Template
Contractor to Full-Time Employee Conversion Policy
Legal & compliance
Global HR
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Turn your contractors into employees without risking noncompliance
Hiring contractors provides a great level of flexibility for your company, but as you expand and grow, you will undoubtedly start looking to build more stable workforce.
Some of your contract workers may also demonstrate notable achievements, prompting you to offer them the opportunity to become full-time team members. Or, as compliance regulations change almost on a daily basis, sometimes you might need to convert contractors into full-time employees to keep them.
Having procedures in place will improve your compliance footing and allow you to bring on top talent full-time as employees. Unlike independent contractors, who are typically self-employed and responsible for paying their own taxes (including social security and health insurance), have their own tools, and don’t require training, employees enjoy certain rights guaranteed by employment laws.
Whether your contractors are starting to resemble employees, you’re looking for intellectual property protection, or you’re keen to avoid worker misclassification risks, start with Deel’s free contractor-to-employee conversion template to keep your contractor workforce in steady shape.
Deel enabled us to hire 100 people that we probably wouldn't have been able to hire otherwise. Plus, it helped us reduce the number of workers leaving us. A lot of contractors were leaving when we couldn’t support them in being employees.
—Leanne Schofield,
Head of People, Form 3
FAQs
What rights and protections do employees have compared to contractors?
Hiring employees requires businesses to comply with local labor laws that define employee obligations, rights, and protections. These laws vary by location, as different countries have different employment contract requirements, minimum wages, employment taxes, and other regulations to comply with.
When onboarding international employees, you must make sure they have access to statutory employee benefits, such as healthcare, vacation pay, retirement plans, and more, depending on their country of residence
How do I convert a contractor in a country where I don’t have a legal entity?
Companies that want to hire employees in compliance with local laws in countries where they don’t own an entity often choose employer of record services. EORs are organizations that act as middlemen between client companies and international employees, taking complete legal responsibility for the employee and covering the following:
- Creation of locally compliant contracts
- New employee onboarding
- Salary payments
- Benefits administration
- Tax filing
- Payslip distribution
- Contract termination, and much more.
Some EORs, like Deel, can help manage workers even if they don’t have an employee status. You can also use our comprehensive contractor product to attract, hire, manage, and pay independent contractors in over 150 countries, while providing them with perks such as Deel Card to make sure they stay.
Can a US company hire a foreign independent contractor?
Yes, US-based companies can hire foreign independent contractors and pay them using a plethora of methods, including hiring them through an employer of record.
While using contractor agreement templates can work well to a certain extent, it’s always better to use a tailored contract in compliance with local employment laws to make sure your contractor isn’t misclassified and doesn’t represent a liability for your company. It’s also important to provide the correct IRS tax forms to your foreign contractors, such as Form W-8BEN.
What are some consequences of incorrect worker classification?
If tax authorities determine you’ve misclassified an employee as an independent contractor, you may face a range of penalties. Severe cases have resulted in jail time, but most violations of tax law and employment law result in monetary penalties.
How does Deel help protect your business from liabilities?
Deel offers a special product for companies that want an additional protection layer when it comes to avoiding misclassification risks: Deel Shield. If you opt for Deel Shield, we assess the correct classification of your workforce and advise you on whether the worker should be a contractor or an employee.
Then, we handle hiring and HR admin on your behalf, create locally compliant contracts and collect all necessary documentation. Once set up, the client and contractor can access one platform to manage documentation, time off, payment approvals, and more.
Through Deel Shield, Deel uses expertly designed worker classification tools and the help of {{IN_HOUSE_LEGAL_SPECIALISTS}}+ local legal experts to continually review, correctly classify, and hire contractors on your behalf based on location, job description, and work setup. Even if misclassification occurs, Deel accepts legal liability.
Who will benefit from this policy template
- C-suite decision makers
- Small business owners
- Legal teams
