What You Need to Know Before Hiring Foreign Freelancers

Last Updated on July 10, 2023

Looking at the 2022 gig economy’s trend, there are probably now more people around the world working on a freelance basis as independent contractors than ever before.

A combination of ever-expanding access to digital technology, coupled with reorganized working practices in the wake of covid, has meant there is much greater flexibility and agility in the global employment market. This has increased the number and range of opportunities that are available to freelancers, while at the same giving employers much greater access to the best talent worldwide.

However, while it is increasingly straightforward to take on workers who are located across the world as a freelance, independent contractors, there are nevertheless some important steps that need to be taken prior to and during the hiring process.

If you are looking to expand your business or get access to talent beyond your home country, and you want to learn more about how to hire a contractor, read our quick guide below.

Assess your business needs

The first step if you are considering taking on foreign contractors is to undertake an assessment of your needs, e.g., would it be easier to hire locally, what a freelancer’s role would be, the projected workload, the skills gap they would be filling, etc.

It is important to assess whether you have a short- or medium-term need, or whether it is going to be more ongoing. This will also help you to determine whether it would be more economically viable to onboard an employee (with all the associated costs in terms of entitlements, employer contributions, etc.), or to take on a freelancer on a temporary basis, just for the duration of a particular project.

Using the right channels to find freelancers

Just as the number of global freelancers has grown significantly in recent years, so have the avenues for finding and hiring independent contractors in all types of industries and sectors.

The role, the sector, and the terms of engagement will to some extent determine which method if the most efficient and cost-effective. In areas such as web design, graphic design and content writing, freelancer websites like freelancer.com, Fiverr and Upwork may meet your needs, along with mainstream platforms like LinkedIn.

For some fields, however (such as data science), you may find that the services of specialist, industry-specific recruiters or headhunters give you access to better-qualified candidates.

Ensuring compliance with local laws when hiring independent contractors

When you hire foreign freelancers, it is important to clearly establish the terms under which they are being engaged, just as would be the case with a local hire. Therefore, it is highly recommended that you create an independent contractor agreement.

This should set out the terms of work, e.g., in terms of the scope, obligations, deadlines, etc., as well as the payment terms, in a document that is legally binding. It should also look to set out in advance any conditions pertaining to working hours, in particular the maximum working hours that employers can demand from a contractor on any given day, as well as the conditions under which an agreement can be terminated.

Having an independent contractor agreement in place is also important for both parties in order to establish for local tax and labour authorities that the person is working for you as a freelance contractor, not as an employee.

Make sure contractors are properly classified

The laws regarding the classification of workers are different in different countries, and so it’s important to make sure that you are in compliance in this area, in particular with regard to tax. In addition, the way in which independent contractors are taxed within a country can change quite significantly (e.g., with a change of government), so it is essential to stay on top of the regulations in any jurisdiction where you are taking on foreign freelancers.

For instance, if you are hiring US-based contractors, you will need to complete and file IRS Form 1099-NEC (if they earn more than $600 locally). Other countries will have their own equivalent requirements in place, and failure to comply can result in significant penalties, so it pays to take the time to ensure you are getting this right.

What you need to know before hiring an independent contractor

There are several other conditions that you need to be clear about in advance of hiring the services of a foreign freelancer on a temporary or contractor basis.

For instance, you need to be informed about local labour laws, such as those with regard to consumption tax, how invoices are paid, and other legislation pertaining to workers who are off payroll, as is the case in the UK.

You should also bear in mind that in countries with a federal system. there may be variations in labour laws between states or provinces. In addition, it should be remembered that the timing of the financial year is different around the world.

It is also helpful to familiarise yourself with the statutory public and religious holidays in countries where you are taking on freelancers. While a contractor is not entitled to higher pay rates on public holidays, you nevertheless need to take holidays into account when drawing up an independent contractor agreement, and in the setting deadlines, transferring of funds, etc.

Likewise, you need to understand the specific laws in relation to personal time off (PTO). While most freelancers are not entitled to this, in some countries they will be (such as in Spain, under certain conditions), so you need to make sure you are fulfilling your obligations in this respect.