I get asked this question a lot.
Recently, I got an email from Karen and I wanted to share my response for people who have the same question.
My business partner is concerned about hiring an OFS directly instead of using an agency out of concerns that this is going to be classification as employee vs independent contractor. Is there a service that we can use as the main employer instead of hiring someone as an employee?
We don’t offer this service, but here’s what I can tell you.
The Philippines doesn’t have a treaty with the US to make this person an employee.
I’ve talked with probably 5 different accountants about this over the years. Not one of them has found a case for making them an employee.
I’ve had hundreds (thousands?) of customers come to me with this question. Not one of them has ever returned to me saying “here…look at this…it makes them an employee.”
There’s just no way to consider this person an employee causing US employee requirements.
What would you do with them? Submit a W2? You can’t even submit a 1099 for them. They don’t have any US tax ID numbers.
THEY ARE INDEPENDENT CONTRACTORS!
I cover this at www.OnlineJobs.ph/taxes.
Now, on the Philippine side, you can’t make a person an employee unless you have a legal entity in the Philippines. This means your business has to be registered in the Philippines for you to hire an employee.
Your business isn’t registered in the Philippines so they HAVE TO BE CONSIDERED INDEPENDENT CONTRACTORS. They pay taxes as independent contractors, which means they don’t need to declare an employer when they file.
Even if you offer them benefits like SSS or Philhealth, their contributions would be considered voluntary. They can’t be employee contributions because you must be a registered business in the Philippines to be considered an employer.
If you’ve been putting off hiring someone because you were worried about them being an employee, now you know the real situation.
Get started hiring at www.OneVAAway.com.