The Great Employment Debate — Contractor or Employee?

As a business development manager for Elements Global Services, a consistent question I get from my prospects is: “how do I ensure that I’m compliant?”.

There seems to be a lot of conversation surrounding international employment compliance, particularly for companies based here in the U.S. and looking to expand abroad. With that, there is also a lot of misconception surrounding the Employee versus Contractor statuses. In the global space, each and every country is unique in their requirements for defining an employee, but there are some basic core tenants to stand by which can be helpful to determine and answer the question: “am I compliant?”.

Contractor v. Employee:

When thinking about your future or current workers, you can evaluate quickly by understanding the employee through these three main categories: Economic Independence, Integration and Supervision and Control.

Economic Independence

o Employee — does this person work only for you and your company?

o Contractor — is this person free to have multiple jobs creating financial independence from your organization?

Integration

o Employee — does this person have a company email, a given title, potentially reports to a manager? Will this person be representing your company to clients and internal employees as if they WERE an employee?

o Contractor — or is this person representing their own business while also supporting the needs of your organization through their work?

Supervision and Control

o Employee — does this person have to request time off for holiday or sick leave? Will this person receive reviews and promotions from your organization or in a managerial role?

o Contractor — is this person free to make their schedule as they see fit for their business?

Employers previously relying on 1099 or contractor status for simplicity are now re-evaluating. Even with a strong employment service agreement, employees are becoming more knowledgeable and both courts and governments are now pursing employers and reprimanding companies trying to circumvent local laws. A service agreement alone is not sufficient, as court rulings look at the context of the work itself to determine contractor vs employee status. The Uber driver ruling in the UK being the most prominent employment regulation recently that spurred more than “….70,000 U.K. drivers to be paid for all hours logged in the Uber app, regardless of ride demand.” You can see this more thorough article from SHRM here, explaining the Supreme Court Ruling.

But, as with most laws — there are always grey areas. As easy as it would be to always have a definitive answer for my clients, I simply can’t. There are short term assignments and instances where an employment relationship doesn’t make sense, and certainly instances where the “core tenants” listed above seem to be blurred. The nice thing about being in the Business Development role at Elements is, I don’t have to know everything — I have a team for that! Compliance changes, legal questions, statutory or customary HR recommendations — that’s what we DO and thankfully we have the best regional experts that are there to help my clients navigate the more complex needs when expanding abroad.

In short, I love what we do here. The demand for global expansion is enormous and more importantly, being the only company that was built on the premise to disrupt a market as a DIRECT EOR provider puts us leagues above our competition.