Converting Independent Contractors into Employees: Everything You Need to Know

For most businesses, hiring independent contractors is an integral part of their expansion in Africa. Independent contractors are, in many ways, advantageous for companies: they require less commitment than traditional employees and can bring in specialised knowledge. But in the long run, converting contractors into full-time employees may be more beneficial for businesses. To make the switch, however, there are procedures and best practices that businesses must respect, since employees and contractors are two highly distinctive statuses.

Read on to find out everything you need to know about converting independent contractors into full-time employees.

What’s the difference between a contractor and an employee?

As previously mentioned, employees and independent contractors each benefit from distinct legal statuses.

An employee is an individual who has been hired by a company on a permanent basis. Employees must respect a set working schedule, must do their work on premises decided by the employer, and may even be told how to carry out the work. In return, employees enjoy a set monthly salary with both mandatory and additional benefits.

An independent contractor, on the other hand, is a self-employed individual who takes on projects and charges an hourly fee or project-based rate. Contractors are given deadlines, but it is they who choose when, where and how they carry out the tasks assigned to them. Contractors do not enjoy benefits such as the 13th month, medical insurance coverage or any other allowances.

Why convert an independent contractor into an employee?

Unsure why you should consider converting an independent contractor into a full-time employee? The following reasons may help you make up your mind:

1.    To meet your business needs

Your business needs to evolve as your company expands. Where before you might have needed an independent contractor for a few projects only, it may be that the workload has grown to the point that it now requires the attention of a full-time employee. Who better than to take on this role than the contractor who was already handling the project, and who understands it better than a new recruit would?

2.    To prevent competitors from ‘poaching’ talent

While some independent contractors are happy with their lifestyle, others may come to prefer the stability afforded by full-time employment. If your company does not make such an offer to an independent contractor who works with you, the person might just go to a competitor who is willing to offer them that opportunity. This loss of talent can be hard to take in, especially when it means a competitor now has the upper hand over you.

3.    To make sure you own the rights over the work produced

Copyright and intellectual property laws vary a lot across the African continent. Some companies that hire independent contractors may be surprised to find that the latter owns the rights to any work produced. This can prove to be problematic, especially when it comes to the distribution and scaling of the work. Companies may then prefer to take on a contractor as a full-time employee to avoid any such legal complications.

4.    To avoid employee misclassification

Employee misclassification is a serious offence across all of Africa. It is a form of abuse that happens when a contractor takes on the role of an employee without receiving any of the benefits a full-time employee would habitually enjoy. If your company is found guilty of employee misclassification, you may be subjected to fines, to hiring sanctions, and your employer image may be damaged. Converting an independent contractor into a full-time employee can help circumvent this risk.

5.    To optimise costs in the long run

While companies are not legally obliged to pay any benefits to independent contractors, this does not mean that contractors are the most cost-effective labour choice. In fact, hiring contractors may prove to be costlier as they charge per hour or per project.

6.    To exert more control over how the work is done

Would you like for an independent contractor to brainstorm with your team while they carry out the work assigned to them? Would you like to check in on them every now and then? Converting a contractor into an employee allows you more control over the way they do the work.

How to convert a contractor into an employee?

Businesses should follow these steps to ensure that the switch from contractor to an employee is compliant with local labour laws:

1.    Check individual’s classification

This step is especially applicable to international contractors. You must verify beforehand if the international contractor can become a full-time employee in the African country you are located. This habitually depends on the nature of the work the person carries out.

2.    Make an official offer

Once you have determined that a contractor can legally be converted into a full-time employee, you must make them an official offer. This employment offer should include working hours, a proposed salary, leaves as well as other mandatory benefits and working conditions set by the local labour laws.

Having some issues drafting an employment contract that is compliant with local labour laws? Africa HR Solutions can help you create compliant contracts and streamline the conversion process.

3.    Ensure compliance with employment laws

If the contractor you wish to hire as a full-time employee lives overseas, they are still bound by the labour laws of the country they live in. Your business should therefore ensure compliance with the labour laws of that country as well.

4.    Add the independent contractor to your payroll system

An important part of officialising the switch from contractor to employee is adding the worker to your payroll system. In this way, the worker’s overtime, bonuses and leaves may be calculated so that they are properly compensated. Taxes will also need to be withheld in adherence with local legislation.

5.    Remain compliant with local regulatory frameworks

Ensuring compliance with local laws is not a one-time-only task. It is a continuing process that requires routine checks to ensure that your company is always up-to-date with the latest changes in local legislation.

Convert independent contractors into employees with our Employer of Record solutions

Africa HR Solutions can help you streamline the independent contractor conversion process. Through our Employer of Record services, we will take care of creating employment contracts, adding your new employee to the payroll system, calculating and withholding taxes as well as ensuring overall compliance with local legislation.

Ready to start an exciting new partnership with Africa HR Solutions? Get in touch with our team of experts now.

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