How US Companies Can Legally Hire International Contractors

You’re growing fast—but your current team can’t meet demand. You need skilled help now without committing to long-term hires.

Hiring a full-time employee doesn’t fit. Maybe you only need short-term expertise. Maybe you want to avoid straining your company culture by scaling too quickly.

Independent contractors offer a smart, flexible solution. But without the right compliance steps, you risk fines, lawsuits, and reputational damage that could slow your momentum.

Deel helps you hire contractors legally and easily. Our all-in-one platform manages contracts, ensures tax and labor compliance across 150+ countries, and simplifies global payments—so you can scale safely and focus on growing your business.

In this guide, we break down every step US companies must take to hire and manage independent contractors—from evaluating needs, to building agreements, to handling renewals. We also share expert tips to make your process smoother, strengthen your reputation as a client, and win better talent faster.

What are the benefits of working with independent contractors?

Many companies balk at the thought of hiring independent contractors as they have less control and direct oversight. However, this type of worker comes with distinct advantages over traditional employees.

Lower costs

Hiring independent contractors can significantly decrease your labor costs. As their client, you’re not responsible for making contributions to benefits like social security, unemployment insurance, or workers’ compensation on their behalf. You could save an average of $13.20 per worker per hour worked by hiring independent contractors instead of full-time employees.

As you don’t have to manage benefits, you also have less paperwork to handle. This puts less pressure on your existing HR and finance departments — critical if you’re operating with a lean team.

Wider talent pool

If you hire foreign contractors, you can open your company to a global talent pool. You won’t have to limit yourself to your domestic job market and compete with local competitors. This allows you to find the right talent for your upcoming projects without bidding against competitors and enhances your business success.

Greater agility

Independent contractors give you the flexibility to scale your workforce up and down according to your short-term needs. You can bring in support for a specific project or skills gap and end the engagement amicably when it’s no longer needed. This keeps your business lean and responsive, so you can move quickly to capitalize on market opportunities.

When should you hire independent contractors?

Independent contractors come with many benefits, but that doesn’t necessarily mean they’ll help you achieve your goals. Let’s explore the scenarios where hiring them makes the most sense:

• One-off needs: There’s no sense hiring a full-time employee for a project your business only does once or twice. Hiring freelancers gives you the numbers to take care of the job without overcommitting your resources
• Quick expertise: Sometimes your team lacks the required expertise to handle a small but necessary task. A contractor can join your company briefly to perform jobs like designing a webpage or fixing a software bug
• Urgent projects: Training an existing staff team member might take too long when you’re facing a new and complex task that has to be done as fast as possible. Meanwhile, an independent contractor with the right expertise can join the team within days and take care of the job
• Rapid expansion: Fast-growing companies might need a lot of workers to handle new divisions or projects. Independent contractors can temporarily give you the people you need while you test markets or formalize your strategy

What do you need to know before hiring independent contractors?

Hiring contractors may be simpler in some respects than finding and onboarding full-time employees, but it’s not free from responsibilities. You must still ensure compliance with local labor laws, tax requirements, and industry standards to avoid issues.

Here’s what you should consider and prepare for ahead of hiring contractors:

Understand your tax obligations

Before hiring any contractors, ensure your business has the right Tax ID. Most businesses need an Employer Identification Number (EIN) issued by the IRS to complete all the required forms and tax filings. You can apply for your EIN in minutes through the IRS web portal if you don’t have one already.

However, if you’re a sole proprietor or run a single-member LLC with no employees, you may be able to use your Social Security Number (SSN) instead.

Ready to make your first hire but unincorporated in the United States? Deel Entity Setup can walk you through the process of establishing a business by helping you complete applications and check that you’re meeting local requirements.

Educate yourself about worker classification

Research all the criteria for classifying workers in the country where you want to hire contractors. You must follow these rules, as employment status is usually based on behavior rather than anything you’ve agreed with the contractor.

The difference between employees and independent contractors isn’t always clear. Additionally, employment laws have tightened in recent years, and misclassifying workers can lead to IRS fines, back taxes, and lawsuits. Businesses have been known to pay over $200 million (USD) in restitution for treating contractors as employees.

While the criteria vary across jurisdictions, a worker is generally more likely to be classified as an employee by their country of residence if:

• You control their working hours, shifts, schedule, break time, and vacation
• You determine the method of working and provide resources and tools
• You are responsible for their training, development, and promotion
• You are their only employer, and you have a stable, long-term relationship

Generally, it’s best not to leave worker classification to chance. Consider outsourcing to a service like Deel Contractor to verify each freelancer’s status before you enter an agreement.

Check your payment setup

Ensure your business has a reliable way to handle invoices and pay freelancers. Unlike employees, you can’t manage these processes through your regular payroll, but you may still be expected to meet certain obligations. For example, the State of New York requires businesses to pay freelancers within the timeframe stated in the contract or 30 calendar days if this was unspecified.

For US-based contractors, you can usually pay via direct deposit. If you’re working with international contractors, you can use software like Deel Global Payroll, which supports cross-border payments and currency conversions.

Draft an independent contractor agreement

Some businesses skip this step, mistakenly thinking it’s unnecessary. However, a written agreement benefits both you and the independent contractor as it clarifies your agreement and prevents misunderstandings.

Here are the terms and conditions you should add to your independent contractor agreement:
Project scope, method of working, and resources to be used,

• Desired outcome and result (preferably with time-sensitive KPIs)
• Deadlines and delivery methods
• Confidentiality and NDA (non-disclosure agreement), when necessary
• Pay rate, payment method, and schedule
• Consequences of not meeting the terms of the agreement
• Division of intellectual property
• Terms of termination

Deel Contractor can generate a compliant agreement for every worker. Our team ensures the terms and conditions meet all the relevant legal criteria for independent contractor status. If there are any issues, Deel can advise you on how to alter the agreement or your partnership with the freelancer.

To eliminate the risks, consider outsourcing hiring to Deel’s Contractor of Record (CoR) service. Deel becomes the hiring entity on paper and handles all the paperwork and compliance, leaving your company with virtually no liability.

Essential steps after hiring an independent contractor

Although there are far fewer obligations for contractors than for employees, there are still a few mandatory steps.

Screen workers

Although they’re not employees, many industries still require you to perform a background check on independent contractors. Other companies should strongly consider these checks if workers will have access to sensitive information or work directly with customers and clients.

HR platforms like Deel build background checks into your onboarding process so it doesn’t slow down hires. You can screen employees and contractors in over 190 countries and receive the results in 15 minutes.

Manage the paperwork

Contractors must complete a Form W-9 if they’re US citizens or residents and a Form W8-BEN if they’re based entirely abroad. Both forms are available to download from the IRS website. From the moment the contract begins, you must store these documents for at least four years.

Your business is also required to file an IRS Form 1099-NEC (previously known as Form 1099-MISC) if you’ve paid a contractor more than $600 in a year. Both you and the contractor need to complete and submit the form to remain compliant.

Sign the agreement

Before signing the written agreement, spend some time discussing the terms and conditions and ensuring both parties are satisfied. This lowers the risk of disputes and potential legal issues in the future.

Afterward, send the independent contractor agreement for the worker to sign. If workers are based in other locations, you can use a global HR platform like Deel to notify them via email and collect their signatures. Our software keeps you updated about progress — this gives you a chance to follow up with contractors when they’re slow to respond and check whether there are any issues.

Arrange regular check-ins

Regular check-ins help strengthen your relationship and keep projects on track. If you're happy with the results and see long-term potential, you might consider converting contractors to employees. If the quality of their work isn’t meeting expectations, this gives you a chance to offer feedback, provide support, or decide to terminate the contract.

Just be mindful not to treat the contractor like an employee. Setting fixed hours, directing their daily tasks, or requiring them to check in with you at certain points can increase your risk of misclassification. Keep the relationship within the agreed project scope unless you're ready to formalise a hire and start paying withholding tax.

Monitor performance

Tracking a contractor’s output lets you check they’re meeting expectations. It also creates a clear record in case questions arise later and you need to resolve a legal dispute.

Avoid monitoring hours or working methods as you would with an employee. Instead, check that the deliverables meet the scope, quality standards, and deadlines outlined in your independent contractor agreement. If you encounter any issues, keep records of the work submitted, feedback given, and any communications.

Make the most of independent contractors with Deel

Independent contractors aren’t just a way to make cost savings. They’re an essential part of modern business strategy, enabling you to become more agile and resilient.

Deel Contractor can ensure you’re making the most of these partnerships. Our service verifies that you have a compliant agreement in place according to each worker’s local and industry laws. We help you build on this strong foundation with invoice management, timely cross-border transfers, and flexible payment options.

Ready to hire your first independent contractor? Schedule a 30-minute call with the Deel team to see how we can support you through this process.