How to manage international contractors without legal problems

Hiring international contractors is a smart way to access global talent, reduce costs, and scale your business. However, misclassifying workers or failing to comply with local labor laws can lead to severe penalties.

In this guide, we’ll explore best practices for managing international contractors while staying compliant. We’ll also discuss how an Employer of Record (EOR) like Roots simplifies global hiring.

Understanding the risks of hiring international contractors

Many businesses assume that hiring contractors is as simple as signing an agreement. However, different countries have strict rules about:

• Worker classification (contractor vs. employee)
• Tax obligations (withholding, VAT, social security)
• Local labor laws (minimum wage, benefits, termination rules)
  Misclassification can result in fines, back taxes, and even lawsuits. For example, in the US, the IRS and state agencies penalize companies that wrongly classify employees as contractors.

Key steps to legally manage international contractors

1. Properly classify workers

Each country has its own criteria for distinguishing contractors from employees. Common factors include:

• Control over work (schedule, tools, methods)
• Exclusivity (working for multiple clients vs. being tied to one company)
• Financial independence (invoicing, business expenses)

> Use local legal advice or an EOR to ensure compliance.

2. Draft a clear contractor agreement

A well-structured contract should cover:

• Scope of work (deliverables, deadlines)
• Payment terms (currency, invoicing, taxes)
• Confidentiality & IP rights
• Termination clauses

> Avoid using terms like “employer” or “employee” to prevent misclassification risks.

3. Comply with tax and labor laws

• Tax withholding: Some countries require companies to deduct taxes for contractors.
• Invoicing rules: Certain jurisdictions mandate specific invoice formats.
• Social security: In some EU countries, contractors must register as self-employed.

> An EOR can handle these complexities for you.

4. Use a global payroll solution

Paying contractors in different currencies with varying tax rules is complex. Solutions like Roots automate payments while ensuring compliance.

5. Stay updated on local regulations

Laws change frequently. For example:

• Spain’s 2021 labor reform made it harder to classify workers as contractors.
• California’s AB5 law imposes strict contractor classification tests.

Partnering with an EOR ensures you adapt to new regulations seamlessly.

Why hiring remote talent is a competitive advantage

Whether you use an Employer of Record (EOR) or hire contractors, remote work offers:

1. Access to global talent – Hire the best professionals, regardless of location.
2. Cost savings – Reduce office expenses and local payroll burdens.
3. Flexibility – Scale teams up or down without long-term commitments.
4. Compliance security – Avoid legal risks with expert guidance.

At Roots, we help businesses hire and manage international teams effortlessly.

Hire internationally, stay compliant

Expanding your team globally shouldn’t mean legal headaches. Roots provides Employer of Record (EOR) and contractor management solutions to ensure smooth, compliant hiring.

Contact us today to hire talent worldwide without the hassle.