Contractor or employee when you hire abroad

Why the label matters

A contractor runs their own business and invoices you for services. An employee works under your direction and has the protections that local employment law gives, while the employer has duties such as payroll, contributions and notice rules.

If a relationship is called a contract but works like employment, the authorities of the person's country, or sometimes of yours, may treat it as employment. The consequences can include back payments of taxes and contributions, and employment rights the contract never mentioned. The tests differ from country to country, which is why this is a question for an adviser who knows both sides.

What the tests usually look at

Countries use different tests, but they tend to ask similar questions about how the relationship works in practice, not only how it is written:

• Control: who decides how, when and where the work is done.
• Integration: whether the person is part of your organisation, with a title, a manager, a company email and a place in the org chart.
• Exclusivity and duration: whether they work only for you, full-time, with no end date.
• Financial independence: whether they invoice, set their own rates, use their own equipment and can take other clients.
• Substitution: whether they could, in principle, send someone else to do the work.

A full-time remote assistant who works only for you, on your hours, with your tools, has several features of employment. That does not settle the question, but it is a good reason to take advice rather than assume.

Three ways to engage someone abroad

1. Independent contractor agreement: you contract directly with the person, who invoices you; you pay through a service such as Deel, Wise or Payoneer. The simplest and cheapest to run.
2. Employer of record (EOR): a provider employs the person in their country under local law and charges you the employment costs plus a fee. You direct the work; the provider is the legal employer. See EOR or contractor for the trade-offs.
3. Your own entity: you register a company or branch in the person's country and employ them directly. Usually worth it only for a larger team there.

If you choose a contractor agreement

Make the paperwork describe a relationship between two businesses, and keep the practice consistent with it:

• Describe services and outcomes, not a job title inside your hierarchy.
• Agree availability windows that serve the work rather than controlling every hour.
• Let the contractor invoice you, monthly or per period, from their own registration.
• Agree confidentiality and a minimum availability instead of banning other clients outright.
• Review the arrangement once a year: roles drift, and what started as a project can turn into a full-time job.

Our contractor agreement checklist lists the clauses to cover, and our guide to paying contractors the payment side.

When to look at employment instead

• The person asks to be employed, for example for a loan, a visa or social security in their country.
• You want to direct them like an employee: fixed hours, your equipment, your policies, exclusivity.
• An adviser in their country tells you the arrangement is likely to count as employment.
• You plan to build a team in one country, where an EOR or your own entity becomes simpler.

None of these is a rule. They are prompts to revisit the set-up before it becomes a problem.

Questions to take to your adviser

1. Under the law of the person's country, is this relationship likely to count as employment?
2. Does my own country's law apply to someone working for me from abroad?
3. Which documents do I need to collect and keep: tax forms, invoices, proof of payment?
4. How are intellectual property and confidential information protected under a contractor agreement?
5. If I switch to an EOR later, what changes for the person and for me?

Silkstaff does not employ the people it places. The contract is between you and the person, and how you engage them is your decision, made with your adviser.