Growing companies may turn to global hiring to bolster international success. Independent contractors can be a valuable asset to complete specific projects. If considering hiring an independent contractor based in Saudi Arabia, companies must first understand the intricacies of the classification and the responsibilities as an employer.
Hiring independent contractors in Saudi Arabia
When companies have various projects to complete, contractors can offer expertise to cover these needs. However, every country has laws regarding this worker type, so it’s vital to understand the requirements and expectations before starting the hiring process.
Independent contractors vs. employees
The primary difference between independent contractors and employees is the level of control they have over their work. Independent contractors have the freedom to choose working hours, how they complete their projects, and how many companies they work with simultaneously.
In contrast, employees work under the supervision of the employer. They must follow orders regarding working hours, abide by company procedures, and use mandated tools to do their jobs. While the country recognizes a few distinct employment types, employees generally take on a more permanent role and contribute services that are integral to the business as a whole.
Penalties for misclassification
Employees are entitled to certain benefits, so if a worker is classified as a contractor when they are functioning as an employee, companies can face hefty fines along with social security and tax back payments.
How to hire independent contractors in Saudi Arabia
The hiring process for independent contractors will require three key steps.
1. Carefully conduct interviews.
Employees and contractors are distinct, so it’s essential to treat the interview process accordingly. Rather than focusing on character traits or ways in which a candidate could contribute to company culture, companies should ask questions regarding skills and experience. They only need confirmation that a contractor can complete a desired project, not that they’ll work as an integral part of the team.
When drafting advertisements for open positions, make sure to include independent contractor phrasing to attract the right candidates.
2. Create a service agreement.
Instead of writing an employment contract, companies will need to create a service agreement. This document will clarify the terms between the employer and the contractor to ensure both parties understand expectations. Companies should include the following terms:
- Description of the project and its due date
- Pay rate and arrangements
- Termination policies
3. Introduce necessities.
Onboarding is characteristic of employee-employer relationships, not contractor agreements. Instead, companies should introduce any elements the contractor may need to complete the project, such as important people within the company structure or essential workflows.
How to pay independent contractors in Saudi Arabia
The service agreement should cover the payment arrangements between the employer and the contractor. Independent contractors may have a standard system for payments, such as installments at different stages or a down payment at the outset of the project. It is a contractor’s responsibility to create invoices and bill the employer for their time.
Unlike with employees, employers are not required to deduct taxes and social security contributions from contractor payments. The government views contractors as self-employed individuals who are responsible for their own taxes and contributions.
Terminating independent contractors
Independent contractors do not have the same protection against dismissals and terminations as employees do. Breach of contract allows for termination, though companies may outline other terms in the service agreement, including notice periods and grounds for termination.
Turn to G-P when hiring independent contractors in Saudi Arabia.
As a part of our #1 suite of global employment products, G-P Meridian Contractor™ allows companies to hire and pay global contractors faster, with self-service workflows and a wide set of flexible payment options. Whether you’re hiring employees or contractors, our platform streamlines the process with a single solution for your global workforce.
Contact us to learn more.