Using overseas contractors

Companies using overseas contractors need to consider country-specific employment regulations and keep updated on any developments in employment law (eg the 2016 ruling that Uber drivers should be classed as 'workers' rather than 'self-employed contractors').

In the UK, there are important distinctions between employees, workers and self-employed contractors which determine the applicability of various employment laws (eg entitlement to minimum wage and holiday pay). Businesses wanting to use contractors in other countries need to be aware of how the different employment statuses are classified to avoid trampling on local employment laws.

Even if employment law issues do not arise, other disputes can crop up, and these can be more difficult to resolve due to differences in legislation between the contractor's country of residence and relevant UK regulations. There can also be a clash of business cultures (eg delays in work submission or payment being more acceptable in one country than another) which can lead to legal disputes. Further jurisdictional complications can arise if litigation ensues; namely determining which court (one in the UK or the contractor's country) should hear proceedings.

For more information on issues relating to the jurisdiction of a contract, please read our guide on Jurisdiction and international contracts.

One of the most effective ways of minimising the possibility of disputes with overseas contractors is to ensure that everything is put in writing before the business relationship commences. A Consultancy agreement or a Subcontracting agreement can be used to set out the expectations and responsibilities of both parties. However, local employment laws vary and you should always Ask a lawyer for advice before using a written agreement with an overseas contractor, to ensure that it is valid in their specific country. It may sometimes be necessary for a local lawyer to convert the agreement into an appropriate form.

Using overseas contractors through a managed service company is another option. Rather than contracting directly with the individual, you will be contracting with the service company which handles any employment law issues at their end.

It's important to agree on payment terms and methods in advance. International payments will often incur extra expenses, both in terms of exchange rates and administration fees. Many overseas contractors will accept PayPal as an alternative to direct bank transfers - but cross-border charges are also levied, so ensure you check these.

If you intend to use a self-employed overseas contractor, there are generally no additional tax implications other than what there would be for using a UK based counterpart. However, as discussed above, it can be tricky to establish the true employment status of an individual. To avoid doubt, it can be helpful to contract with them via an overseas services company that handles payment and administration. It is also advisable to Ask a lawyer to assess your specific arrangements.