How to Manage Global Expansion with the Contingent Workforce

Organizations are becoming increasingly reliant on contingent workers—such as freelancers, contractors, and other temporary workers—for global expansion. A recent survey found that 80% of global firms already use contingent workers, with 65% expecting their use of this workforce to increase over the next two years. This approach offers scalability, access to specialized talent, and operational flexibility.

However, managing a global contingent workforce presents some practical challenges around compliance, payroll, and worker classification. Without the right tools, these challenges can slow growth and open your business up to legal disputes.

Read on to find out how Deel can help organizations manage global teams.

The role of contingent workers in global expansion

Contingent workers—freelancers, independent contractors, consultants, and workers indirectly employed by a company—play an important role in global expansion. They provide businesses with the flexibility, cost efficiency, and specialized expertise needed to scale operations and enter new markets.

Flexibility and agility

A contingent workforce drives global expansion by providing the flexibility and agility businesses need to thrive in fluctuating markets. Unlike traditional hiring, contingent workers can be onboarded quickly to meet immediate demands, reducing the time it takes to scale operations. On top of this, using a contingent workforce can help businesses save on costs by scaling up or down based on project timelines and shifting demands.

• Companies expanding into new markets can use contingent workers to establish a temporary local presence without the need to set up legal entities. For instance, hiring local sales consultants or market researchers can provide immediate insights and operational support.
• Seasonal businesses can scale their workforce up during high-demand periods, such as hiring additional logistics contractors for holiday retail surges, and then scale back once the period ends.

Cost efficiency

Hiring contingent workers helps businesses save significantly on overhead and operational costs. This includes:

• Avoiding the expense of benefits like healthcare, paid leave, and pensions, which are required for full-time employees in many countries.
• Reducing payroll tax liabilities since contractors handle their own taxes in most regions. However, it’s important to note that some countries have wage and hour laws that apply to contractors. In the United States, certain state regulations require minimum wage, overtime, or timely payment obligations for contractors in specific industries, such as California’s Assembly Bill 5 (AB5).
• Eliminating the need for physical office spaces by relying on remote contingent workers, further cutting costs.

Access to specialized talent

Contingent workers also provide access to specialized talent pools in different regions. This is particularly beneficial for global teams, as you can hire local experts to help you navigate cultural nuances and market-specific challenges. For example:

• Hiring a local marketing consultant to tailor campaigns for cultural relevance, such as creating region-specific advertisements for a new product launch in South America.
• Using translators or localization experts to adapt materials for global audiences, ensuring cultural and linguistic accuracy when entering non-English-speaking markets.

Enabling remote workforces

The rise of remote working is hugely beneficial for companies looking to expand globally. Many businesses are choosing to be entirely remote, eliminating the need for a physical office. This reduces overhead costs for businesses and removes geographical limitations around hiring. The result? Endless opportunities for growth. For example:

• Hiring the best talent worldwide, such as approaching AI specialists for tasks like data labeling, algorithm refinement, or machine learning training. These professionals often work as contractors and can provide highly technical expertise without requiring long-term commitments.
• Scaling operations in countries where the business doesn’t yet have a legal entity, using contingent workers as a bridge until expansion is solidified.

How to leverage contingent workers for global expansion

As your business expands globally, the ability to adjust staffing levels quickly becomes crucial. Whether scaling up for high-demand periods or downsizing after a project concludes, contingent workers provide the flexibility needed to stay competitive. However, businesses often encounter operational inefficiencies that slow down global expansion. These include:

• Slow onboarding processes: Delays in collecting compliance documents and creating contracts tailored to each region can hinder operational timelines.
• Error-prone payroll systems: Managing multi-currency payments and adhering to varying tax regulations is time-consuming and prone to inaccuracies.
• Compliance risks: Navigating local labor laws and avoiding misclassification issues require significant resources and expertise.

Here’s how leveraging the right tools and workforce solutions can address these pain points and simplify the expansion process:

• **Centralized workforce management tools. **Utilize platforms like Deel to manage hiring, onboarding, compliance, and payroll from a single dashboard. This minimizes administrative overhead and provides real-time insights into workforce distribution and costs. Features such as automated compliance tracking and localized contracts help reduce errors and ensure alignment with local regulations.
• **Automating onboarding: **Streamlined systems can generate localized contracts, collect and store compliance documents, and speed up the onboarding process. This reduces delays and ensures that workers can begin contributing immediately.
• **On-demand workforce scaling. **A robust platform enables you to scale up or down rapidly based on project demands. For instance, during a large-scale project launch, you can quickly onboard contractors with specialized skills from various regions. Tools like Deel’s Contractor of Record (COR) and Employer of Record (EOR) services ensure legal compliance and operational readiness, making it easy to adjust workforce size without long-term commitments.
• **Integrated payroll systems. **Managing multi-currency payments and tax compliance becomes simpler with integrated payroll solutions. Deel’s global payroll system supports over 120 currencies and automates compliance with local tax laws, ensuring timely and accurate payments. This reduces financial and operational risks while improving worker satisfaction.
• **Localized expertise and compliance management. **Expanding into new markets requires an understanding of local labor laws, tax regulations, and cultural nuances. Platforms offering access to regional experts, like Deel’s in-country advisors, provide valuable guidance to navigate these complexities. This ensures your operations align with legal requirements, preventing costly compliance issues.

If your company is looking to expand quickly for a large-scale project, or similar, Deel can help you quickly onboard skilled contractors from a wide talent pool. We’ll ensure global compliance and timely payments, keeping your organization compliant and your contractors happy.

See also: Hiring and Managing Contractors: A Global Client's Guide

Overcoming global compliance challenges

Global expansion can cause compliance hurdles, like differing labor laws, tax complexities, and, most critically, the risk of worker misclassification. These issues can result in financial penalties and legal disputes, leading to operational setbacks.

Worker misclassification is a particularly common occurrence, with research suggesting between 10% and 20% of employees are misclassified across US states. This can be accidental or intentional.

Worker misclassification

Worker misclassification is when a business incorrectly reports a worker’s employment status, often to evade taxes and costs associated with employing a worker. For example, a permanent employee may be incorrectly categorized as a contractor, or vice versa. This can be financially and reputationally damaging to businesses, resulting in fines, back taxes, and even lawsuits.

For example, in the US, misclassification can trigger audits from the IRS or the Department of Labor. Employee misclassification penalties will depend on several factors, including the business size and the amount of time the misclassification has been going on.

The challenge is that each country defines employment differently. What qualifies as a contractor in one country may fall under employee status in another. As a result, businesses are vulnerable to accidental noncompliance if they lack knowledge of these legalities.

How to mitigate global compliance challenges

Deel handles global compliance challenges and eliminates the risk of misclassification with Employer of Record (EOR) and Contractor of Record (COR) services. These solutions ensure compliance with regulations by handling worker classification and managing taxes on behalf of your business.

Our platform is easy to use and provides real-time guidance on labor laws and regulatory updates, reducing the risk of costly mistakes.

See also: How to Maintain GDPR Compliance Within Global Teams

Expand into new markets easily with Deel

Scaling your contingent workforce doesn’t have to be complicated. Deel’s all-in-one platform simplifies every step of the process, from hiring and onboarding to payroll and compliance. Whether you’re managing freelancers, independent contractors, or employees hired through Employer of Record (EOR) services, Deel provides the tools and support you need to succeed.

With Deel, you can:

• Generate localized contracts compliant with labor laws in over 150 countries.
• Automate payroll and manage payments in 120+ currencies.
• Reduce compliance risks with real-time regulatory updates and worker classification tools.
• Leverage in-country expertise to navigate regional labor laws and cultural nuances.

Ready to expand globally and manage your contingent workforce with ease? Book a demo today and see how Deel can support your business growth.