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Contractor or employer of record

Two ways to engage someone. One is right for you.

The honest answer is usually the simpler one. Here is the difference in plain words, and how to tell which you need.

The short version
Not sure how long you'll need the roleContractor
Project or part-time workContractor
Long-term, full-time team memberEmployer of record
You want maximum protectionEmployer of record
Side by side

The two arrangements.

Lighter and faster

Independent contractor

Your team member works for themselves and invoices for their time.

Cheaper to run: no statutory employment costs
Faster to start, with less paperwork
Good for testing the relationship or project work
Your team member handles their own taxes in their country
Less protection if a local authority reclassifies the role as employment
No statutory leave or benefits built in
Fuller protection

Employer of record

Linkers becomes the legal employer in their country, so you do not need a company there.

We are the legal employer: compliance sits with us
Statutory contributions, leave and local employment law all handled
Right for a long-term, full-time person you intend to keep
Stronger retention: people stay longer when they have proper employment
Costs more, because the statutory contributions are real
Slightly longer to set up

Neither is a trick. The contractor route is genuinely right for a lot of engagements, and we will say so even though the employer of record route earns us more.

The real question

How to choose, in three questions.

Is this ongoing or finite?

If you expect this person to be part of your team in a year, employer of record is usually the right call. If the work has an end, a contractor arrangement fits better and costs less.

How much do they look like an employee?

Set hours, your tools, your instructions, no other clients. The more of those are true, the more a local authority would call it employment, and the more an employer of record protects you.

How much risk do you want to carry?

Misclassification is the one that catches people out, and the consequences land on the company, not the worker. Employer of record moves that risk to us.

The one that catches people out

Misclassification, and why it matters.

If you engage someone as a contractor but treat them exactly like an employee, setting their hours, directing their daily work, requiring them to use your systems and nobody else's, the authorities in their country may decide they were an employee all along.

When that happens the bill is usually back-dated: unpaid statutory contributions, leave that should have accrued, sometimes penalties. It lands on the company that engaged them.

This is not a reason to panic, and plenty of contractor arrangements are perfectly sound. It is a reason to be deliberate about which arrangement you choose, and to write it down properly before anyone starts. That is work we do for you either way.

Questions

Questions about the two arrangements.

No, on either route. On an employer of record arrangement we are the legal employer in their country. On a contractor arrangement they invoice through their own set-up. Neither requires you to register anything abroad.
Yes, and it is common. Many of our clients start someone as a contractor to test the fit, then move them onto employer of record once it is clearly working. We handle the transition.
On employer of record, Linkers is. On a contractor arrangement, nobody is: your team member is self-employed and contracts with us. In both cases you direct the daily work and we handle the administration.
A contractor arrangement, because there are no statutory employment contributions on top. How much cheaper depends on the country: the statutory load in South Africa is small, in the Philippines it is considerably larger.
Both routes include an NDA and intellectual property assignment before day one, so the work your team member produces is yours either way. This is not where the two arrangements differ.
Both, and the split depends on the role. Long-term full-time roles tend to end up on employer of record; part-time, project or trial engagements tend to stay as contractor arrangements.
Read next

Related reading.

PricingWhat it costs, and every invoice lineWhat the monthly fee covers and the three things that change the price.See pricingBlogIndependent contractor vs employer of recordThe longer write-up, with more detail on the compliance side.Read the articleGuideHiring in Myanmar without a local companyHow employer of record works in practice in one of our three hubs.Read the guide

Not sure which you need?

Tell us the role and the hours and we will tell you which arrangement fits, and why. Even when the answer is the cheaper one.