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Employ Candidates Compliantly in Sri Lanka

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  1. Overview: Sri Lanka
  2. Work permit for hiring expats via PEO
  3. Contractor vs. employee: which is better?
  4. Global PEO and payroll
  5. Global HR Compliance
  6. Expand without a company set up
  7. Global Payroll Calculator
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Are you looking to engage and pay international talent in Sri Lanka?

Find out how you can make an informed decision on whether you should engage and pay employees or independent contractors using our free ‘Employee vs. Independent Contractor’ Checklist.

Designed to be used by companies engaging remote workforce in Sri Lanka, the checklist is the best way to define why and in what cases companies should onboard new hires or convert existing contractors/freelancers into employees without missing any crucial aspects.

 

What Our Clients Are Saying?

I’d like to share my experience dealing with Acumen International company.

Speed and responsiveness: The company was very prompt in responding to my first enquiry about converting contractors into employees and in answering follow-up questions.

Completeness of information: I like how detailed the estimates and the transparency make us feel more confident in knowing where the money goes.

Overall experience: I am pleased and impressed with how fast they respond to my enquiries. We can trust the company to employ the contractors we want to keep.

Quah Shen Dee,
People Success Officer

I have always found Acumen International very supportive, professional, and helpful. They pay salary on time and are always ready to resolve any issues that arise.

I must admit I truly enjoy my time as an Acumen International employee and feel like they care about me as an individual. I have my own dedicated manager that provides me with detailed explanations when it’s needed. Payments are always prompt, and the entire team does its best to respond to any of my questions.

I highly recommend Acumen International to anyone who requires their services.

Andrew Yanchurevich,
COO


Independent contractors play a crucial role in the modern business landscape. They are individuals who provide services or goods to businesses, operating with a high degree of autonomy. Unlike traditional employees, independent contractors are responsible for their own tax affairs, independently handling their income tax and any other relevant financial obligations. 

This freedom allows them to work with multiple clients and manage their schedules, but it also requires a deeper understanding of their tax responsibilities. The distinction between an independent contractor and an employee is not just about work flexibility; it’s also about financial and legal obligations.

Navigating Compliance: Understanding Employee Misclassification

In the complex landscape of modern employment, accurately distinguishing between independent contractors and full-time employees is paramount. Failure to do so can lead to legal, financial, and operational challenges that businesses cannot afford to overlook. This section highlights the importance of getting this distinction right and its implications for compliance.

Employee Misclassification Risks in Sri Lanka

In Sri Lanka, employee misclassification presents significant legal and financial risks. Misclassification occurs when a worker is incorrectly identified as an independent contractor rather than an employee. This can lead to non-compliance with Sri Lanka’s employment laws, resulting in penalties and legal disputes. Financially, companies could face back payments for taxes, employee benefits, and other entitlements. Furthermore, reputational damage is risky, potentially impacting business relations and trust. It’s essential for companies to accurately determine the status of their workers to avoid these consequences.

The Significance of Correct Worker Classification

Employee misclassification occurs when a worker is incorrectly categorized as an independent contractor when they should be classified as a full-time employee. The consequences of such misclassification can be far-reaching:

  1. Legal Consequences: Governments and labour authorities are increasingly cracking down on misclassification. Businesses that fail to classify their workers correctly may face legal action, including fines and penalties.
  2. Taxation Challenges: Incorrect classification can lead to issues related to payroll taxes, social security contributions, and other tax-related matters. Ensuring accurate tax withholding is crucial for both the worker and the employer.
  3. Benefits and Protections: Under labour laws, Full-time employees are entitled to various benefits and protections, such as minimum wage, overtime pay, and workers’ compensation. Misclassified workers may miss out on these benefits.
  4. Reputation and Trust: Misclassification can harm a company’s reputation, leading to a loss of trust among both employees and customers. Ethical employment practices are increasingly important in today’s business landscape.

Key Factors in Employee Classification

When businesses make the strategic shift from engaging independent contractors to hiring full-time employees, they unlock a host of valuable benefits. This transition, often facilitated by a Global Employer of Record (EOR), goes beyond mere compliance; it offers advantages that can reshape an organization’s dynamics and performance.

Several factors come into play when determining the correct classification of a worker:

  1. Control Over Work: One crucial aspect is the employer’s degree of control over the worker’s tasks. Employees typically have a structured work environment and follow company directives, while contractors maintain more autonomy.
  2. Financial Independence: Independent contractors often provide their own tools, equipment, and materials, while employees typically receive these from the employer. Financial independence is a key indicator.
  3. Nature of Contractual Relationship: Another factor is the nature of the working relationship, as defined by the contract. Contracts should be carefully drafted to reflect the true nature of the engagement.
  4. Duration and Permanence: The length and permanence of the working relationship can also influence classification. Short-term, project-based engagements may lean towards contractor status, while long-term, ongoing roles tend to align with employee status.

The Role of Compliance

Compliance with employment laws and regulations is non-negotiable. Businesses must invest the necessary time and resources to ensure accurate worker classification. This often involves legal counsel and expert advice to navigate the intricacies of labour laws in different jurisdictions.

Understanding the critical distinction between independent contractors and full-time employees is essential for compliance with labour laws and tax regulations. Employee misclassification can lead to legal, financial, and reputational risks that businesses should proactively mitigate. It’s a foundational element in the pursuit of responsible and ethical employment practices.

Together with 100% compliance, official employment of your international in Sri Lanka ensures:

  • NO business risks: secured customer base and intellectual property
  • On-site customer support and in-depth knowledge of local business culture
  • Local managers speak your language
  • Your time and money saved
  • Less time spent on recruitment, evaluation, onboarding of globally distributed teams of professionals, or a learning curve.

Navigating the Shift: How Global EOR Facilitates Contractor to Employee Transitions

The benefits of converting contractors to employees, enhanced by using a Global Employer of Record, include:

  1. Enhanced Legal Compliance: Ensures adherence to employment laws, reducing misclassification risks.
  2. Cost Efficiency: Potentially lowers overall costs through streamlined payroll and benefit management.
  3. Increased Worker Loyalty: Converts to higher engagement and commitment, improving productivity and company culture.
  4. Access to a Broader Talent Pool: Attracts those seeking employment stability and benefits.
  5. Risk Mitigation: Lowers legal disputes and fines risks.
  6. Simplified Administration: Eases the administrative burden by outsourcing HR tasks.
  7. Improved Resource Allocation: Allows for more effective project and task distribution.
  8. Better Training Opportunities: Offers more development programs for skill enhancement.
  9. Enhanced Company Culture: Fosters a stronger sense of belonging and job satisfaction.
  10. Streamlined Communication: Simplifies internal communication processes.

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the ‘Employee vs Independent Contractor’ Checklist

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