How to hire contract employees: money, compliance, and contractor outsourcing

In the first part of the comprehensive guide to contractor management, we’ve covered the nuances of the difference between full-time employees and contractors. In today’s article, we cover the challenges and best approaches to managing contract employees.

When hiring contract employees on a global scale, companies face several challenges:

• How to access a high-quality workforce?
• How to manage contract employees efficiently?
• How to pay them salaries, considering taxes, benefits, and compliance rules?

To start with, let’s define the employment relationship between the contractor and the hiring company.

Who is a contract employee?

A contract employee is a person who works for a company or an individual on a temporary, project-based, or fixed-term agreement rather than being a permanent, full-time employee.

• Temporary contract: Contract employees are typically hired to complete specific tasks or projects within a set timeframe. Usually, they have a written fixed-term contract that outlines the terms of the employment.
• Fixed-term duration: Once the contract term ends, the employer may finish working with the contract employee without paying severance (unless it’s envisaged by the contract).
• No benefits (but may have some): Contract employees are typically not on the company's payroll as permanent employees. It means they typically don't receive long-term benefits like health insurance, retirement plans, or paid time off (PTO). Although, they may have it, depending on the agreements and labor laws.
• Handle taxes themselves: Unlike permanent employees, contract employees are responsible for handling their taxes, which may include self-employment taxes (as they are considered independent workers). Employers don't withhold taxes from their pay.
• Have certain obligations: Contract employees may also have certain limitations on collaboration with other clients. They may be required to sign additional policies, such as NDAs and IP protection.

In short, a contract employee works under a temporary agreement and has more independence than a permanent employee but weaker labor protection.

How much does it cost to hire a contract employee?

The cost of hiring a contract employee varies widely depending on several factors, such as the industry, expertise, location, the complexity of a job, per hour or flat fee, and many more.

On most contractor platforms, users provide their fees, portfolios, and basic terms of work. This allows companies to vet the candidates and plan budgets for assignments effectively.

Hourly rates can range from $30 to $250 per hour, depending on the factors listed above. And project-based fees might range from a few hundred dollars to tens of thousands, depending on the project's size and complexity.

Rough estimates of the general price range as of 2025:

• Freelancers (e.g., writers, designers): $30–$150 per hour, depending on experience.
• Tech contractors (e.g., software developers, IT consultants): $50–$250 per hour, with highly experienced or specialized developers on the higher end.
• Skilled trades (e.g., electricians, carpenters): $40–$100 per hour.
• Consultants (e.g., business consultants, marketing experts): $100–$500 per hour or more, depending on their expertise.

When hiring contract employees, companies can get help from hiring agencies or PEO/EOR services. It is best for large-scale expanding projects involving big budgets and lots of compliance intricacies. For example, EOR services are a go-to solution for hiring international contractors and contractor management outsourcing for tech projects.

What is the difference between PEO and EOR?

When companies decide to outsource hiring contract employees, there are two ways to go – Professional Employer Organization (PEO) or Employer of Record (EOR). Both PEO and EOR are services that help businesses manage human resources and compliance, but they function differently. Here's a breakdown:

1. PEO (Professional Employer Organization):

A PEO is a company that provides employers with outsourced HR, payroll, benefits, and compliance services. With a PEO, there’s a co-employment arrangement. It means that both the client company and the PEO share responsibilities for the employees.

A PEO usually handles tasks like payroll, benefits, tax compliance and labor regulations, HR support, and more. Meantime, the client company manages the day-to-day work, supervision, and other operational aspects.

2. EOR (Employer of Record):

An EOR is the official employer who legally hires workers on behalf of the client company. The EOR takes all employment responsibilities, including payroll, taxes, and legal compliance. However, the client company retains control over the employee’s daily work and responsibilities.

EOR or PEO – what’s the key difference?

An EOR is more common for global hiring across different countries, while PEOs usually operate within a single country.

With EOR services, businesses can legally employ workers without establishing a local entity in those regions. An EOR takes on full legal responsibility for employment.

In a PEO, the company shares employment responsibilities with the PEO. Also, with a PEO, the business and the PEO both handle certain HR responsibilities.

The compliance risks of hiring contractors

Here is a fresh case related to union compliance. Google is undergoing hearings against the US Labor board. In 2024, the company removed the $15-per-hour minimum wage for contractors and made changes to avoid bargaining with unions. 

Meanwhile, the National Labor Relations Board claimed that Google was a “joint employer” of about 50 San Francisco-based content creators who were employed by an IT firm Accenture Flex – they joined the Alphabet Workers Union in 2023. This fact may push Google down to the negotiation table with contractors’ unions to reconsider the working terms for contractors.

Note: What is co-employment?

Co-employment is a situation when a contract worker has two employers who both may bear legal responsibilities toward them. This situation often arises when independent contractors are hired through staffing agencies, as both the agency and its client can be considered the contractor's employer.

Usually, the staffing agency is called the primary employer. Co-employment risks emerge when the client, or “secondary” employer, goes beyond its roles in their employment relationship. For example, the client may want more control over the contract employee than the agreement and laws permit.

As you can see, hiring contractors may have complications depending on the country and labor laws where the business is based. This way, if you need to expand globally fast, outsourcing or outstaffing services to specialized EOR companies can be a good approach.

How to hire contract employees through outsourcing

An outsourcing company typically provides comprehensive human resource solutions to businesses. When a company partners with a PEO, the latter acts as a co-employer. When partnering with an EOR, the latter acts as a full employer. In any case, the outsourcing organization handles tasks related to contract employee management while the business focuses on its core operations. 

For example, an EOR company may cover the following needs:

1. Process payroll for the contractor teams, including salaries, tax deductions, and other withholdings.
2. Manage benefits, if there are any (which can be additionally agreed upon for contract employees).
3. Foster compliance requirements, such as employee classification, workplace safety, and benefits.
4. Provide recruiting and staffing services, especially when hiring foreign workforce and navigating the local trade market.
5. Support onboarding and termination of contractors – assist with handbooks, policies, employee relations, and dispute resolution.
6. Manage risks and safety policies to minimize workplace accidents or handle them if such issues occur.
7. Provide visa support handling immigration services and relocation for digital nomads, tackling residency permits, etc.

Contractor management outsourcing – for or against?

Hiring contractor employees without expertise may have severe consequences for a company. Remember contractors are not a cheap workforce or somebody you are not obliged to do anything. Working with contractors requires even more work discipline.

The Juggl team has a proven track record of managing a global workforce and minimizing red tape. The customer story shows how the contractor management software and EOR services helped the tech company to:

• Pay contractors the right amount at the right time.
• Handle independent contractors and contract employees alongside full-time employees.
• Keep track of policies, legal documentation, and contract agreements.
• Manage benefits for salaried and contract employees.

If you are interested in these features or want to learn more about how we could help you manage contractors, contact us.