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How to Hire an International Independent Contractor

A red-haired man with a hardhat holding a box of tools, standing next to an outline of the globe and a yellow airplane.

Thanks to the internet, there are more options than ever to hire remote workers from anywhere in the world. This gives your business the means to call upon a vast pool of skilled talent no matter where you’re located.

However, hiring an international contractor comes with its own special challenges, such as managing IRS requirements and navigating labor policies in the country where your contractor lives. We’ll guide you through the international contracting process below.

What is an International Contractor?

International contractors are non-US citizens working in another country on behalf of a US-based business or individual. These contractors are self-employed, rather than employees of your company or of another business contracted by your company. International contractors cannot be green card residents in the US or qualify as a US resident for tax purposes under the substantial presence test.

What is the difference between a contractor and an employee?

There are many differences between employees and contractors. An employee’s work is directed and controlled by their employer, and they receive regular wages and benefits in exchange for their ongoing labor. Independent contractors are self-employed, do not receive a regular wage or benefits from the business that contracts them (although international contractors in certain countries may require benefits under the terms of those nations’ labor laws), and do project-based work on their own terms.

The distinction in classifying a contractor versus an employee is crucial for Internal Revenue Service compliance. Misidentifying a hire as a contract worker when they should be classified as an employee can result in fines and penalties.

Have an employee who wants to work from a foreign country? Check out our guide to international employees.

Pros and Cons of Hiring International Contractors

Hiring an international contractor can be a great solution for certain business problems, but it can also bring its own issues.

Pros of hiring international contractors

  • Contractors can supply talent as-needed for short term or one-shot purposes when hiring an employee may not be practical.
  • International contractors can provide skills, resources, and perspectives that may not be available where your business is headquartered, or their country may exceed the US in certain knowledge sectors.
  • You can hire a contractor in a different time zone to do work during hours that your company isn’t conducting business—like hiring a European contractor to complete a project during their daytime while it’s night in the United States.
  • Your company might also save money by hiring a contractor, depending on currency exchange rates and pay standards where the contractor lives.

Cons of hiring international contractors

  • While many countries don’t require foreign companies to provide employment benefits or pay taxes on contract work, there are countries where foreign labor restrictions apply.
  • Contractors in different time zones may be unavailable when you need to reach them, which can cause delays in production or feedback.
  • Compared to local workers, you may have limited control over the pace and process of the work you’ve hired the contractor to do.
  • Contractors may need to split their time between multiple clients rather than focus solely on your project.
  • Contractor agreements may require language translation.
  • Depending on the project and the contractor’s capabilities, finalized work may also require translation.

How to Hire an International Contractor

If you have a project that would benefit from an international contractor’s work, you’ll need to solicit applicants, review their applications, and make an offer with an independent contractor agreement.

Step 1: Solicit contractors for your project

You can post a call for contractors on employment websites like Indeed or LinkedIn, or you can use contractor-focused services such as Upwork or Remote. Many of these sites allow you to view applicant profiles or even directly contact freelancers about potential work.

Wherever you choose to post your call for applicants, make sure the ad includes…

  • Project details
  • Basic information about your business
  • Education and skill requirements
  • Estimated time to complete the task
  • Samples of the contractor’s work (if applicable)

You may or may not want to list a pay rate or budget for the contractor. On the one hand, listing the pay will help weed out applicants who require more money than you can afford. On the other, you might end up paying more than you need if you list a rate and an applicant was willing to work for less.

Some ads ask the contractor for a quote rather than listing a pay rate, which lets the contractor tell you how much they expect. Over time, you’ll get a better sense of what your budget should be when contracting in the future.

Step 2: Review contractor applications

Once you’ve received applications for the contracted job, you can compare your candidates. You might want to reach out for an interview before settling on a choice. An applicant that looks good on paper might fail to meet expectations when you talk to them.

Ask the applicant if they’ve worked on similar projects and their estimated time to complete the work, as well as whether their skills, equipment, and current workload will allow them to do the task. You might even solicit references from previous work.

Step 3: Write an international independent contractor agreement

Once you’ve settled on your contractor, you’ll make an offer, and negotiate an independent contractor agreement. The agreement should contain language specifying a contractor relationship, not an employer-employee agreement. It should also specify the terms of the work and clauses for termination that will end the contract—including terms under which the contractor has failed to live up to expectations and will be terminated without pay, and terms for successful completion.

Step 4: Provide forms for international contractor taxes

When you’ve arranged to hire your contractor, you’ll need to provide forms for information that will keep your company compliant with the IRS while using international workers.

  • If your contractor is self-employed (a sole proprietor in their country), you’ll need them to fill out Form W-8BEN.
  • If the contractor has created their own formal entity for their work (much like an American LLC), you’ll need to provide Form W-8BEN-E.

These forms do not need to be sent to the IRS. They are for your use in determining your tax reporting and withholding requirements when you file.

Your contractors must comply with the tax requirements in their home country, but as a contractor, that will not be your responsibility in most cases. If you’re unsure whether you’ll need to pay taxes (or provide benefits) for contract work in another country, speak to an international employment lawyer.

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This entry was posted in Opinion.