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Employ Candidates Compliantly in Liechtenstein

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  1. Overview: Liechtenstein
  2. Expand without a company set up
  3. Contractor vs. employee: which is better?
  4. Global PEO and Payroll
  5. Global HR Compliance
  6. Global Payroll Calculator
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Use our free ‘Employee vs. Independent Contractor’ Checklist to decide whether to engage and pay employees or independent contractors.

Designed for companies engaging a remote workforce in Liechtenstein, 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 want to share my experience dealing with Acumen International company.

Speed & responsiveness: Very prompt in response to my first enquiry 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 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 always found Acumen International very supportive, professional and helpful. They pay salary on time and are always ready to sort out 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


In today’s global business environment, navigating complex regulatory frameworks is crucial for operational compliance and integrity. Emphasizing tax compliance is essential, especially when hiring independent contractors, due to non-compliance’s significant legal, reputational, and operational risks.

The practice of adhering to tax laws is vital not only for legal compliance but also for supporting economic stability and maintaining social norms, ensuring businesses operate effectively within strict legal boundaries. However, the complexity of current regulations poses a challenge to maintaining this compliance.

Businesses are increasingly moving from hiring independent contractors to hiring full-time employees, a transition facilitated by Global Employers of Record (EORs). This change is motivated by evolving legal standards, workforce expectations, and the need for greater compliance, positioning Global EORs as crucial partners in navigating the complexities of global employment and tax laws. By adopting Global EOR services, businesses can align their hiring practices with local and international regulations, mitigating legal risks and streamlining the employment process.

Engaging with Global EORs offers a strategic pathway to ensure compliance, operational efficiency, and workforce stability for businesses looking to adapt to these changes. This approach helps navigate the intricacies of global employment laws and supports sustainable business growth and success in the competitive global marketplace.

Understanding the Risks of Employee Misclassification

The incorrect classification of workers by employers—often identifying them as independent contractors rather than employees—can lead to a cascade of legal and financial consequences. Let’s delve into the key motivations for such misclassification and the subsequent repercussions.

Employment classification is under increasing scrutiny by regulatory agencies. The consequences for non-compliance are severe, ranging from monetary fines to legal sanctions, thus making adherence to local and national employment laws paramount.

For workers engaged as independent contractors, it’s vital to understand the potential downsides of being misclassified when you might qualify as a full-time employee. Misclassification isn’t just an employer’s concern; it directly impacts you in several significant ways:

  1. Lost Benefits: Independent contractors typically don’t receive the same benefits as full-time employees. This means missing out on essential perks like healthcare, retirement contributions, and paid leave.
  2. Tax Implications: As an independent contractor, you handle your taxes, including social security contributions. Without an employer’s partial contribution, you could have a considerable tax burden at the end of the year.
  3. Legal Vulnerability: As an independent contractor, you may lack the employment protections that full-time staff enjoy, such as workers’ compensation for an injury or the right to seek legal redress for unfair dismissal.
  4. Job Security Concerns: Independent contractors can typically be let go without notice, missing out on the severance packages or notice periods usually offered to employees.
  5. Intellectual Property Issues: When engaged as an independent contractor, you may not have legal rights over the work you produce. Conversely, employment contracts often include clauses that protect your creations under certain conditions.

Proactive Approach to Employee Misclassification

Express Global Employment team helps determine the correct employee classification. We also provide expert guidance to ensure regional tax and labour compliance.

  • Accurate Employee Classification & Tax Compliance: We harmonise the proper employee categorisation with regional specifications and support full tax compliance.
  • Affordable Global Employment Solutions: We provide compliant global employment solutions that are flexible and affordable. With us, you can offer all statutory benefits without resorting to independent contractor workarounds for full-time roles.
  • Adaptable Employment Structures: We offer tailored solutions for short-term projects or long-term positions, ensuring a perfect fit for your international operations and minimising potential classification errors.
  • Comprehensive Tax Guidance in 190 countries: Our team ensures you’re in line with local tax obligations, from payroll to benefits, removing the guesswork for you.
  • Global Payroll Calculator: Leverage our Global Payroll Calculator for real-time insights on payroll costs and hiring, enhancing precision in budgeting and strategic talent acquisition decisions.

The 70,000 EUR Mistake: A Real Case of Employee Misclassification

An American corporation engaged a Slovakian IT freelancer full-time for roughly three years. Recognising the potential hazards linked to misclassifying this individual as an independent contractor, the company’s Human Resources director contacted Express Global Employment to formalise the freelancer’s employment status.

Although Express Global Employment proposed officially employing Slovakian talent, the finance department rejected the offer. The projected costs exceeded what they were currently remunerating the freelancer. At that time, the likelihood of facing an employee misclassification lawsuit seemed remote, prompting the decision to maintain the status quo.

Fast forward six months, and the company reinitiated contact with Express Global Employment, approving the employment offer for the Slovakian freelancer. However, by that point, the working relationship had deteriorated. The freelancer opted not to enter the employment agreement, instead filing a complaint with the labour authorities. While the final outcome remains undisclosed, communication with the HR director suggested that the company was at risk of incurring substantial liabilities, including back payments for social security taxes, accrued vacation, severance packages, and additional fines. The total sum in contention was estimated to be approximately 70,000 EUR.

This case underscores the significant financial risks and legal ramifications of employee misclassification, emphasising the importance of preemptive action and due diligence in international employment arrangements.

Understanding the Complexity of Permanent Establishment Risk

What is Permanent Establishment Risk?

Permanent Establishment Risk, often called PE risk, is a multi-faceted concern beyond mere tax liability. When a business has substantial operations, physical presence, or even key personnel acting on its behalf in a foreign jurisdiction, it risks being classified as having a Permanent Establishment. This classification not only subjects the business to corporate income taxes in the foreign country but can also bring about Value-Added Tax (VAT) obligations, complicate compliance requirements, and even expose the company to legal scrutiny.

The Role of Independent Contractors in Triggering Permanent Establishment Risk

Engaging independent contractors in another country is a simple, flexible way to expand your operations. However, this choice can unknowingly tip your business into PE risk territory. In various legal jurisdictions, if an independent contractor has the authority to conclude contracts or make significant business decisions on behalf of your organisation, your business might be considered to have a Permanent Establishment in that country.

Why Matters

  1. Unexpected Tax Liabilities: Once PE status is triggered, your company will likely be subject to corporate income taxes and VAT in that country, which can substantially affect your bottom line.
  2. Compliance Complexities: Achieving and maintaining compliance with foreign employment and business laws becomes far more intricate, requiring local legal expertise and potentially costly adjustments to your operations.
  3. Legal Exposure: A PE status could lead to legal actions against your business in a foreign jurisdiction, impacting your finances and brand reputation.
  4. Operational Challenges: Having a Permanent Establishment often necessitates a fully functioning HR and legal department in the foreign country, which could escalate operational costs and complicate management structures.

Therefore, when considering independent contractors for foreign operations, it’s imperative to consult legal and tax professionals familiar with the specific jurisdiction’s rules on Permanent Establishment to navigate the potential risks adeptly.

How IT Companies Can Succeed in Converting Existing Contractors into Employees in Liechtenstein

As businesses across various sectors increasingly rely on specialized skills and expertise, the trend of engaging international talent is becoming more prevalent. In Liechtenstein, a jurisdiction known for its robust financial services and growing sectors beyond IT, companies are exploring innovative ways to attract and retain top talent from around the globe. The Express Global Employment (EGE) solution offers a strategic approach to navigating the complexities of global employment, ensuring 100% compliance with local and international regulations.

This solution has proven beneficial for businesses in Liechtenstein seeking to transition from traditional freelancing or contracting models to more stable employer-employee relationships. Feedback from companies that have adopted the EGE solution highlights the advantages of providing official employment status, including enhanced stability and access to statutory benefits for their international workforce.

By leveraging the Express Global Employment GE solution, businesses in Liechtenstein can gain a competitive edge in attracting global talent across various industries, not limited to IT. Offering the security and benefits of formal employment positions companies as employers of choice for top-tier professionals, including those previously working as independent contractors or freelancers. This transition fosters employee engagement and loyalty and ensures a consistent, dedicated workforce engaged in long-term projects. As a result, companies experience lower turnover rates and a more stable talent pool.

Using the Express Global Employment solution mitigates the risks associated with misclassifying employees as independent contractors, protecting businesses from potential legal implications and unforeseen expenses. This comprehensive approach to global employment enables companies in Liechtenstein to focus on core business activities while ensuring compliance and attracting the best talent from around the world.


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