Shifting from Contractors to Employees: Solutions to Avoid Compliance Pitfalls
Learn more about the key distinctions between an independent contractor and an employee.
Get more knowledge on how to identify the regular misconceptions that often lead to improper categorization.
Hear about the ‘compliance maze’: ensuring you have the right knowledge to enable an understanding of international labor laws and potential penalties.
In this UNLEASH webinar watch Anita Lettink, Founder of HRTechRadar speak with Janelle Margolis, Director of Government Services at Atlas, and Mary Holland, Global Payroll Evangelist at Payslip as they discuss how to navigate the blurred lines between employees and independent contractors, how to balance flexibility with legal compliance and what might come next in the world of independent contractor management.
Why contracting?
Despite the risks, contracting is a popular solution to strategic needs. If there is no headcount for an employee, a contractor can backfill. They also can work for short periods, bring specialized skill sets, and mitigate downsizing moments.
Indeed, an UNLEASH audience poll in the webinar (on what they liked about engaging contractors) showed the top consideration was specialized expertise, with cost, duration, legal considerations, and scalability also popular.
The risk, reward, and change of independent contracting
Contracting and contracting law is often volatile. It changes often and can be complex to navigate. It also differs from country to country. Indeed, the audience on the UNLEASH webinar was only somewhat familiar with contracting law (85%) with double the number of attendees not understanding vs. understanding contracting.
The landscape has really changed…indeed, it’s forever changing…but the growth of the change of the space is exciting.
Mary Holland, Global Payroll Evangelist at Payslip
Not just risk, but potentially huge risk
Indeed, the risks of getting it wrong are huge. There are fines which, if the contracting status was willfully misrepresented, could even ensure jail time.
If this was intentional fraud, not only could fines be issuesd, but you could be disbarred from working in the country, face huge reputational loss in industry, and in some countries, even go to jail.
Janelle Margolis, Director of Government Services at Atlas
Common errors?
Okay, so there is a clear need for contractors but many end up misclassifying their contractors. Why?
The reason for these changes is that contractor status often changes from country to country, a company or contractor might misunderstand the time limits on contracting, not understand the implications of nomad visas, there can be confusion between the remote workforce and contractor workforce, and questions around whether a supposed contractor does indeed have time to engage in work for another employer.
There are also country-specific issues, such as the UK’s understanding of the difference between a fixed-term employee and a contractor and all the legal, compliance, and payroll issues that exist alongside this.
As Anita Lettink, Founder of HRTechRadar said: “It’s hard to keep up.” Indeed, alongside these issues are compliance issues that come with operating in different countries, such as understanding what happens if a project overruns (and how this impacts contractors), how to pay tax, and how to keep contractor communities on the side if you make a misstep.
As a result, Holland said: “I recommend having a contractor policy that has payroll, HR, legal and tax parts.”
Where to go next?
It was unequivocal that the webinar panelists believed that having an employer of record is critical to success when it comes to engaging contractors. As Margolis said: “[Take a contractor] on with an employer of record and it takes on all the risk and liability.”
An employer of record avoids problems around classification, can operate in different countries, speaks local languages, understands local laws and working customs, and sorts out payroll, too.
As Holland said:
An employer of record also plays a crucial role as they take responsibility for employment and regulation laws in different countries…so you’re not at risk.
About our Panel:
Mary Holland: A driven Strategic Global Business Leader with a passion for global payroll. Mary has been a nationally recognized Certified Payroll Professional with 25 + years of experience in U.S. and Global Payroll and Compliance, Finance, Payroll Accounting, Global Payroll Management, Global Mobility, Global Payroll Implementation, Project Management, Equity and Stock Reporting, Accounts Payable, and General Ledger. Currently, Mary is the Global Payroll Evangelist and was the Chief Customer Officer July 2019 – 2023 for Payslip. She is a frequent presenter at conferences and has presented many sessions across the U.S., Dublin, Ireland, the Netherlands, and London, England. Mary enjoys sharing her global payroll knowledge with others and helps payroll professionals across the world.
In 2009, Mary received the Donald W Shaper Education Grant. Mary received an American Payroll Association (APA) Meritorious Service Award in 2011, an APA Special Recognition Award in 2014. Mary was named the APA Payroll Women of the Year in 2016 and named The California Payroll Professional in 2018.
Janelle Margolis: Janelle is Director of Government Services at Atlas Technology Solutions. She has 20 years of experience in federal regulation, government contracting, project management, HR, EOR, and consulting. Janelle has lead Atlas’ Government Services practice to new heights, offering compliant solutions to clients in the government , NGO, INGO, and nonprofit space. Atlas currently offers services in 160+ countries. Janelle was formerly a federal contracting officer, and she worked for multiple federal agencies and nonprofits before joining the Atlas team. Janelle is based near Washington, D.C.
UNLEASH is recognized by SHRM to offer Professional Development Credits (PDC) for SHRM-CP or SHRM-SCP recertification activities.