Convert Independent Contractors to Full-Time Employees_ The EOR view
                     Convert Independent Contractors to 
 Full-Time Employees: The EOR 
view
Hiring independent contractors from across the globe is a great business 
strategy,  especially if a business needs expert skills to complete a big 
project. However, the  decision to hire a contractor or an employee 
depends on several factors, such as  the nature of the work, the level of 
control and flexibility required, and the needs  and objectives of the 
business.
Sometimes, it becomes business-critical to convert international 
independent  contractors to full-time employees. But is this transition 
easy? Do you need a  registered company in India for this conversion? 
Have you explored EOR as a  potential option for conversion? Are there 
any necessary steps you should take?  Have you thought of any specific 
time to do it? Let’s have a look at the guide we  have compiled to 
examine all these situations.
From a company perspective, you can have various pain points that 
prompt you to  consider converting your international independent 
contractors to full-time  employees. Have you faced any of the following 
challenges?
● Integration and Retention: Contractors are not necessarily integrated 
into  the company culture, which leads to communication gaps and 
collaboration  challenges, as well as a lack of employee 
engagement. They are more likely  to leave the company for other 
opportunities, leading to a loss of institutional  knowledge and a 
need for ongoing recruitment.
● Inconsistency: They may have different work schedules and may 
not be  available when needed, which can lead to staffing 
inconsistencies, delay in  delivery, and a lack of continuity in 
business operations.
● IP risks: As contractors have the freedom to work with multiple 
clients at the  same time, they expose companies to IP risks.
● Benefits: Generally independent contractors are not eligible for 
benefits  such as health insurance, paid time off, or retirement 
plans, which can  impact their job satisfaction and retention.
By converting contractors to full-time employees through EOR, you can 
address  some of these pain points. This can lead to a more stable 
workforce with improved  collaboration and communication, as well as 
reduced legal and financial risks  related to employment status. 
Additionally, providing benefits and training  opportunities can enhance 
job satisfaction and retention for employees.
Why should you convert
contractors  to employees using 
EOR?
● Increased control and flexibility: Converting independent 
contractors to  employees through an EOR demonstrates that 
you’re invested. As an  employer, you can have more control and 
flexibility over the work that is  being performed, and the timing 
and methods used to perform the work,  providing the company 
with greater flexibility in staffing and meeting  business needs.
● Reduced PE and other legal risks: If your independent contractors 
are  working solely for you, while you dictate schedules and are 
making sales,  they expose you to the risk of permanent 
establishment. Converting
independent contractors to employees can reduce the risk of 
potential legal  issues related to employment status, including 
worker misclassification, and  tax and labor law violations.
● Enhances company culture and HR policies: It helps you strengthen  
recruiting efforts and boost corporate culture by creating HR 
policies that  provide the opportunity for independent contractors 
to become employees.  These will help in amplifying the 
company’s positive reputation and  strengthen talent recruitment 
and retention strategies.
● Greater loyalty and commitment: Employees often have a greater 
sense of  loyalty and commitment to the company than contractors 
who may be  working for multiple clients simultaneously.
● Ease of converting with EOR: For testing out the method of working 
with a  remote team in India, it is not necessary to form a subsidiary 
company. EOR  service providers act as legal employers and 
smoothen the transition for you  as well as your employees.
When is the best time to convert contractors/freelancers in India to 
 full-time employees?
In India, the Fiscal Year starts on the 1st of April and ends on the 31st of 
March of  the following year. February-March marks the best month for the 
seamless  conversion of your contractors/freelancers to employees with 
an EOR. As the  contractor’s status is treated differently from full-time 
employees, the manner of  computation of tax and the govt benefits also 
differ greatly. To help your current  contractors, let’s rightly call them your 
potential employees, in streamlining their  income tax returns and Form 
16, you must act on this conversion right away – in  February and March.
What are the major benefits of converting an independent  
contractor to a full-time employee?
Converting independent contractors to employees is beneficial for both 
the worker  and the company. If you are in a dilemma about whether to 
make this switch,  consider the following reasons to make the transition:
● Enhanced benefits for your team: As an employee, the individual is 
often  eligible for benefits such as health insurance, paid time off, 
and retirement  plans, which can enhance their financial stability 
and overall job satisfaction.
● Creates a competitive advantage: Companies known for allowing  
contractors to convert to employees have an advantage by 
mitigating attrition  to the competition. You get the benefit of 
building strong working  relationships with contractors by offering 
them full-time salaried positions to  expand the talent on your 
current team.
● Reduces risk of compliance violations: Converting from contractor to  
employee can also be a pragmatic decision for companies. It is very 
 commonly seen that the lines between contractor and employee 
get blurred,  exposing the company to potential labor and tax code 
violations. To prevent  this misclassification, transitioning 
contractors to full-time positions is the  best-suited solution
● Supports the worker’s career goals: Independent contractors 
sometimes  prefer working as full-time employees because it allows 
them to play a more  significant role within the company while 
having access to compensation,  benefits, bonuses, vacation pays, 
and so on.
What are the challenges of converting from contractor
to  employee?
● Change in pay: This is inevitable. If you do decide to convert your  
independent contractor to a full-time employee, you will have to 
expect a  change in costs from your end. Your company will pay 
for their benefits as  well as their taxes.
● Taxation compliance: Business contractors pay their own taxes. 
However,  once you convert them to full-time employees, your EOR 
partner is  responsible for withholding taxes on behalf of the 
employee.
● Local labor law compliance: Local knowledge (includes information 
about  national holidays, laws on vacation and sick leaves, overtime 
pay, severance  pay, etc.) is the biggest challenge.
It is a must to ensure the conversion is done correctly, fairly, and 
compliantly with  each country involved. The right conversion strategy will 
definitely help you expand  teams, retain top talent, and maintain a 
competitive advantage in your industry. But  these challenges while 
transitioning are time-consuming and at times high on  investment.
Converting Contractors with an EOR
The best solution to navigate this complex and sensitive process is to 
partner with  an employer of record. EOR services can be availed from 
them as they have local  entities in the hiring country, so they can legally 
employ talent on your behalf.
Remunance’s EOR formula
As the most trusted and experienced employer of record, we help 
companies  manage everything from hiring, onboarding, HR services, and 
IT & infrastructure  support, to legal and regulatory compliance matters. 
Remunance enables the  conversion from contractors to employees in 
India quickly, easily, and  cost-effectively.
We have curated the best formula to simplify these tedious 
transitions  As a partner –
● We will run salary simulations for your team based on Indian 
compliance  laws and benchmarks to ensure a competitive offer 
is extended to  contractors being converted. Along with 
competitive salaries and benefits  packages, we help you outline 
perks like paid bonuses and paid time off.
● Our support team will organize introductory consultations to 
answer any  questions you or your contractor may have about 
the process, giving you  peace of mind as you all proceed.
● When we get on agreeing terms, our team of experts helps you to 
draft  employment contracts, compliantly onboard, enroll onto 
payroll and benefits  portals, and pay the newly converted 
employees in India.
● Here on, you and the employee receive expert support from our 
team to  ensure an excellent employee experience and 
compliance throughout their  employment.
Our expert-led process helps you and your team to have a smooth 
transition into  their new permanent role within your organization without 
having to form a  subsidiary in India.