An Effective Guide for Hiring Foreign Consultants and Foreign Independent Contractor

It’s easier now to work with foreign consultants and independent contractors. With the internet, communicating and accomplishing projects with teams and people from different places has become commonplace. With remote work becoming the norm for many companies, it is now time to take advantage of the possibility of working with a larger pool of talent coming from different countries.

But before you hire foreign consultants and independent contractors, you need to know a few things about their legal status. What are your legal obligations when you work with foreign consultants? Finally, we will guide you on hiring foreign consultants and independent contractors while following all laws and regulations.

Legal Status of Your Consultant or Foreign Independent Contractor

You have to ensure that the person you hire as an independent contractor will not be considered an employee. Should it be proven that he is an employee then you will be facing liabilities for not meeting the requirements set for employee benefits and pay.

If it’s proven that an independent contractor is actually an employee, you may have to pay for unpaid Social Security and taxes. Not only that, you may face other legal problems if it’s proven that the person you hire is actually an employee. It could even be more complicated if the contractor is based in another country. There are regulations in other countries which you may have to follow. In the EU for example, employees get 4 weeks of paid vacation per year. It can cost a lot if you fail to follow some of these regulations.

Make Sure a Contractor Is Not an Employee

How can you make sure that a contractor is not an employee under the law?

The line between an employee and an independent contractor is not clear all the time. For example, when a person is working exclusively for a company, it becomes difficult to justify the fact that he is a contractor. The length of time that a person is working for a company can also be a factor. If a person has been working for a long time for a company, it’s not easy to justify that he is not a de facto employee.

Have an Agreement with Your Contractor through a Contract and Meeting Transcription

One of the best ways to ensure that you will not have a problem with your foreign consultant or independent contractor is to have a contract or an agreement. The contract should clearly define your relationship. It should clearly state that he is not to be considered an employee.

You need to have a meeting with the person online and you can have it recorded. You can then have a certified transcription services provider work on the recording of the meeting as additional proof that the person is not an employee.

Determine Your Business’ Tax Obligations to the IRS

You must be aware of what your tax obligations are if you hire an independent contractor. You are obliged to report a payment of over $600 annually using a Form 1099-MISC. However, if you are working with a foreign independent contractor, there are different rules that would apply to you. You should also learn what your obligations will be to your independent contractor based on the laws of the country in which they are based.

Have Your Foreign Consultants and Contractors Complete the W-8BEN

Even if your company does not report the payment to foreign independent contractors, you need to make them complete the W-8BEN form. The forms can be useful in clearing your company from any liability later on.

The W-8BEN form is issued by the Internal Revenue Service (IRS). It is used to collect correct Nonresident Alien (NRA) taxpayer information for reporting purposes. It is also used to document their status when it comes to tax reporting. It is mainly used to certify that the country of residence of the independent contractor is not the United States.

Make Sure the Consultants Are Autonomous

If you are going to hire a foreign consultant, you need to make sure that he stays autonomous. It must be easy to prove that you are not directing the consultant in the same way that you would an employee.

This can be arranged by having the right kind of agreement or contract that both of you will be signing. The agreement should clearly define that the consultant or contractor is not directed in the same way that a regular employee would be.

Hiring a foreign consultant or an independent contractor is an excellent solution for staffing problems. It is just important for you to be aware of the various regulations which you need to follow. Otherwise, it could end up costing you even more. Educate yourself as to what your relationship will be and what limitations would come with that relationship.