As you might expect, each jurisdiction has its own specific tax considerations, which can vary greatly. Consider just a few:

K. employers have to withhold national insurance contributions (NIC), as well as the apprenticeship levy.
In Germany, the "solidarity surcharge" is an additional tax that supports the development of Eastern Germany.
Australian employers need to consider "superannuation contributions" (similar to retirement savings).
In Brazil, employers must also consider taxes related to the "13th salary" (a mandatory annual bonus).

While each jurisdiction has its unique regulations, there are some general indicators that employers should consider to help determine how best to classify their global workers.

Control and supervision: Consider if your company controls what your workers do, what hours they work, where they have to do their tasks (in a company-owned facility or elsewhere?), and if they can work for other companies while working for you. The more control and supervision you have over a worker, the more likely they should be classified as an employee.
Duration of the work: A contractor typically has a predefined employment period or a specific project deliverable, while an employee may remain on board indefinitely.
Business intent of the work: Similar to duration, you should consider if a worker is hired to accomplish a specific task. Often a contractor will be hired to oversee a GDPR integration or software implementation, or perhaps they are filling a role in accounting until you can hire a permanent employee. On the other hand, employees typically have broader responsibilities that apply to the organization's ongoing operations.
Level of integration: Employee-centric organizations want to ensure everyone, even contractors, are treated well. But if the contractor has a company email, is listed on your organizational chart, attends company events, gets company perks, and walks around in a company logo shirt, you might have an employee. This is why some companies require non-employees to wear badges that identify them as contractors and limit their access to company facilities, events, and other benefits.

Misclassifying workers as contractors rather than employees might be seen as an attempt to circumvent these regulations. Legal penalties for tax evasion and potential liability for unpaid taxes or contributions can damage your company's bottom line as well as its reputation. Seeking guidance from tax and legal advisors in each jurisdiction is the best way to ensure compliance when hiring globally, but in most cases, it's not practical or even feasible (keeping up with 50+ in the U.S. alone is a daunting challenge!). Technology can help fill the void as today's human resources and global employment platforms can provide up-to-date local knowledge that can help you avoid worker misclassification and other costly compliance mistakes.

Instant Insights /

Meeting the compliance challenges of hiring a global workforce

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