How to Hire International Contractors in 6 Steps
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
This article is part of a larger series on Hiring.
If your company is looking to expand its talent pool outside the US, partnering with a self-employed foreign contractor may save you money and get you access to an expert. Our guide walks you through how to hire international contractors, from planning the project and evaluating candidates to requesting quotes and completing forms.
Hiring international contractors can seem challenging, as you need to find and review applicants and figure out payment and taxes. For assistance, consider an international payroll provider like Remote. It lets you onboard, pay, and manage your global contractors and even helps you create agreements tailored to the labor laws you need to follow. Sign up today.
Step 1: Plan the Project & Determine Qualifications
When working with an international contractor, you need to give them a project. You cannot control their daily duties and assign them tasks to complete like you can with regular employees. Figuring out what you need the foreign contractor to do will help you determine if this is really a job for a contractor or an employee.
Also, consider the time it will take to complete this project. If it’s a yearslong project, that might not be right for a contractor. They may work with multiple clients and likely won’t be able to give you full-time hours. Short-term projects, temporary needs, and work that’s commonly outsourced is best suited for international contractors.
Based on your project needs, you’ll determine the qualifications needed. Ensure you distinguish between what you need and what you want, as no one will match up perfectly. Consider asking yourself the following questions:
- Does the project require someone with a specialized degree?
- How many years of experience do they need to have?
- Does the foreign contractor need to have certifications? (e.g., accounting, legal, and other industry-specific)
- What is your budget for the entire project?
- How long will the project take?
- How much time will you need a foreign contractor to dedicate to the project? (Remember, if you’re looking for 40 hours per week, that may be work for an employee.)
You also need to consider the time difference. While you cannot tell a foreign contractor what schedule to work, you must prepare for delays in responses based on time zone differences.
Step 2: Create a Job Ad & Evaluate Candidates
Just like when you hire regular employees, you need to post a job ad to let applicants know you’re looking. It should state with absolute clarity that you’re hiring independent contractors, not full-time employees.
Keep your job ad focused on project work, not daily tasks. For example, if you need someone to respond to customer emails using a comprehensive guide, work in your client management system, and escalate issues to you, that’s an employee. But if you need someone to build you a client management system, that could be a project for a skilled contractor.
Make sure your job ad includes:
- Details about the project
- Any education and certification requirements
- Estimated length of time the project will take to complete
- A few sentences about your company
Some companies also provide their budget for the foreign contractor. This can help keep candidates to only those willing to work within your budget but could also hurt your negotiations. If you don’t mention the rate, you can instead get quotes from the foreign contractors, which can help in your decision making.
You can use typical job boards to post your job, or a platform like Upwork, which boasts millions of users, including many foreign contractors. You can search profiles and let them apply to your job post. Upwork makes it easy to pay them, too, using its platform as the payment processor.
Your list of requirements and like-to-haves will be helpful as you evaluate applicants. Match your must-haves list with each foreign contractor’s application. If they match with most or all, then you can add them to your interview list.
Step 3: Request Quotes
Once you’ve received applications from interested foreign contractors and compiled your list of the most qualified, ask them for quotes. Doing this before an interview will help you reduce the number of interviews you need to conduct, as some quotes may be outside your budget. Negotiation can come later.
At this point, you’re trying to make sure the foreign contractor’s rates are reasonable. Do your research beforehand to determine the reasonable pay for that type of project in the countries your applicants are in.
Review the quotes when you get them, and be cautious of quotes that are outside the norm, both low and high—that could be a red flag that someone doesn’t know what they’re doing. Remove any foreign contractors who don’t fit in your budget.
Step 4: Review Applicants & Conduct Interviews
As you screen applicants and their credentials, don’t be afraid to reach out and ask questions before scheduling an interview or official discussion regarding the project. You may want links to some of the work they’ve produced (if applicable) or just clarification that they’re really interested.
We recommend narrowing your final list of contracting candidates down to approximately half a dozen applicants. If you choose too many to interview, you will be unable to effectively decide which contractor is right for your project.
Some foreign contractors will look great in their application but fail to live up to your expectations during an official discussion. That’s why it’s crucial that you ask certain questions, including:
- Have you recently completed a similar project? Can you tell me more about it?
- How long do you estimate this project will take?
- Do you have all of the equipment you need to do this job?
- What are your education and certifications?
- How many clients do you have right now?
- What are your payment terms?
- Do you have the required insurance?
- Do you have any references I could call?
After you have spoken with every candidate, make a selection about who you want to work with on your project.
Step 5: Make an Offer Using an Independent Contractor Agreement
When you’ve decided which foreign independent contractor you want to partner with, discuss the offer with them. This is a less formal process than an employee offer and is usually a simple discussion on terms. Once you agree, you’ll formalize everything in an independent contractor agreement, which states the work scope and project details clearly. Both parties should sign it.
Compliance Tip: If an independent contractor agreement is challenged, a court or governing body will glance at the agreement but will thoroughly evaluate the actual day-to-day relationship of the parties. It is critical that you have a contract in place, but it’s equally important that you treat the independent contractor as a non-employee. Do not control when they work, provide them with equipment, and assign them a supervisor. All of this could be evidence of an employment relationship, leading to costly fines.
There should be a specific clause in the contract stating that the parties are not entering into an employer-employee relationship, instead entering into a contractor relationship.
Mere words, however, are not enough. That’s why it’s important for the scope of work to clearly show the foreign contractor has complete control over how and when they work, helping solidify the independent contractor status of the worker. If you require daily check-ins, for example, that could be seen as the beginning of an employment relationship.
Of course, you’ll need to have regular status updates and contact with the foreign worker—but you cannot become their supervisor. You’re partnering with them to complete a project or provide some expertise. Make that abundantly clear.
A termination clause should exist in the international independent contractor agreement, as well. This will set the process for ending the contract, should the contractor not live up to your expectations; they can be terminated at any time without compensation.
If the contractor has successfully completed the project and you have no additional work for them, you still need to terminate the contract. Usually this is done by providing written notice to the contractor that their services are no longer required. Whether parting on good terms or bad, make sure that the process for termination is clear in the contract.
Step 6: Complete & Retain the Right Forms
When you hire international employees, there are certain forms you must collect. The same is true for foreign independent contractors—you need them to complete either Form W-8BEN or Form W-8BEN-E.
These forms are used to establish the status of a foreign independent contractor. Form W-8BEN is used for individuals who work as a sole proprietor, whereas Form W-8BEN-E is used for foreign workers who have set up their own formal entities.
When the international contractor completes the appropriate form, you do not need to send it to the IRS. The form is for you to determine tax reporting and withholding obligations in the US.
The international worker will be required to adhere to tax obligations in their home country. However, as mentioned above, there are a few countries that require US companies to pay benefits or taxes. These laws are in place to protect independent contractors in those countries from exploitation. Every country has slightly different requirements, so it’s a good idea to discuss this with an international employment lawyer.
Pros & Cons of Hiring International Contractors + Final Tip
| PROS | CONS |
|---|---|
| Access cheaper labor without a loss of quality | Delayed work feedback and production due to time differences |
| Increased talent pool outside the US | Less control over the day-to-day work |
| Reduce overall company overhead by not needing to expand physical office | Inconsistency as foreign contractors come and go |
| Increased productivity and staffing flexibility | Depending on the home country of the foreign contractor, you may need to provide limited benefits |
Classify the Worker Correctly (& Don’t Cross the Line)
Deal with foreign independent contractors as a business partnership, not as an employer-employee relationship. In the US, the Internal Revenue Service (IRS) defines an independent contractor as someone who has the right to control their own work and is not directed by a company on what to do and how to do it.
Other countries, including many European countries, go even further and, in certain circumstances, require companies to provide limited benefits to independent contractors, including time off and holiday pay. This is why understanding local employment laws, in addition to those in the US, is crucial to making sure your company stays compliant.
There are several types of employees you can hire, each classified differently. Even if you have a solid international independent contractor agreement in place, if your company tells the worker when or how to work, you may inadvertently transition them from an independent contractor to an employee, subjecting your company to fines, back taxes, overtime pay, and other penalties.
To avoid misclassification, abide by the following best practices:
- Do not require the international contractor to work specific hours
- Ensure the contractor’s work is not the central focus of your business
- Do not have the contractor sign a noncompete or non-solicitation
- Do not be the only source of income for the contractor
- Do not assign a direct supervisor or conduct performance reviews
- Make sure the foreign contractor has all of the supplies required and your company does not provide them with any tools or equipment
- Unless required by the foreign contractor’s home country, do not provide benefits
Why is this so important? Because it can be extremely costly. The US routinely fines companies for misclassification, and other countries even put people in prison for violating their employment laws. Learn more in our guide on 1099 vs W-2 workers.
Bottom Line
There are inherent risks to any business relationship, and working with international contractors is no different. Taking the time to follow a structured process can reduce the risk of legal troubles and help you find the right foreign contractor for your needs. Make sure you always have a contractor agreement in place and do not take action that will transition the foreign contractor into an employee.
