Can Independent Contractors Get Equity? Stock Options Explained

More companies are embracing contractors to access specialized skills, scale faster, and stay flexible in a changing market. Hiring contractors opens new possibilities—but until recently, offering them equity remained out of reach.

Traditionally, stock options, RSUs, and other forms of equity have been reserved for full-time employees. This created a major gap: contractors driving critical results were often excluded from long-term financial rewards, limiting loyalty, engagement, and shared success.

Deel helps companies close that gap. With deep expertise in global compliance and contractor management, we make it simple to extend equity—whether NSOs, RSUs, or direct stock grants—to contractors in over 150 countries. Our platform ensures every arrangement meets local tax rules and legal requirements, reducing risk while maximizing value for both sides.

This article guides you through designing and delivering compliant, compelling contractor equity packages with Deel—building stronger partnerships and future-proofing your contractor strategy.

By offering contractors ownership opportunities, companies can attract top talent, boost retention, and unlock deeper commitment—all while staying compliant and competitive in a global market.

How does contractor equity work?

Equity ownership gives contractors a share in the company’s potential growth, encouraging commitment and a stronger connection to the business. It drives both personal and organizational growth.

What are the types of equity compensation available for independent contractors?

Independent contractors can receive compensation in various forms of company stock or equity-based rewards:

• Non-qualified stock options (NSOs): A type of stock option plan that allows independent contractors, including foreign contractors, to purchase a specific number of shares at a predetermined exercise price. The grant is often offered at a discounted price compared to the market value at the time
• Restricted stock units (RSUs): Company shares that become available once the contractor meets certain conditions. These conditions may include time-based vesting or performance milestones
• Outright stock grants: The independent contractor receives full ownership of company shares upfront, though some grants may include vesting schedules
• Virtual stock options: These provide independent contractors with a cash payout equivalent to stock value appreciation, rather than actual shares. They are also known as phantom stock or shadow equity

See more: Contractor Benefits and Perks, Powered by Deel

What are the benefits of offering equity to contractors?

When companies offer well-structured equity-based compensation to contractors, the benefits are significant for both parties. These include:

• Higher motivation and engagement: Equity ownership can be a powerful motivator, encouraging independent contractors to contribute their best efforts to the project or assignment
• Access to a better talent pool: Offering equity grants can make a company more attractive to top-quality independent contractors
• Long-term relationship building: As the contractor becomes a stakeholder in the company, they are more likely to continue working on future projects
• Success sharing: Independent contractors often take on a level of risk by working on a project basis. If the company grows in value, equity grants can lead to long-term capital gains. This can help offset some of the risks of project-based work
• Tax advantages: Depending on the structure of the equity grant, there may be tax advantages for both the company and the contractor. However, tax implications can vary based on jurisdiction and the specific terms of the equity arrangement
• Improved cash flow: Using equity to cover part of an independent contractor’s compensation reduces immediate cash outflows for the company

What are the challenges faced by contractors in obtaining equity?

Contract work is changing, removing barriers that once kept companies from compensating independent contractors using equity. These barriers included:

• Legal and regulatory constraints: Equity ownership is often more straightforward for employees than for independent contractors. Legal and regulatory constraints may limit the ability of contractors to receive equity
• Complexity of equity arrangements: Determining the appropriate structure, vesting schedule, valuation, and other terms may require legal and financial expertise that is not always readily available
• Uncertain future relationship: Independent contractors typically work on a project-by-project basis. This uncertainty can make it challenging to structure equity grants that align with the contractor’s contributions over time
• Tax implications: The tax treatment of equity grants for contractors can be complex. They may differ from those offered to employees, and contractors need to understand how they affect income taxes
• Valuation challenges: Unlike publicly traded companies, private companies may require a more intricate valuation process. Contractors may face challenges in understanding and agreeing on the valuation method

To address these challenges, contractors and companies must work closely to establish clear and transparent equity arrangements. Legal and financial professionals play a crucial role in managing the details of equity grants for independent contractors and ensuring compliance with relevant laws and regulations.

A well-defined agreement is also critical. It should outline the terms of the equity arrangement to manage expectations and potential issues.

See more: Contractor Conversion Guide: From Contractor to Employee

How to offer equity to independent contractors

Structuring equity grants correctly requires careful planning and compliance. With the help of Deel Equity, you can navigate the process effectively.

1. Determine the right equity type

Choose between NSOs, RSUs, outright stock grants, or virtual stock options based on your goals, the nature of your business, and any legal considerations.

Tax rules and regulations vary by location. Consulting Deel’s experts can help you understand the implications of each equity type.

Our equity support will guide you in selecting the best options for your unique situation. We’ll assist with reporting grants to local authorities, securing advance approval from tax authorities, and navigating other regulatory requirements.

2. Customize your equity grant agreements

Every contractor role is different, and equity grants should reflect the value provided and the level of involvement in the work.

Consider factors like project duration, skill specialization, and long-term value when designing equity offerings. Some contractors may prefer faster vesting for short-term projects, while others might benefit from performance-based grants tied to key milestones.

Use Deel to create customized grant agreements. The platform offers a variety of equity grant formats, ensuring accessibility for contractors. It allows contractors to choose from different structures, such as time-based or milestone-based equity grants.

This flexibility provided by Deel ensures that the equity agreement aligns with the specific dynamics of the contracting relationship.

3. Simplify your equity process

Managing equity agreements alongside regular contracts can be complicated, especially when dealing with multiple contractors. But Deel streamlines the entire process on a user-friendly platform.

The option to include equity is available when creating a contractor agreement. With just a few clicks, you can trigger the process. Deel ensures that the agreed-upon equity grant is satisfactory to all parties and also compliant with relevant regulations.

4. Ensure clarity in equity arrangements

Equity grants can be a powerful incentive, but all parties need a clear understanding of their benefits and implications. Contractors and employers should understand the different stock option grants, potential tax liabilities, and how vesting schedules impact earnings.

Deel helps streamline this process by providing guidance on compliance and equity structures. We ensure that both parties understand the terms, reporting requirements, and regulatory considerations when establishing an equity grant agreement.

Offer contractor equity easily with Deel

Deel makes it easy to grant compliant, customized equity packages, so you can attract and retain top-tier contractors.

One of the best parts? Because equity is built into Deel’s contractor management platform, you can manage everything—from contracts to compensation to compliance—in one place, with less time and effort.

We also support your entire workforce strategy with Deel EOR and our global HRIS. This makes it easy to manage contractors, internal employees, and EOR employees side by side.

Book a free demo to see how Deel simplifies contractor equity.