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Employ Candidates Compliantly in Lebanon

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  1. Overview: Lebanon
  2. Global HR Compliance
  3. Global PEO and Payroll
  4. Work Permit for Hiring Expats via PEO
  5. Expand without a company set up
  6. Contractor vs. Employee: Which Is Better?
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Convert Independent Contractors to Employees in Lebanon

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 the remote workforce in Lebanon, 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 & responsiveness: Very prompt in response to my first inquiry about converting contractors into employees to follow-up questions.

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

Overall experience: I am pleased and impressed with how fast they respond to my inquiries. 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 sort out any issues.

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 a 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 that requires their services.

Andrew Yanchurevich,

How to Hire Independent Contractors in Lebanon without Risking Lawsuits

Employee misclassification occurs when an employer, knowingly or unknowingly, incorrectly determines the employment relationship of its workers. This can result in severe financial and legal penalties for an organization. Companies that operate globally are particularly vulnerable to these risks since they often have employees working in more than one country.

Disposable company structures have become increasingly popular with companies seeking to take advantage of low-cost labor markets. It is common for companies that use this structure to hire independent contractors or offshore employees to reduce their operating costs by eliminating employer contributions for tax withholding, health insurance, and other benefits. However, these arrangements may also put employers at risk for claims that employees are misclassified as independent contractors in Lebanon.

Misclassification puts organizations at risk of legal action from employees and the government, which can lead to costly penalties and even jail time. In addition to fines and penalties, companies can lose out on substantial tax deductions if they fail to properly classify their workers.

The Case of an IT Freelancer You Most Certainly Want to Avoid in Lebanon

Here is the litigation you would want to avoid… One American company worked with a Slovakian IT freelancer for approximately three years. The American HR director decided to contact Acumen International to employ this freelancer so that they would be in compliance with labor laws and avoid future misclassification issues.

The finance department of this US company did not approve of our offer to employ the Slovakian freelancer as it seemed higher than what they were currently paying the freelancer. An employee misclassification case did not seem imminent, so they decided not to act.

Half a year later, the company contacted us to employ a Slovakian freelancer. Our offer got approved, but the freelancer refused to sign our employment agreement. In this half-year, the relationship between the freelancer and the US company went sour. The freelancer decided to go to the labor authorities instead. We never heard the ultimate verdict, but from communication with the HR director, we understood that they risked owing social security taxes, vacation, severance payment, and additional fines totaling about seventy thousand euros.

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Tips for Hiring Independent Contractors with Confidence in Lebanon

As the world becomes increasingly interconnected, it is not just businesses growing more internationally. Now more than ever, individuals are taking advantage of improved communication technologies to work from home offices in their own country or homes in other countries. While this can benefit the workers, it also brings new challenges for employers and the organizations that hire them in Lebanon.

One of these challenges is the possibility of misclassification—the failure of a country to recognize a worker as an employee rather than an independent contractor. In many countries, independent contractors are not afforded the same workplace protection and tax benefits as employees, which can lead to significant financial exposure and risk for companies based in those countries that hire such workers. By following a checklist that addresses the most important issues related to working with contractors, you can be sure that your business will remain in compliance and avoid the costly consequences associated with employee misclassification. Below are four signals that will help you identify misclassification risk.

1. Control

If the client provides explicit instructions on completing a task, including what needs to be done, when it should be done, and where it should be done, this is referred to as “how, what, when, and where” testing. In these cases, the workers are usually controlled by the client and would therefore be considered employees. 

Independent contractors (freelancers) are professionals who provide services to companies under contract. They may work remotely or on-site and are typically distinguished from employees based on the degree of control exercised by the company. In general, the more control a company has over an individual, the more likely that person is an employee rather than an independent contractor.

One of the key distinctions between employees and contractors is that employees are typically required to complete the work that “comes down the pipe,” as stipulated in their job description. 

A high degree of control over the contractor’s work or schedule might also help show that they are more like employees than independent contractors.

2. Substitution

The employment relationship is built on two key concepts: 

  1. that the employee is an individual, and not a legal entity; 
  2. that the employee cannot be replaced. 

The employment contract is personal to the individual, based on their skills, experience, and identity. The employer hired them because of these qualities, which are essential to the contract.

It is implied that a worker given the right to substitute for themselves and to have work assigned to someone else is not providing a personal service and is not an employee. This would suggest that the employer can quickly replace the contractor, indicating that they do not need such a contractor personally for their business. Also, suppose the employer has the right to assign work to someone else. In that case, it means they control how many people work for them at one time and when which would mean the contractor is not considered to be working under an employment contract but under a contract of service.

3. Mutuality of Obligation

The concept of mutuality of obligation means that both an employer and employee have specific duties and responsibilities to each other. An employer is obligated to provide work for their employee while the employee is required to complete the assigned work.

Suppose a worker is not focused on a specific project and has to do any task allocated by the client. In that case, there is probably mutuality of obligation, and the worker is not seen as an independent contractor by tax authorities.

4. The Burden of Entrepreneurial Risk

When examining the rights and responsibilities of an independent contractor, there is often confusion over what classifies one as an employee. the most crucial distinction between an employee and an independent contractor is financial risk. If a contractor can make a profit or a loss, i.e., financial risk, this would suggest that the worker is an independent contractor. Otherwise, they may be considered to be an employee.

OECD, Commentary on Article 5

Whether a person is independent of the enterprise represented depends on the extent of the obligations which this person has vis-à-vis the enterprise. Where the person’s commercial activities for the enterprise are subject to detailed instructions or to comprehensive control by it, such person cannot be regarded as independent of the enterprise. Another important criterion will be whether the entrepreneurial risk has to be borne by the person or by the enterprise the person represents. An independent agent will typically be responsible to his principal for the results of his work but not subject to significant control with respect to the manner in which that work is carried out. He will not be subject to detailed instructions from the principal as to the conduct of the work. The fact that the principal is relying on thespecial skill and knowledge of the agent is an indication of independence.

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Hiring Independent Contractors in Lebanon: the Do’s and Don’ts

When it comes to employment law, there are key factors that experts consider to determine whether a worker is an independent contractor or an employee. These include control, substitution, and mutuality of obligation. However, there may be other important considerations to take into account as well.

Independent contractors may be subject to employment tests by tax authorities in home and host countries to determine their full-time employee status. If it is determined that they are a disguised employee, such independent contractors and their factual employers may be required to pay back taxes, social security contributions, interest, and penalties. To avoid this outcome, employers and independent contractors must understand the difference between an employee and an independent contractor.

How Tax Authorities Can Distinguish Independent Contractors from Employees

  1. How the parties treat each other.
  2. The amount of control exercised by the principal over the details of how the work is done.
  3. Whether payments are made by time or by results.
  4. Whether the work is part of the regular business of the principal.
  5. Whether the contract was entered into as a means of carrying on business or for any other commercial purpose.
  6. Whether the work requires special skills and initiative and whether such skill is peculiar to any trade, business, or calling.
  7. The length of time for services to be provided, and more.
  8. Whether the worker is taking on financial risk.
  9. Whether the worker is providing their own equipment.
  10. Whether the worker is in receipt of employment benefits.
  11. Whether the worker can profit from their work. 
  12. Whether the worker has the right to terminate the contract.
  13. Whether the work performed requires special skills and initiative.
  14. The permanence or exclusivity of the relationship with the employer company.

Accurate Worker Status Determinations and Compliant Hiring via Global PEO (Professional Employer Organisation)

Today’s global economy is a unique and exciting time for business. It’s an era of remote work, constant expansion, and innovation, and the future looks bright for companies that can take advantage of the growing demand for their goods and services across borders.

However, the challenges of this new age are just as significant as the opportunities. One of the most formidable obstacles is employee misclassification risk. Global companies without a comprehensive solution to manage their international labor force risk can be held liable for failing to meet local compliance regulations, tax requirements, and other legal obligations in Lebanon. These risks can cripple even the most well-run business or conglomerate.

Companies should implement global employment solutions designed to protect them from worker misclassification issues when operating globally. A global PEO can offer a comprehensive array of services that can help you avoid employee misclassification risk and other similar potential liabilities.

Engaging Independent Contractors with Confidence in Lebanon

Acumen Internation, a global PEO (Professional Employment Organisation), helps companies, especially those with offices in multiple countries, to prevent legal trouble by ensuring they are not misclassifying employees as independent contractors. Tax and labor laws are complicated and vary globally, making it hard for companies to know what they’re doing is right. A global PEO handles these issues for you with on-site customer support and expertise in local labor law in the Philippines. A global PEO can also ensure that professionals are being appropriately handled for tax purposes and adhere to the complex regulations of local labor laws. This ensures that your company has the necessary infrastructure in place so that you can focus on your core areas of business without having to worry about these legal issues.

Benefits of Hiring and Payrolling Foreign Employees vs. Independent Contractors in Lebanon

  1. Engaging and paying foreign talent via a global PEO solution is about 30% cheaper than engaging in-house.
  2. Saves around 50% of costs compared to working and paying through your entity.
  3. With the help of employment, employee loyalty grows by 47%, which is why you can retain the top minds long-term.
  4. Legal foreign employment eliminates 95% of legal, financial, and business risks. Leveraging the global PEO (Professional Employer Organisation) solutions, you can get flexibility and take up more projects of different duration.
  5. You can start a bare-bones operation in Lebanon with just one or a couple of employees and easily add any headcount as you move along.
  6. Less time spent on recruitment, evaluation, onboarding of globally distributed teams of professionals, or a learning curve.

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