As your company grows, you may choose to hire contractors internationally to provide specialized services. Explore the following best practices when hiring workers in this designation.
Hiring contractors in Pakistan
Before beginning the hiring process, you’ll need to understand your company’s legal responsibilities and the logistics of working with a contractor.
Independent contractors vs. full-time employees
There is no established test to determine whether a person is an independent contractor or an employee, rather the determination is made on a case-by-case basis by the courts. Courts generally consider an individual an independent contractor if said worker is not subject to direction or control of the company they are providing services to, they have the freedom to set their own working hours, determine the methods to perform services, and have the flexibility to provide services to multiple companies. As self-employed individuals, independent contractors are not entitled to employee benefits such as paid leave, health insurance, or retirement funds, and are responsible for their own taxes and social security contributions.
Penalties for misclassification
When you hire a contractor, you need to ensure your company properly classifies them. Treating an employee as a contractor could result in fines, lawsuits, and penalties. Your company may also be required to retroactively pay for all benefits the employee should have received throughout their duration of service.
How to hire independent contractors in Pakistan
Whether you’re hiring contractors to work on-site, remotely, short term, or long term, the process will differ from that of engaging an employee. Follow these 3 fundamental steps.
1. Carefully conduct interviews.
Since contractors are their own business entities, they offer extensive project experience and can discuss their capabilities in detail with you. During interviews, focus on their skills and project-specific experience over employee-based considerations such as personality. The goal is to find the person best qualified for your project.
2. Create a service agreement.
After choosing a contractor, the next step is to establish a service agreement both parties can reference as needed. Cover these details in your agreement:
- Pay rates and arrangements
- Services the contractor will provide
- Length of the contract
- Termination conditions
3. Introduce necessities.
While a contractor will not need the same in-depth training an employee would, they may require an introduction to your company’s specific workflows. Ensure they know who to ask questions about the project and how to access the software, tools, and programs they will need.
How to pay independent contractors in Pakistan
Because they’re not on your employee payroll, there are a variety of ways to pay independent contractors. You may consider using a money transfer provider as long as you’re aware of any restrictions for transferring funds internationally.
Your company is not obligated to withhold taxes or provide benefits to contractors. However, you are responsible for meeting the compensation schedule and rates you agreed to in the service contract. You can consult with your contractor on whether to deliver payments in your company’s local currency or rupees.
Terminating independent contractors
Contractors generally provide services until a predetermined date or until they complete the project. Consequently, termination of services is usually clear-cut. Your company and the contractor are free to establish the termination and extension terms that work best for both parties.
It’s wise to have termination protocols in place should you need to end your working relationship unexpectedly. Outline the procedures in your service agreement so you can refer to them if needed.
Turn to G-P when hiring independent contractors in Pakistan.
As a part of our #1 suite of global employment products, G-P Contractor allows companies to hire and pay global contractors faster, with self-service workflows and a wide set of flexible payment options. Whether you’re hiring employees or contractors, our platform streamlines the process with a single solution for your global workforce.
Contact us to learn more.