Are you misclassifying your global contractors? Find out in 90 seconds.

Global hiring solutions like Rippling make it easier than ever to hire them, but determining whether an international worker is legally a contractor or an employee is still complicated and risky. Not only are you dealing with nuanced rules, but they’re outside your company’s own geographic area of expertise—the rulebook might even be in another language. 

There’s also no single tipping point between a contractor and an employee. A multitude of factors can sway the balance, and before you even realize you’re on the wrong side of the law, you can get buried by fines and penalties.

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It’s easier to misclassify people than you think 

There’s no single factor that determines whether your worker is legally an employee or a contractor—so you need to tread carefully. 

Let’s say you engage a freelance worker based in Australia. After a while, they ask if they can expense some software they need to complete a certain project. It might seem like a reasonable request, but contractors typically pay for their own equipment. So if you agree, their degree of integration with your company may begin to resemble that of a full-time employee.

As you continue using the freelancer’s services, the risks of misclassifying them get even higher. Over time, you might give them more and more work, and feel comfortable delegating increasingly high-profile projects to them—sometimes as much as 40 hours per week. It feels win-win: They produce excellent work for you, and they consider you a valued, regular client, and never turn down a project. 

At this point, your risk of misclassifying them is sky-high. Ask yourself:

• Does the increasing volume of work they do for you prevent them from working for other clients? 

• Do their high-profile projects make them integral to your business? 

If so, you’re sliding into full-time employee territory…and it might be too late to backtrack. 

If they’re actually a full-time employee according to Australian law, corporations can be hit with a fine of A$82,500 per contravention—and you could owe back taxes, too. The worker could also be entitled to holiday pay and other benefits. 

The heavy cost of misclassifying your contractors

Many employment lawyers drum up business by encouraging contractors to challenge their classification in the hope of a big payout. Even the biggest players can be hit hard if they fall foul of classification laws: 

• In 2021, Dutch courts ruled that Uber drivers were employees entitled to backpay and benefits, and hit the company with a €50,000 fine. That same year, the US Supreme Court also found that Uber drivers were not contractors, and that as workers they should be entitled to overtime pay, sick leave, and unemployment insurance—all of which are required for employees but not contractors. Uber paid out $8.4 million to settle a class action lawsuit with California drivers.

• In 2015, FedEx paid out $228 million after misclassifying drivers as independent contractors in California. The company was found to have violated state labor laws by not providing drivers with benefits like overtime pay and workers' compensation insurance.

You could also find yourself under the regulator’s microscope and facing reputational damage from failing to classify your workers correctly.

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Rippling can support every stage of your global worker lifecycle

Rippling makes it easier than ever to hire international contractors or convert them into full-time or part-time employees as needed. It’s the first system that lets you hire, pay, and manage all of your global employees and contractors together in one system.

• Onboard contractors in 90 seconds, with a localized experience 

• Easily pay international contractors in their local currency

• Automatically monitor and enforce global compliance

• Convert contractors to employees with a few clicks (goodbye misclassification risk!)

• Consolidate your global workforce data with advanced reporting

Automate your global compliance work

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