What do recruiters need to know about placing contractors overseas?

23rd September 2020

Global lockdowns may have temporarily limited international travel for contractors, but the demand for expert skills that simply can’t be found in-country remains high. As border controls ease, we expect to see a rush to source overseas experts as businesses play catch up. In fact, in many instances we already have a number of contractors lined up and ready to relocate for work as soon as travel restrictions allow it – news that contractors and recruiters alike will certainly welcome. However, placing contractors overseas does come with its challenges and, as 6CATS chief executive, Michelle Reilly, recently explained to Contractor UK, while more agencies are turning to global markets in a Covid-hit economy, there are numerous compliance considerations to be aware of.

Here’s what she had to say:

Know the differences – and the similarities!

International tax and compliance legislation is nuanced and can vary significantly from one location to the next. So, while your recruitment business might have the experience operating in France, for example, that doesn’t mean you’re covered in another European location. As a case in point, tax and employment regulations in Germany are incredibly intricate and very difficult to navigate. There are very few similarities between contracting legislation in Germany and its neighbouring countries (in fact the country arguably has one of the most complex legislative landscapes – so if you are looking to tap into the German market you’ll certainly need support!)

While each jurisdiction is different, there are some commonalities to be aware of as well. For example, for UK firms, the Criminal Finances Act 2017 (CFA) applies no matter where in the world you are placing contractors. As Michelle explained: “Under this law, those in the supply chain, not just the contractors, could face criminal charges for evasion if the contractor fails to pay the correct taxes. This is especially the case if the agency has not conducted the right ‘due diligence’ on the solutions being used.”

And there’s also the Common Reporting Standard (CRS) to be aware of. This automatic exchange of information that multiple countries have signed up to (over 100 tax authorities at the time of writing) means that international authorities are collaborating to share financial information across borders. In other words, the activities of your business, its contractors and any overseas staff is monitored and can be shared between authorities without your knowledge. As the CRS was designed to clampdown on tax fraud, recruiters need to be aware that even a small administrative mistake could have a significant financial impact on your business, as Michelle noted in her article:

“This co-operation has also led to more governments working together worldwide to take action against those operating non-compliantly, so the risks to you and your business for a small administrative error are higher than they’ve ever been.”

IR35 clarification

One conversation that usually crops up with UK staffing companies looking to expand into new international markets is IR35. We won’t go into too much detail on this topic for one very crucial reason. IR35 rules only apply to those working in the UK, so when you are looking at global opportunities, IR35 won’t affect your contractors.

However, it is important to add that each country has its own legislation similar to this that is designed to drive the correct determination of an individual’s employment status. This does vary across locations and agencies will certainly need to seek expert advice based on the circumstance of their contractors.

Placing contractors overseas – a lucrative opportunity

While placing contractors overseas might be wrought with complex tax compliance requirements, heavy administrative burdens and potential risks if not managed correctly, there is a reason why so many recruitment agencies are tapping into this market. Simply put, the money is worth it.

International contractor recruitment is a truly lucrative field and can really pay dividends to those recruiters willing to put in the work and, perhaps more importantly, ensure compliance is at the heart of everything they do. And as the reliance on contract professionals grows across the globe – particularly in skills short fields such as technology and engineering, for example – the potential expansion opportunities for staffing companies increases.

Plan before you leap into international waters

But while we welcome the news that more recruitment businesses are looking at expanding their scope internationally, we’re keen to urge any agency owners to ensure they have everything in place before they jump into the fire. It is absolutely imperative that your company takes a risk averse approach to placing contractors overseas and the best way to ensure this is to partner with an expert that has not only the global experience, but also the on the ground connections to ensure your firm remains compliant no matter where in the world you have set your sights.

Of course, we will say that partnering with 6CATS International is one way to achieve this, and here’s why. We are a leading global brand and supplier of contractor management solutions to the world’s top recruitment agencies. Our expert team offers solutions in more than seventy countries across Europe, the Middle East and Africa as well as further afield.

6CATS recognises the importance of providing fully compliant, transparent and streamlined contractor workforce solutions and, as a result, we are dedicated to providing our clients with the highest levels of service whilst offering complete compliance assurance.

We take the stress and uncertainty out of engaging contract workers around the world enabling our clients to focus on their core business. To give extra reassurance, when using our solutions, we fully indemnify recruitment businesses and end users from any tax compliance liability – and you won’t find that offer anywhere else!

Our friendly and approachable team is always on hand to offer support and advice. With some of the most experienced professionals in the sector, we have a wealth of knowledge to draw on and can advise on most countries around the world.

In an ever-changing industry, we are constantly enhancing our service offering to ensure clients and contractors receive maximum benefit.

Contact the team today to find out more.

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