Salaried Employees vs Independent Sales Reps: Which is best for your global enterprise?

There is no question that technology has fueled a global gig economy that enables freelancers and small business contractors to engage with enterprises of all sizes. While some businesses benefit from as-needed services from independent contractors and sales representatives, there are some down sides for both companies and contractors, and many businesses gravitate to traditional employer-employee relationships.

Employee vs Contractor

While both salaried employees and independent contractors perform similar tasks for businesses, there are several distinct differences that define their relationship to, and interactions with, the employer.

Please mind the ✅ — Benefits and ❌ — Risks connected with both* :

Employee or a salaried worker pays FICA taxes just like their employer in equal parts.

Contractor, also called a commission-based worker is responsible for paying self-employment (SECA) taxes.

Check the below infographics for a greater visibility:

Risks of Hiring Contractors Over Employees

For many businesses who are expanding overseas, it may seem sensible to start off with local independents in the interest of saving money on taxes, benefits and the cost of establishing a legal entity. However, working with foreign independent contractors has multiple inherent risks.

• Compliance risks. Working in foreign nations can present pitfalls that you didn’t see coming. When you employ foreign workers, you need to be certain that you are fully compliant with national and local laws and regulations regarding taxes and employment guidelines. Failure to meet compliance requirements can put you in a legal bind that can be costly and time-consuming.
• Financial risks. Employing foreign independent contractors gives you minimal control over their behavior or activities, and how they represent your brand. They may even work for your competitors, and promote whichever products bring the highest commission, losing you money in the long run.
• Business risks. Contractors are temporary employees with limited loyalty to any single entity except their own. High performers can be easily poached by your competition, and low performers can harm your brand’s image. High turnover can result in loss of leads and customers, and have a destabilizing effect on workforce morale.

Employee vs Contractor

✅ — Benefits and ❌ — Risks* :

While using an independent commission-based sales force may be less expensive in the short run, a dedicated sales team that works exclusively for your brand will save you money in the long run. Moreover, if you take on contractors for projects in multiple countries, the complexities and challenges are magnified.

Get the Best of Both Worlds with a Global PEO

A global Professional Employment Organization (PEO) can provide the ideal solution to your overseas staffing problems. A global PEO is a third party that acts on your company’s behalf to onboard and payroll your chosen foreign talent, without the need to establish a foreign entity for your business.

Partnering with a global PEO can benefit your business in multiple ways:

• Increase the loyalty of your foreign salesforce without having to set up your own legal entity abroad. Delegate employee management to a global PEO, to handle the entire scope of employee hiring, retention, replacement and compensation.
• Build strong brand equity via a globally distributed workforce that represents your company proudly and builds customer relationships across the globe. Retain ownership of your client base after salespeople leave your company.
• Protect your company’s security, IP rights, and client database from unscrupulous contractors with no loyalty to your brand.
• Build a hybrid salesforce that is 100% dedicated to your products and brand. By combining the expertise of independent agents or contractors with the loyalty of salaried employees, you create a win-win situation that gives you the best of both worlds, while mitigating your compliance, financial and business risks.

A global PEO is less expensive than in-country incorporation and gives you the flexibility to easily exit unlucrative markets. You can start with a small team or even one person in multiple countries and go global now, without waiting for your business to grow.