Contractors are independent professionals who provide services to a particular company. This person could associate themselves with freelancing, but there are some differences that must be considered to avoid inconsistencies.
The relationship between the company and the contractor is commercial, so this type of agreement involves a major risk for the worker, who does not receive benefits like vacations, salaries, or compensation. In this case, net payment must be higher than that of a salaried worker, since the contractor must bear a greater number of expenses (self-employed quota, income tax, etc.).
It is important to keep in mind that contractors’ specific conditions depend directly on local laws, therefore you must pay attention to the existing legislation in different countries.
Spain, Italy, and Ireland have similar regulations for contractors. However, while in Italy and Ireland they are known as contractors, in Spain they can be linked with self-employed economic dependents. According to Law 20/2007, a contractor can consider themself dependent on a company when they habitually provide services to that company and when billing to that company accounts for at least 75% of their total profits.
In the event that the governments of these countries consider the contractors official employees, the company could be obligated to hire these workers in accordance with Spanish legislation.
To make sure this does not happen, the self-employed economically dependent worker should have more benefits than if they were only a freelancer or contractor, like, for example, a maximum duration of the agreed-upon workday, weekly rest days, and breaks for national holidays. In addition, the government must be informed of this agreement between the worker and the company.
How to differentiate between an employee and a contractor?
- Is the person working on their own? (Getting their own clients, no exclusivity, deciding their own strategy).
- Does the worker have control over their schedule and the capacity to decide their own vacations?
- Does the worker have their own workspace and their own team?
If the answers to these questions were no, it is possible that the worker is an employee, not a contractor. In this case, it would not be possible to rely on any contractor relationship but rather on the labor regulations of each country.