Engage a contractor vs. hire an employee: which solution best matches your needs ?
Want to onboard an employee in Brazil or Mexico today?
To compliantly run your business, you must avoid worker misclassification. To do so, you need to understand the difference between contractor and employee. Then you’ll be able to hire your talent following the right classification.
Check out the topics covered in this article:
Key takeaways about differences between contractor and employee
✔️ If a business wants to quickly onboard employees or contractors in a new market, then using an EOR in the best solution.
✔️ If a business is looking to establish a long-tem presence in a market, then opening a local entity is the best solution.
✔️ If a business is looking to hire someone for a short-term project, then engaging a contractor would be the winning strategy.
What is an independent contractor?
An independent contractor is a professional that perform work to another organization under contract but not classified as employees.
They are self-employed and not considered as employees. Then they don’t receive the same rights and protection.
pros of engaging an independent contractor
- Provide higher flexibility in staffing: the business can engage contractors for short-term and specific projects or peak periods without being committed for too long.
- Reduce costs: there is no obligation for employee benefits , payroll taxes and other employee-related expenses. Also there is no cost related to entity creation.
- Access to a specialized talent pool: Grants access to specialized expertise that might not be available internally.
Cons of engaging an independent contractor
- Less control: When engaging a contractor, the business has limited control over how the contractor completes the tasks.
- Legal risks: There might be legal implications if the professional is misclassified, leading to financial consequences.
- Lack of company culture: Contractors are providing services for a short period of time which exclude fostering a strong company loyalty from contractor.
What is a full-time employee?
An employee is a worker hired by an employer to do specific tasks. The business which hires the employee has control over the employee’s work output, the working time and the manner in which the work is performed. The employment relationship must usually meet the following criteria:
- The worker must be a physical person, not a company.
- The person works on a permanent basis.
- The worker receives a monthly salary (economic dependency).
- The worker must follow the rules of the employer.
What is the Difference Between a Contractor and an Employee?
The key difference between contractor and employee is that a contractor is a self-employed individual when the employee works in your business on a permanent basis.
For business, the difference lies in the rules and regulation that apply to both categories. Generally, a contractor provides work services for an hourly rate on an independent schedule. On the other side, an employee usually has regular and defined working hours.
Engaging a contractor or hiring an employee with Europortage
Engaging a contractor of hiring an employee is complex especially when it comes to compliance. That’s why we recommend working with a direct and local partner like Europortage.
Our team of local experts is on hand to support you throughout the entire employee lifecycle, including time-off management. We can give you clear advice on fringe benefits, in addition to handling employment contracts, payroll, and benefits. That way, you can focus on growing a world-class team and business.
Get in touch to find out more and start hiring top talent in Brazil and Mexico!
