freelancer in the U.S. They receive income in the form of a 1099-MISC or 1099-NEC tax form, rather than a W-2 form which is used for full-time employees.
The W-4 tax form, officially known as the Employee's Withholding Certificate, is a crucial document used in the United States by employers to determine the correct amount of federal income tax to withhold from an employee's paycheck.
Read Time
June 21, 2024
Nike is currently facing a potential fine of over $300m for misclassifying thousands of independent contractors. That underscores the need for companies to ensure correct classification of workers.
Both contingent workers and contractors are engaged on a temporary basis. While contingent workers work under the supervision and direction of the employer, contractors work as independent entities. Employers should differentiate contingent workers from contractors in employment contracts to avoid costly misclassification risks.
Contingent workers are also called temporary workers. These workers are hired on a short-term or temporary basis to help complete specific projects or tasks within a company. A contingent workforce is usually hired through staffing agencies or managed service providers. Different types of contingent workers include freelancers, gig workers, part-time employees, on-call workers, and consultants.
Independent contractors, on the other hand, are self-employed individuals or entities with contractual agreements to provide specific services within an organization. Unlike contingent workers, contractors operate as independent business entities and are not subject to clients' supervision. Again, contractors are not covered by employment laws and are responsible for their own taxes and business costs.
While contingent workers and independent contractors are non-permanent workers, they have distinct characteristics that set them apart.
One of the key differences between a contingent worker vs contractor is their legal classification and relationship with the hiring agency or organization.
Legally, contingent workers are classified as temporary workers of the staffing agencies or the organization contracting them. Depending on their employment terms, they may be entitled to some employee benefits and protections, including minimum wage, overtime pay, health insurance, and retirement plans.
Contractors, on the other hand, are classified as independent entities. They work separately from the hiring organization and are not entitled to employee benefits and protections. Since they are self-employed, they negotiate their terms of engagement and compensation.
Contingent workers integrate into the company's workforce and work alongside other full-time employees. Thus, they are subject to the same supervision, direction, and control as regular workers.
On the contrary, contractors retain full autonomy and control over their work and are not subject to clients' supervision or control. Unlike contingent workers, contractors do not integrate into the company’s workforce and can work for multiple clients.
A contingent worker is considered an employee of the agency or organization through which they are engaged. Therefore, the employer is responsible for income tax withholding and providing a W-2 form to the worker.
On the other hand, employers aren't responsible for handling taxes or other deductions for independent contractors. Contractors should pay self-employment taxes and report payments on their tax return.
Payments to both contingent workers and contractors can be deducted as business expenses, providing companies with tax planning opportunities.
Contingent workers may be entitled to certain employment rights and protections, including overtime pay, minimum wage, and other benefits like health insurance and retirement plans.
Contracts' legal obligations and liabilities should also be documented and clearly stated in the contractual agreement.
Classifying a contingent worker as a contractor or vice versa can result in legal non-compliance and violation of labor laws. That can expose a company or organization to employee misclassification risks, including:
Below are 3 companies that paid hefty penalties for the misclassification of contingent workers vs contractors.
As we can see from the examples, companies end up paying heavily for violating employee rights and protections. That can be avoided through:
Contingent workers and independent contractors are classified differently, and confusing these types of workers can result in misclassification risks.
Playroll is an innovative employment platform that enables you to hire global teams following the latest labor laws and employment regulations in different countries. We help you avoid misclassification risks through:
Read Time
March 1, 2024
According to IT Contractors UK, there are about 4.2 million self-employed professionals in the United Kingdom. That makes it fairly easy for companies to find and hire an independent contractor in the UK. But after hiring an independent contractor, you need to onboard them with the right contractor agreements and paperwork to build a legal working relationship.
This article outlines 9 key factors to consider when building an independent contractor checklist, and how Playroll.com contractor management tools can help you streamline the onboarding process.
Compliance with legal and tax requirements should be top of mind when considering how to onboard an independent contractor. That means collecting the relevant tax information and legal documents to ensure compliance and legally protect you and the contractor.
Key legal considerations include:
Take advantage of Playroll's EOR expertise for compliance guidance to tailor your contractor agreements to comply with tax laws.
Tech tools and software make for an efficient and streamlined onboarding process. They make it a breeze to prepare, customize, and send the right contractor agreements. They also help automate payments so that you don’t need to be nearby to process the payment.
Playroll offers easy-to-use contractor management tools and solutions, including:
Besides the contractor agreements, your company should collect and document all the relevant paperwork required to streamline the onboarding process. Important documents that may be useful to ensure a smooth working arrangement include:
Playroll.com offers HR support and guidance to help you collect and document all the necessary independent contractor paperwork.
Companies need to think about how to onboard an independent contractor across different industries. Create industry-specific sub-checklists from your general independent contractor onboarding checklist to meet the specific needs of the industry.
For instance, your independent contractor onboarding checklist for a software developer may differ from the one for onboarding a content manager or a writer. Playrol offers ready-made contracts that you can easily customize to meet industry-specific needs.
Introducing your contractors to the existing team and giving them access to the necessary tools and software is part and parcel of how to onboard an independent contractor. Top tips for the smooth integration of independent contractors include:
Within legal limits, you can also invite your independent contractors to meetings, coffee chats, and relevant company events to bond with other team members. Playroll.com’s collaboration tools enable you to organize and coordinate meetings and relevant company events with independent contractors.
Independent contractors should be treated as self-employed professionals, not company-employed workers. That's important to keep in mind when considering how to onboard an independent contractor to avoid misclassification risks.
To avoid any potential risks in their contractor/client working relationship, companies should:
Failure to correctly classify independent contractors can lead to serious legal fines & penalties or even backdating of tax and national insurance contributions. Playroll.com offers expert advice to help employers navigate contractor classification challenges.
Clear communication helps set expectations and is a top tip to keep in mind when thinking about how to onboard an independent contractor. Communication best practices to ensure a successful working relationship include:
Playroll insights on effective communication practices can help you set clear contractor/client expectations during the onboarding process.
Providing support and resources is part and parcel of how to onboard an independent contractor. Make sure that you give them the necessary support and the resources they need to get their job done.
However, you should be careful about the level of support and access you allow to avoid misclassification risks. Payroll.com recommends working with an experienced EOR to ensure smooth onboarding.
Changing employment regulations shouldn't be ignored when considering how to onboard an independent contractor. Employers should stay updated with regulatory changes to ensure continuous improvement of their onboarding processes.
Playroll's EOR expertise helps you build a compliant onboarding process in line with changing labor laws and legal requirements across global markets.
Learning how to onboard an independent contractor is essential to ensure a smooth onboarding process. Playroll.com offers contractor management tools to help you hire, onboard, and pay contractors anywhere in the world.
Ready to streamline contractor onboarding in the UK? Visit Playroll for expert solutions and ensure a seamless, compliant process. Get started today!
Read Time
December 20, 2023
An independent contractor provides services on a contractual basis for specific projects or timeframes. As they’re not employees, they have control over how they perform their work, offering employers flexibility and cost savings.
Many employers rely on hiring independent contractors because of the flexibility and cost savings they can offer – the gig economy as a whole has boomed in popularity in recent years. However, as an employer, it is important to know the key differences between contractors and employees.
There are a number of tests that exist for this purpose, including the common-law tests in the U.S. which asks questions around the following areas:
Behavioral Control: Independent contractors decide how to complete their work, whereas employees follow specific directions from their employers.
Financial Control: Contractors manage their own expenses and business operations and are not economically dependent on any one client, whereas employees are economically dependent on their employer.
Relationship: Independent contractors work on a project-by-project basis and typically have no long-term commitment, unlike employees who usually have continuous employment contracts.
Misclassifying workers as independent contractors rather than employees can lead to serious legal and financial consequences, including unpaid employment taxes and penalties. Businesses should be clear on the distinction to avoid issues with social security and Medicare taxes, as well as potential lawsuits related to worker rights.
Classify your workers compliantly with our comprehensive guide on avoiding misclassification risks.
Read Guide.png)
Being self-employed means you work for yourself and are responsible for generating your own income. This includes independent contractors, but also a range of other business types and arrangements, from freelancers to small business owners. For example, someone running a sole proprietorship or a small graphic design business might be self-employed but is not necessarily an independent contractor.
Self-employed individuals may own a business and provide goods or services to a broader market, and can have multiple income sources from various clients or customers.
Self-employed individuals often choose to set up their own businesses, for tax advantages, to clearly separate their personal and business finances, or to boost their professional credibility. There are a few different types of business structures they can choose, which affect their legal and financial obligations:
Independent contractors don’t always register their own businesses. Many independent contractors work as sole proprietors without the need for formal registration.
However, if they want to protect their personal assets or take on higher-risk work, they might form an LLC or get general liability insurance. Depending on the industry, such as construction, hairstyling or medicine, and depending on the state, licensing requirements might also apply.
Unlike full-time employees, independent contractors and self-employed individuals pay their own income taxes. In the U.S., they are responsible for both the employer and employee portions of social security and Medicare taxes (hospital insurance tax), collectively known as self-employment taxes.
Here’s a breakdown of key tax forms for independent contractors and self-employed individuals in the U.S.:
A freelance designer working on a contractual basis for various clients is both an independent contractor and self-employed. They are responsible for managing their business and paying their own taxes.
A self-employed individual running a small business (e.g., a bakery) is not necessarily an independent contractor, as they do not work under a contract for another company, but rather run their own business entity.
A sole proprietor offering consulting services might take on projects as an independent contractor, but if they expand and hire employees, they are self-employed without being classified as an independent contractor.
Hiring independent contractors or self-employed individuals can offer businesses flexibility, but it also comes with potential compliance risks. Here's your checklist of what you need to do as an employer to sidestep these risks:
Always have a written contract outlining the scope of work, payment terms, and project deadlines. This helps to establish the contractor’s independence and can help protect both parties in case of disputes.
Employers should not exert the same level of control over independent contractors as they do with employees. For example, employers should avoid dictating the contractor’s work schedule, tools used, or specific methods. The more control exerted, the higher the risk of misclassification.
Depending on the industry and state, some contractors may need to have certain licenses or general liability insurance. Employers should verify that contractors meet these requirements before starting work to reduce the risks with non-compliance.
Independent contractors are responsible for their own taxes and benefits. Employers should not withhold income taxes or provide benefits such as health insurance, as this could indicate an employee relationship.
In the U.S., employers must issue Form 1099-NEC to independent contractors who are paid $600 or more in a tax year. This is crucial for tax reporting and compliance with IRS regulations.
Misclassifying an employee as an independent contractor can lead to significant penalties, including unpaid wages, back taxes, and fines. Employers should regularly review contractor relationships (and not just focus on how the relationship is labeled) to ensure they comply with state and federal worker classification laws.
Contractor management software is a digital solution that helps businesses manage the entire lifecycle of hiring, managing, and paying contractors. Some typical features of contractor management systems include automated manual processes such as setting up contractor agreements, making payments and conducting compliance checks.
It’s tempting to manage contractors yourself to save costs as a business. However, going the manual route can quickly get time-consuming, and it’s especially risky if you’re hiring contractors in multiple countries. Contractor management software can offer the following benefits over managing everything yourself:
We admit our bias, but have a proven track record of success behind our name as a standout global employment solution to compliantly hire workers across the globe – which includes our all-in-one platform for contractor management.
With Playroll, we’re not just getting lower costs but a true service-oriented mindset. You don't know what you're missing until you meet Playroll.
Sherene Binni, Senior Office Manager & HR People Partner, Exalate
With Playroll’s contractor management system, you can hire and pay international contractors in 180+ countries. Managing and paying your team is made easy with automated contract creation, global payments in 50+ currencies, and an intuitive platform to manage work for all your contractors in one place.
When setting up your contractor agreements, Playroll does the heavy lifting to ensure compliance with local labor laws. Each client gets their own dedicated Customer Success Manager, at no extra cost, for ongoing support.
Playroll also offers Employer Of Record (EOR) services to hire full-time employees, making it easier to scale your workforce for any type of employment need.
Pricing: $35 p/contractor. Flat fee per month.
Fiverr offers a large marketplace that allows businesses to connect with freelancers worldwide. It’s easy to navigate with advanced filtering options, making it a popular choice for companies that want quick access to talent and browse freelancers by category.
However, managing larger teams of contractors through Fiverr may require additional tools for tracking and contractor management. They also do not offer comprehensive compliance support when hiring international contractors.
Pricing: Base service fees of 5.5% per purchase amount. For purchases under $100, an additional $3.00 is added per purchase.
Upwork provides project management tools and time tracking to help businesses manage contractors. With access to a large talent pool, it’s a great platform for finding specialized skills or purchasing ready-made projects.
On the downside, managing payments across international borders may require third-party tools. They don’t offer compliance support for hiring international contractors. Upwork also charges high fees for its premium features, including dedicated support and customized reporting.
Pricing: Between 5-10% service fees, some plans include contract initiation fees per contract. Custom fees for enterprise customers.
Deel is a well-known platform designed for managing international contractors and employees. It automates multi-currency payments, has comprehensive compliance support, and offers an intuitive dashboard for tracking contractor performance and agreements in one place.
On the downside, they charge high fees for contractor management, starting from $49 per contractor/month, as opposed to the flat fees other providers offer. They’ve also received reviews of high exchange fees and unexpected fees. This can make it hard to properly budget for their services.
Pricing: Starts from $49 per contractor/month.
Rippling is a workforce management system that also offers services to hire, pay and manage international contractors. It offers advanced capabilities to automate payment processing and compliance checks. They offer a wide range of products, including IT and finance management, that can make them a good fit for businesses looking for one platform to handle multiple aspects of their workforce.
On the other hand, Rippling has received public reviews on the steep learning curve of its products, with many products that are difficult to navigate. They do not publicly disclose their pricing, making it hard to make a straightforward assessment of whether their services fit into your budget.
Pricing: Not publicly disclosed.
While there are many strong contractor management solutions on the market, Playroll stands out for its competitive pricing, dedicated support to businesses of all sizes – and built-in compliance to hiring globally.
While hiring independent contractors comes with many perks, government authorities worldwide have started clamping down on the issue of misclassification of employees as contractors, which can open up businesses to hefty penalties.
Playroll does free misclassification assessments to protect clients from these risks, helps set up compliant contractor agreements, and ensures that your IP belongs to you when working with contractors. Dedicated support in these areas comes free of charge, unlike many competitors. When hiring globally, these are essential features to scale your workforce without risk.
In addition, Playroll offers businesses the ability to hire full-time employees compliantly in 180+ countries, and can help convert your independent contractors to employees if needed. This helps your business remain flexible to any future workforce needs, without bringing any additional third-party services on board.
Book a chat with our team to find out how we can help you scale your global team, without the red tape.
Our comprehensive guide to employee misclassification include a checklist to distinguish correctly between employers and contractors, and top tips to avoid misclassification risks.
Read Guide.png)
Employee misclassification is the incorrect categorization of a worker as an independent contractor when they should be classified as an employee due to the true nature of the relationship, regardless of the type of contract they had entered into. This misclassification occurs when companies fail to meet legal criteria that distinguish employees from contractors.
Why is this problematic?
Employee misclassification is particularly challenging because the criteria for determining employment status vary between countries and states.
For example, a worker classified as a contractor in the US may be seen as an employee in the UK based on local labor standards. Because these rules can be complex, many businesses rely on expert assistance to ensure compliance across different jurisdictions.
To avoid misclassifying employees as independent contractors, you first need to know how to distinguish between them. Here are the key differences:
Employees have income tax automatically deducted from their wages, while contractors are responsible for their own tax filings.
Employees follow strict guidelines from their employer on how and when to perform their tasks, while contractors have more flexibility and autonomy.
IP created by employees typically belongs to the employer, while IP created by contractors remains their own unless specified in contracts.
Employees are entitled to mandatory benefits such as health insurance, unemployment insurance, and workers' compensation, while contractors usually do not receive these same benefits.
Employees are also generally entitled to protection from discrimination and harassment, whilst contractors may not be afforded the same level of protection.
Correctly distinguishing between employees and contractors can get surprisingly complex: several tests exist for this reason, for example the Economic Reality Test test in the U.S.
There are, however, some common hallmarks of misclassification. Here’s your checklist of the most common questions that government authorities use to determine misclassification. If you’ve hired a contractor and find your answers aligning with the characteristics of an employee, it’s a red flag that they may be misclassified:
There are several risks to employee misclassification, whether unintentional or not – though the repercussions tend to be most severe if government authorities find that a business has intentionally misclassified workers or committed fraud.
Some of the repercussions can include:
Whilst any industry is susceptible to employee misclassification, some industries have longer standing practices of misclassification than others or it’s generally more common.
For example, businesses in sales, IT, high-tech, hospitality, entertainment, logistics and construction industries should be especially aware of misclassification risks.
Penalties for employee misclassification differ between countries but can include financial fines, tax penalties, and reputational damage. For example:
The IRS imposes heavy fines for unpaid payroll taxes, along with penalties for failure to provide benefits like health insurance or workers' compensation. The Wage and Hour Division of the U.S. The Department of Labor also actively pursues claims. For example, you can be subject to a $50 fine for each unfiled Form W-2, or charged a percentage of wages.
Companies may face penalties under the UK’s Employment Rights Act, including paying back-pay for lost wages, holiday pay, and missed pension contributions.
Penalties vary but may include large fines, repayment of lost unemployment insurance benefits, and damage to the company’s standing with labor unions.
Several notable legal cases highlight the consequences of misclassifying employees:
There are several measures you can take as a business to avoid the pitfalls of misclassification. These include:
Ensuring compliance and the correct classification starts at the recruitment and onboarding stages. When hiring contractors, make sure your contractor agreement is set up correctly in line with local labor laws. It should cover, amongst others (see checklist above):
In a worst-case scenario, a robust contractor agreement can be used in your defense in legal cases – assuming you truly haven’t misclassified the worker.
Whilst the content of the contractor agreement is important, employers should still be aware of the “substance over form” principle, discussed above, and determine if it is applicable in the countries in which they hire individuals.
Employment laws are constantly evolving, especially in the context of remote work.
Spend time researching local regulations for the regions you’re interested in, before taking the next step and hiring an independent contractor or employee.
Regularly review the status of all your workers to ensure they are correctly classified. Make sure this forms part of your standard policies or procedures, and assign ownership of the audit to a specific person or department so these checks don’t fall through the cracks of your business.
If a contractor's role has evolved to more closely resemble that of an employee, consider offering them a formal employment contract. This can also hold the following benefits:
It can take significant time and resources to stay compliant as a global business when hiring remote workers. That’s why many businesses choose to use global employment services like Playroll, that have experts on-hand to help you make sense of local labor laws and stay fully compliant when hiring across borders.
I always feel completely calm and safe with Playroll, which is very important to me and the people we employ. I have complete trust that everything is done by the law.
Violeta Cirkovic, HR Generalist, Two Desperados
Employee misclassification can get complicated, but it doesn’t have to be a bottleneck to scale your global team.
Playroll can help businesses sidestep employee misclassification risk by ensuring compliance with employment laws in over 180 countries. No matter what type of worker you want to hire, Playroll’s team of experts will do the heavy-lifting to ensure your workforce is correctly classified and compliant – freeing you up to focus on your business growth.
Book a free chat with our team and get a compliance consultation, to ensure your business is not at risk of misclassification.
Working with contractors has many perks. For one, you don’t have to pay tax and statutory benefits as an employer, and it can be an efficient way to approach project-based work, or quickly get access to in-depth expertise.
But if you find yourself using a contractor’s services long-term, converting them to a full-time employee could be the right move to ensure compliance and avoid risks like contractor misclassification. An Employer of Record like Playroll can help you simplify this process, and make sure all your workers are correctly classified and working compliantly.
Here’s your guide on why and how to convert contractors to full-time employees, the easy way.
When deciding whether you need a contractor or a full-time employee for your business, you first need to understand how the law distinguishes between the two types of workers. This is especially important to avoid the legal and financial repercussions of contractor misclassification.
There are many key legal differences and business requirements at stake. These tend to be practiced around the world, but each country may have its own particularities.
We’ll use the U.S. as an example when it comes to country-specific details here:
For employees:
For contractors:
For employees:
For contractors:
For employees:
For contractors:
For employees:
For contractors:
For employees:
For contractors:
Independent contractors can help your business flourish without changing your whole operation. It makes sense to hire contractors if you need to urgently complete short-term projects, or if you require expert input or skills that will be difficult to source.
Here are some of the best ways to hire contractors for your business:
Transitioning from relying on freelancers to employing full-time staff is a significant shift in business strategy. If you find yourself ticking many of the boxes below, it might be time to consider converting a contractor to a full-time employee.
You can convert a contractor to an employee in two ways. If the worker is local, your HR team and the contractor will have to complete the necessary admin that’s relevant for that country. For example, in the U.S. this involves filling out form W-4, which determines the amount of federal income tax to withhold from an employee's paycheck. Additionally, your new employee will complete form I-9 that acts as verification that they can work in the United States.
But if you’re dealing with global workers, it gets complicated and expensive if you don’t have a legal entity in the country.
It doesn't have to be a cumbersome process, though. One of the best alternatives is to use an Employer of Record (EOR). These services handle global compliance, payroll and all the HR admin on behalf of an organization. They allow companies to hire employees in new markets without having to establish an entity, by leveraging the EOR provider’s networks instead.
With a good EOR provider, like Playroll, the process of converting a contractor to an employee is straightforward. We will simplify the transition process, handling the administration on your behalf, and ensure full legal compliance when you’re adding your new team member to the platform.
Contact our team to learn how we can simplify contractor conversions to streamline your HR efforts and keep you focused on your business.
Contractors are not bound to any specific company, so they can work on their own terms and for as many clients as they want. But that means they are not protected by labor laws and don’t have the full benefits that employees have.
A 1099 employee is another term for an independent contractor or freelancer in the U.S. They receive income in the form of a 1099-MISC or 1099-NEC tax form, rather than a W-2 form which is used for full-time employees.
The W-4 tax form, officially known as the Employee's Withholding Certificate, is a crucial document used in the United States by employers to determine the correct amount of federal income tax to withhold from an employee's paycheck.
In the landscape of American economic transformations over the last decade, the pivot from traditional employment to independent contracting stands out. This shift is marked by a growing number of full-time employees opting for the flexibility of freelancing over the confines of the 9 to 5 grind.
The year 2020 was a tipping point, witnessing three out of ten full-time workers transition to freelance roles. This surge has led to an estimated 59 million Americans embracing independent contracting, collectively earning around US$1.2 trillion.
Despite market contractions during the pandemic, projections indicate a continued expansion of the independent workforce—with the rest of the world following suit.
The earnings that independent contractors make—combined with the high number of people participating in nontraditional employment—reveal that independent contracting is becoming an increasingly important part of a 21st-century economy and labor market. Additionally, the significant earnings workers have made through the gig economy show that it can be a driver of future economic security.
Independent workers are self‐employed, freelancers, or independent contractors. These incorporate solo self‐employed, laborers whose work relationships are governed by a market‐based arrangement under contract rather than employment law.
Independent contractors are not employees and do not employ others in their provision of labor, skills, and knowledge. The focus is on actors who are neither bound by the control of an organization nor subject to mutual obligations as seen in an employment relationship. While independent work primarily concerns relationships between individuals and organizations, this extends to those in work relationships where a third‐party vendor contracts a labor market intermediary, digital platform, or project network organization.
What some call the gig‐economy can come under the umbrella term of independent work through independent contracting.
When it comes to independent work, there is no employment relationship; independent contractors are not legally classified as employees or workers, and therefore not subject to entitlements such as a minimum wage, statutory sick pay, maternity or parental leave, minimum notice periods, protection from unfair dismissal, and statutory redundancy pay.
The allure of independent contracting is undeniable, with many drawn to its promise of flexibility, autonomy, and a more harmonious work-life balance. This mode of employment allows individuals to tailor their work environment and schedule to their personal needs, offering the freedom to work from virtually anywhere and to allocate time for family.
Satisfaction levels among independent contractors are high, reflecting the value they place on autonomy and the benefits it brings. Research indicates that 80% of independent contractors report being very or somewhat satisfied with their work situation, significantly surpassing the national satisfaction rate of 53.7% among traditional employees.
Taxation presents another advantage for independent contractors, offering access to a range of deductions unavailable to their traditionally employed counterparts. These tax benefits not only enhance financial efficiency, but also contribute to the overall attractiveness of freelancing as a viable and lucrative career path.
However, the independent contractor model is not without its drawbacks. For example, in Australia, food delivery riders—emblematic of the gig economy's workforce—often find themselves without the employment rights afforded under the Commonwealth Fair Work Act.
Furthermore, despite the growing reliance on independent contractors, there appears to be little appetite from the federal government to introduce regulatory changes aimed at improving the work rights of gig economy participants. This reluctance to address the legal and social protections of independent workers highlights a challenge in balancing the flexibility and autonomy of freelance work with the need for fair and equitable treatment within the labor market.
As the debate continues, the call for a more open regulatory environment becomes increasingly pertinent. Advocates argue that fostering a framework that prioritizes the rights and contributions of independent contractors will not only benefit the economy at large, but also provide essential income security and economic stability for workers navigating this modern employment landscape.
In a move that reflects the evolving nature of work and the growing recognition of freelance labor, the state of New York has recently enacted significant amendments to its Labor Law, set to take effect in May 2024. The Freelance Isn't Free Act introduces a series of requirements and protections aimed at bolstering the rights of independent contractors within the state.
Drawing from a similar legislative framework previously implemented in New York City, this statewide extension underscores a broader push towards securing fair treatment and equitable working conditions for freelancers.
The Freelance Isn't Free Act broadens its protections to encompass a wide range of freelance workers, defining them as any individual or single-person entity engaged by a hiring party under independent contractor terms. It stipulates that any service contract meeting a minimum threshold of US$800—either per assignment or cumulatively over four months—must be formalized in writing. This mandate aims to clarify the expectations and obligations of both parties, ensuring that freelancers are afforded the same legal safeguards as their traditionally employed counterparts.
Furthermore, the law delineates specific exclusions, such as sales representatives and licensed professionals, while also outlining the requirement for written contracts. This structured approach not only protects freelancers from exploitation but also mandates record-keeping practices by employers.
In the evolving landscape of work, the formulation of an independent contractor contract is not merely a formality but a foundation for clear, mutually beneficial relationships between service providers and their clients. The transparency of contract terms concern the nature, location, scope, and compensation for work.
Gig workers are often compensated based on short-term performance, with compensation models including market-wage adjustments, individual incentives, and bonuses. Platforms like Upwork and Fiverr use compliance-based pay practices, appraising gig workers against strict pre-set standards. Such models prioritize flexibility, allowing for surge pricing or premium rates during peak demand periods, aligning compensation with market dynamics and worker performance.
It should go without saying: fair and competitive rates, beyond just monetary compensation, contribute significantly to contractor satisfaction and loyalty. Transparent negotiation processes, reflecting both market standards and individual contractor performance, can help establish a solid foundation for long-term collaborations.
The distinction between independent contractors and employees extends into the drafting of fixed-term contractual agreements. It's imperative that these contracts are formulated with clarity, specifying any termination of an independent contractor agreement clauses that might influence the calculation of damages in the event of premature contract cessation.
This careful drafting is essential not only for upholding the contractor status but also for safeguarding against misclassification, ensuring that governing law principles are adequately reflected, and that provisions of this agreement are understood by all parties.
High rates of contentment among independent contractors is underscored by the considerable number of workers transitioning from traditional roles to embrace freelancing full-time, challenging the notion that independent contractors are systematically exploited by larger corporations. The data suggests a strong preference for the freedoms and opportunities provided by independent contracting, underscoring a need for policies that support, rather than restrict, this employment model.
Despite its reported benefits, the burgeoning trend of independent contracting has not been universally welcomed. Legislative efforts in several states, most notably California's AB-5, have sought to curtail the freedoms associated with independent contracting, casting a shadow over the gig economy and sparking widespread job losses and income reductions.
Clamping down on independent contractors could force millions of people out of an employment structure of which they approve. It would also show an ignorance of the shifting employment landscape.
Employers can turn independent contracting into a strategic advantage by embracing the flexibility, specialized skills, and cost efficiencies that independent contractors bring to the table. This approach allows businesses to swiftly adapt to market demands, scale their operations up or down without the burdens of traditional employment structures, and access a global talent pool.
To effectively leverage this model, companies should focus on creating clear, comprehensive contracts that define the scope of work, deliverables, timelines, and payment terms. This clarity ensures that both parties understand their obligations and expectations, reducing potential disputes and fostering a positive working relationship.
Moreover, by integrating independent contractors into their talent strategy, employers can bypass the substantial costs associated with workers compensation insurance and employee benefits, typically required for full-time employees. Instead, resources can be redirected towards investing in project-specific talent, innovation, and growth initiatives.
However, this strategy requires a nuanced approach to ensure legal compliance, particularly concerning worker classification and tax obligations. Employers must carefully navigate these areas to avoid the risks of misclassification and ensure that the use of independent contractors aligns with both local and federal regulations.
Thoughtfully engage with independent contractors through Playroll, which helps businesses gain operational agility and access to specialized expertise. Position your company advantageously in a competitive marketplace—book a demo today.
Nike is currently facing a potential fine of over $300m for misclassifying thousands of independent contractors. That underscores the need for companies to ensure correct classification of workers.
Both contingent workers and contractors are engaged on a temporary basis. While contingent workers work under the supervision and direction of the employer, contractors work as independent entities. Employers should differentiate contingent workers from contractors in employment contracts to avoid costly misclassification risks.
Contingent workers are also called temporary workers. These workers are hired on a short-term or temporary basis to help complete specific projects or tasks within a company. A contingent workforce is usually hired through staffing agencies or managed service providers. Different types of contingent workers include freelancers, gig workers, part-time employees, on-call workers, and consultants.
Independent contractors, on the other hand, are self-employed individuals or entities with contractual agreements to provide specific services within an organization. Unlike contingent workers, contractors operate as independent business entities and are not subject to clients' supervision. Again, contractors are not covered by employment laws and are responsible for their own taxes and business costs.
While contingent workers and independent contractors are non-permanent workers, they have distinct characteristics that set them apart.
One of the key differences between a contingent worker vs contractor is their legal classification and relationship with the hiring agency or organization.
Legally, contingent workers are classified as temporary workers of the staffing agencies or the organization contracting them. Depending on their employment terms, they may be entitled to some employee benefits and protections, including minimum wage, overtime pay, health insurance, and retirement plans.
Contractors, on the other hand, are classified as independent entities. They work separately from the hiring organization and are not entitled to employee benefits and protections. Since they are self-employed, they negotiate their terms of engagement and compensation.
Contingent workers integrate into the company's workforce and work alongside other full-time employees. Thus, they are subject to the same supervision, direction, and control as regular workers.
On the contrary, contractors retain full autonomy and control over their work and are not subject to clients' supervision or control. Unlike contingent workers, contractors do not integrate into the company’s workforce and can work for multiple clients.
A contingent worker is considered an employee of the agency or organization through which they are engaged. Therefore, the employer is responsible for income tax withholding and providing a W-2 form to the worker.
On the other hand, employers aren't responsible for handling taxes or other deductions for independent contractors. Contractors should pay self-employment taxes and report payments on their tax return.
Payments to both contingent workers and contractors can be deducted as business expenses, providing companies with tax planning opportunities.
Contingent workers may be entitled to certain employment rights and protections, including overtime pay, minimum wage, and other benefits like health insurance and retirement plans.
Contracts' legal obligations and liabilities should also be documented and clearly stated in the contractual agreement.
Classifying a contingent worker as a contractor or vice versa can result in legal non-compliance and violation of labor laws. That can expose a company or organization to employee misclassification risks, including:
Below are 3 companies that paid hefty penalties for the misclassification of contingent workers vs contractors.
As we can see from the examples, companies end up paying heavily for violating employee rights and protections. That can be avoided through:
Contingent workers and independent contractors are classified differently, and confusing these types of workers can result in misclassification risks.
Playroll is an innovative employment platform that enables you to hire global teams following the latest labor laws and employment regulations in different countries. We help you avoid misclassification risks through:
According to IT Contractors UK, there are about 4.2 million self-employed professionals in the United Kingdom. That makes it fairly easy for companies to find and hire an independent contractor in the UK. But after hiring an independent contractor, you need to onboard them with the right contractor agreements and paperwork to build a legal working relationship.
This article outlines 9 key factors to consider when building an independent contractor checklist, and how Playroll.com contractor management tools can help you streamline the onboarding process.
Compliance with legal and tax requirements should be top of mind when considering how to onboard an independent contractor. That means collecting the relevant tax information and legal documents to ensure compliance and legally protect you and the contractor.
Key legal considerations include:
Take advantage of Playroll's EOR expertise for compliance guidance to tailor your contractor agreements to comply with tax laws.
Tech tools and software make for an efficient and streamlined onboarding process. They make it a breeze to prepare, customize, and send the right contractor agreements. They also help automate payments so that you don’t need to be nearby to process the payment.
Playroll offers easy-to-use contractor management tools and solutions, including:
Besides the contractor agreements, your company should collect and document all the relevant paperwork required to streamline the onboarding process. Important documents that may be useful to ensure a smooth working arrangement include:
Playroll.com offers HR support and guidance to help you collect and document all the necessary independent contractor paperwork.
Companies need to think about how to onboard an independent contractor across different industries. Create industry-specific sub-checklists from your general independent contractor onboarding checklist to meet the specific needs of the industry.
For instance, your independent contractor onboarding checklist for a software developer may differ from the one for onboarding a content manager or a writer. Playrol offers ready-made contracts that you can easily customize to meet industry-specific needs.
Introducing your contractors to the existing team and giving them access to the necessary tools and software is part and parcel of how to onboard an independent contractor. Top tips for the smooth integration of independent contractors include:
Within legal limits, you can also invite your independent contractors to meetings, coffee chats, and relevant company events to bond with other team members. Playroll.com’s collaboration tools enable you to organize and coordinate meetings and relevant company events with independent contractors.
Independent contractors should be treated as self-employed professionals, not company-employed workers. That's important to keep in mind when considering how to onboard an independent contractor to avoid misclassification risks.
To avoid any potential risks in their contractor/client working relationship, companies should:
Failure to correctly classify independent contractors can lead to serious legal fines & penalties or even backdating of tax and national insurance contributions. Playroll.com offers expert advice to help employers navigate contractor classification challenges.
Clear communication helps set expectations and is a top tip to keep in mind when thinking about how to onboard an independent contractor. Communication best practices to ensure a successful working relationship include:
Playroll insights on effective communication practices can help you set clear contractor/client expectations during the onboarding process.
Providing support and resources is part and parcel of how to onboard an independent contractor. Make sure that you give them the necessary support and the resources they need to get their job done.
However, you should be careful about the level of support and access you allow to avoid misclassification risks. Payroll.com recommends working with an experienced EOR to ensure smooth onboarding.
Changing employment regulations shouldn't be ignored when considering how to onboard an independent contractor. Employers should stay updated with regulatory changes to ensure continuous improvement of their onboarding processes.
Playroll's EOR expertise helps you build a compliant onboarding process in line with changing labor laws and legal requirements across global markets.
Learning how to onboard an independent contractor is essential to ensure a smooth onboarding process. Playroll.com offers contractor management tools to help you hire, onboard, and pay contractors anywhere in the world.
Ready to streamline contractor onboarding in the UK? Visit Playroll for expert solutions and ensure a seamless, compliant process. Get started today!
With Playroll, contractors can efficiently withdraw their earnings using Payoneer. The process is user-friendly, with the option to withdraw funds to a Payoneer opt-in card. Payoneer ensures transparency with competitive rates and real-time forex rates, providing a seamless withdrawal experience for contractors.
Payoneer is the world’s go-to partner for digital commerce, everywhere. From borderless payments to boundless growth, Payoneer enables businesses to transact in 70 different currencies across more than 190 countries and offers support in 22 languages, simplifying the management of finances and guaranteeing timely payments to suppliers and clients.
Now contractors can withdraw funds with ease through Payoneer. Here's How:
We'll be releasing the payment functionality over the next few weeks - keep your eyes peeled. For now, read on for a step-by-step guide on how to withdraw funds from Payoneer. 👇
Connecting your Payoneer account with Playroll is simple. Our EOR platform is designed for user convenience, ensuring that the process is both simple and efficient. By linking your Playroll account with Payoneer, you open the door to seamless financial transactions. Connect or set up your Payoneer account in a few simple steps.
✅ Step 1: Set-up or link your Payoneer account. Once you have signed your Playroll Contractor agreement, you will be immediately guided to set up or connect your Payoneer account. You have the option to complete this later by navigating to settings. Select “Login to Payoneer” to be directed to the Payoneer sign up page to set up or link your account.
✅ Step 2: Select your business type. You will select “individual” if your business is not yet registered, or you are operating as a freelancer.
✅Step 3: Complete the required information fields, including your first name, last name, email address and date of birth. Define your country of residence, address, contact number and ID number.
✅ Step 4: Set a secure Payoneer password.
✅ Step 5: Select your prefered account type. Complete the Payoneer sign up by selecting between a Business or personal account, supply your banking information and submit your details to continue.
Already a Payoneer account holder? Simply select “Already have a Payoneer account” and continue with the steps that follow.
💡 Tip: Ensure you have your banking details on hand and double check the information supplied before proceeding to accept the terms and conditions.
✅ Step 6: Review in Progress: You will need to wait for your review to be completed before you can submit your first contractor invoice. The review process can take up to 3 business days. You’ll also receive a confirmation email directly from Payoneer, confirming your account creation. This is your golden ticket to getting started, so keep your eyes on your inbox!
If you choose to set up or link your Payoneer account at a later stage, simply navigate to your profile on the Playroll platform and select “Payment Settings” and “manage” to kickstart your Payoneer journey.
Once your Payoneer account has been set up and linked to Playroll, you’re ready to start receiving payments. All funds due to you will automatically be transferred to your Payoneer account - removing the need for manual intervention or tedious direct bank deposits.
Withdrawing funds from your Payoneer account is simple. Follow this step-by-step guide to walk you through the process effortlessly.
Step 1: Log-in to Payoneer.
Step 2: Access the “Withdraw” option from the menu and then selecting “To Bank Account”.
Step 3: Choose the specific currency or card you want to withdraw funds from.
Step 4: Enter the withdrawal details by following these three steps:
Step 5: Click on “review” and a fund withdrawal summary will be displayed for your review.
Step 6: Carefully review all the withdrawal details and confirm everything is accurate. If any changes are needed, you can simply select “Edit” to make the required changes.
Step 7: Once you’ve confirmed all details are correct, you can select the checkbox ‘I approve this transaction’ and then select “withdraw”.
Ready to get started on your contractor journey? Schedule a demo to learn more.
You can expect your funds to be deposited into your account within 3-5 business days.
You can track the progress of your invoice payment through its different phases until it reaches Payoneer. Once it's in their Payoneer account, you'll have visibility into the status of your funds within your Payoneer wallet."
Exact fees are dependent on the account usage. You can access a detailed pricing and fee breakdown during the registration process, in the top left-hand corner under the "fees" tab. You can also access the "Pricing & Fees" breakdown after the registration process under "Help" in "My Account".
Playroll simplifies global contractor management, ensuring compliance and efficiency. The user-friendly platform simplifies contractor onboarding, making it easy for employers to manage their independent workforce. Employers can approve and pay invoices, including transaction fees, while contractors can submit invoices and track payments effortlessly.
Playroll supports businesses looking to hire, pay and manage contractors compliantly and efficiently in over 180 countries, helping you avoid any misclassification risks along the way. By simply adding contractors to the Playroll platform, employers can effortlessly manage and pay their independent workforce, while focusing on their core operations. With a seamless contractor onboarding process, and an intuitive user-friendly platform, contractors can get to work quickly, effortlessly submit invoices and get paid into their bank accounts in their preferred local currency.
Getting started on your contractor journey is easy, by following a few simple steps you can quickly build your independent workforce.
Step 1: Add contractors to the Playroll Platform: Contractors can only access the Playroll platform once they have been added and invited to the platform by their employer.
Step 2: Contractor account verification: Contractors need to verify their account to get started with Playroll, by simply clicking the link in the account verification email.
Step 3: Account Login. After verifying their account, contractors must create a secure password and login to the contractor platform to begin their contractor onboarding journey.
💡 Hot Tip: Follow the guidelines on setting up a strong password and store the password securely for easy future access.
Step 4: Account info verification: Contractors must verify all account information by selecting the verification checkbox.
Step 5: Sign the Playroll contractor agreement: Contractors need to read through the contractor agreement and sign once they are satisfied with the terms of the agreement. Once signed, a copy of the agreement will be sent via email and made available on the contractor platform.
Step 6: Sign up for Payoneer: After signing the Playroll contractor agreement, contractors must set up or link their Payoneer account to enable easy submission of invoices and withdrawal of funds.
Playroll streamlines the process of submitting invoices and getting paid. Our platform provides contractors with a single hub to submit and view invoices, ensuring a seamless experience from start to finish.
Contractors can start submitting invoices via the Playroll contractor platform once their Payoneer account has been set up or linked and successfully authenticated in two simple steps:
Step 1: Navigate to the dedicated invoice section of the platform and select "New Invoice."
Step 2: Provide all invoice details, including uploading an independent invoice and timesheet and submitting it for payment.
Step 3: Once the invoice is submitted, it will appear in the Dashboard section of the Contractor platform, providing insight into all outstanding invoices, including those that have been paid.
Step 1: Approve or reject invoices: Once contractors submit their invoices, customers will find them in the dedicated contractor invoice section of their employer platform. Here, they can choose to either approve or reject the invoices as needed.
Step 2: Paying contractor invoices: Approved contractor invoices will automatically move to the "Awaiting Payment" tab. Here, employers can easily select invoices from different contractors, giving them the choice to cover transaction and foreign exchange (forex) fees associated with these invoices. This includes any fees contractors may incur when withdrawing funds through Payoneer.
Step 3: Continue to the Payment Details Modal. Here, the contractor bank details are made available allowing electronic bank transfers to be made based on the contractors selected billing currency. Use the Playroll reference number displayed on the screen to ensure no payments are mismatched and processed effectively.
💡Hot Tip: Employers have 4 hours to make payment at the amount shown due to currency fluctuations.
Once confirmed, our platform will be on the lookout for the arrival of their payment, which will automatically be allocated to the contractor(s) Payoneer account. Contractors will be sent a notification when payment has been received and their account has been topped up!
Once your Payoneer Account has successfully undergone the review process and has been authenticated, you can submit your first invoice via the Playroll Platform.
The Payoneer account review process can take up to 3 business days.
No. The sign-up process for Payoneer has been thoughtfully designed for ease of use and convenience. Simply follow a few simple prompts to activate your Payoneer account.
We’re all familiar with that statistic about passive candidates. Whether it’s 70% or 50% doesn’t matter as much as the fact that most of the talent pool isn’t actively looking for a new job. So your future hires are out there, but they’re probably not going to come to you.
And that’s especially true in the era of The Great Resignation.
What does that mean for companies? Well, if you want to hire foreign workers with rare skills, you’re going to have to seek them out in their natural habitats:
LinkedIn hosts over 800 million users and over three-quarters of them are outside of the USA. 6 hires happen on the platform every minute. When it comes to hiring foreign workers, LinkedIn is the place to be. It’s easy to advertise a position as remote or hybrid and even target specific countries.
Employers can also make use of special features to vet applicants and their qualifications.
To get the most out of LinkedIn, focus on telling your brand’s story in an engaging, compelling way. It’s a loud, crowded space where everything has been heard before. Try to be interesting, concise and fresh. For example, share insights about your company’s culture and individual people within it.
Job boards and dedicated Slack communities are valuable resources for recruiters. The last few years have seen a proliferation of platforms that connect remote digital nomads with the recruiters who are looking for them. Here are some of the bigger job boards for remote hiring:
Your next big hire might be closer than you think. Employee referral programs tend to generate quality, long-term hires. In fact, a majority of recruiters rate this method above all others in terms of ROI.
To build a successful referral program, provide incentives for your workers to go out there and sing your praises. These can be financial incentives or recognition-based.
But even with the best strategy, you’ll only succeed if you have something enticing enough to turn prospects into applicants. This leads us to the next step.
What are remote workers looking for in 2022? For starters, they want to keep being remote workers. As more and more of the world’s workforce have had a taste of flexible hours and autonomy, it’s becoming harder to entice them back to the ancient past of brick and mortar, commuting and formalwear.
That’s a dead end, and companies should instead focus on developing policies that cater to individuals’ preferences.
Competitive salaries and performance bonuses calibrated to their local cost of living are also major draw cards. Businesses hiring foreign workers should invest time in understanding these factors and structuring their offers accordingly.
Here’s an often-overlooked tip: keep it simple! Many of the people you’re targeting don’t need a job. So your application and interview process needs to be smooth and straightforward.
The moment they start to feel like extra work is the moment potential applicants will click out, for good.
Worker classification is an important aspect of compliance. Long before you start hiring foreign workers, you need to decide what kind of role they will play in your organisation. For example, if you are looking for highly specialized skills for time-bound projects, contractors may be the best option.
On the other hand, companies seeking long-term staff for critical operations should opt for direct employment.
Unfortunately, getting these distinctions right is not always straightforward. And the stakes are high: getting it wrong can incur fines, payment of back taxes and worse.
So it’s vital that any business that wants to hire foreign workers understands how different countries construe the differences between independents and employees.
If you hire foreign workers as independent contractors, you can pay them through international transfers, independent payment platforms or even digital wallets. Each of these methods has its own advantages and disadvantages.
The payee is not liable for tax withholding on these payments, although their home countries might have legal norms for verifying the non-resident alien status of remote contractors. For example, US-based companies must request a W-8 BEN-E from their contractors.
Paying foreign employees is a different matter entirely. When you hire foreign nationals who work remotely from their home countries, you need a local legal entity. Incorporating an entity takes months, and the legal setup costs tend to reach around $20,000.
There’s also the added complexity of country-specific laws about who is allowed to establish entities, and on what terms.
As difficult as it is, this is the way to go if your employee headcount within a particular country exceeds 20 people, or if you have the means to establish a long-term presence abroad.
These companies can outsource their overseas HR functions to Professional Employment Organizations (PEOs) once they have established their own entity.
For smaller projects, or companies looking for an interim solution, there are other options. Employers of Record (EORs) handle payroll, tax and compliance with local labour laws on behalf of foreign companies who don’t have a legal presence in the countries where they hire.
Let’s face it - all the fun of global recruitment belongs in steps 1 and 2: finding, vetting and interviewing fresh talent. What if you could focus exclusively on that, and leave the legalese and compliance administration in the hands of a trusted partner?
Well, that’s exactly what we do at Playroll. Through our cutting-edge global platform, our clients can build international teams and retain their best talent, remotely and hassle-free. We enable zero-entity hiring in over 170 countries through our network of international subsidiaries.
Request a demo today to learn more about how Playroll can smooth the runway for takeoff.
Back to Top
.svg)
.svg)
Curated insights, tools and guides to win at global hiring and remote work, straight to your inbox.
Playroll will handle your data pursuant to its Privacy Policy
.png)
.svg)
.svg)
.svg)
