Employers
How to escape the Sword of Damocles of misclassification of freelancers
Step 1: Are you Compliant? Make the Test!
Step 2: Become Compliant!
Read carefully each of the 12 questions and determine your risk level.
If you could not answer all of these 11 questions with a clear YES, you will need to decide what to do next.
1. Task Autonomy
Does the independent contractor have completely liberty over the way they complete the task? – My answer is: Yes / No / Maybe?
2. Prior Contracts
Has the chosen contractor worked on more than one contract lasting for a definite term in the past? – My answer is: Yes / No / Maybe?
3. Work Schedule
Does the contractor possess the autonomy to fix their own work schedule, that is, the way they are going to complete the project? – My answer is: Yes / No / Maybe?
4. Supervision
Is it guaranteed that the independent contractor is not monitoring other employees or contractors? – My answer is: Yes / No / Maybe?
5. Self-Employment Status
Does the contractor publicly admit their identity as self-employed rather than claiming to be an employee of your company? – My answer is: Yes / No / Maybe?
6. Client Freedom
Is the contractor free to take up projects for other clients not related to your business? – My answer is: Yes / No / Maybe?
7. Invoicing
Does the contractor send you an invoice for payments or use an expense report? – My answer is: Yes / No / Maybe?
Is the contractor receiving payments as per the payment disbursal frequency mentioned in the agreement or getting it monthly as regular salary? – My answer is: Yes / No / Maybe?
8. Payment
Is the contractor receiving payments as per the payment disbursal frequency mentioned in the agreement or getting it monthly as regular salary? – My answer is: Yes / No / Maybe?
9. Tax Compliance
Does the contractor adhere to the tax deadline and make payments on time? – My answer is: Yes / No / Maybe?
10. Training
Are the contractors starting work without receiving any training from the company? – My answer is: Yes / No / Maybe?
11. Insurance
Do the contractors carry proper insurance documentation, including health, property, and liability coverage? – My answer is: Yes / No / Maybe?
12. Invoicing through a third-party limited company or Contractor of Record
Do you get invoices directly through a legal entity not belonging to the contractor as a majority shareholder? Do the contractors invoice indirectly through a Contractor of Record service provider? – My answer is: Yes / No / Maybe?
Result of the test
If the answer to any of these questions is a clear “No,” it may mean you are not compliant with local laws and regulations. Sooner or later, it could result in potential worker misclassification issues or legal complications. Best-case scenario: you must cancel all the contracts and lose your contracted workforce.
Solution 1
Stay as you are
You think that they will never catch you, and the contractors will never check your situation precisely by himself. You can bear the risk of being subject to misclassification at some point.
You think your contractor will never have a tax or social security control to reveal the unclear situation.
For you to know: The cost of a reclassification can vary depending on income and duration. Typically, the freelancer may be required to pay around 18.9% of their income in social contributions, with half paid by the freelancer and the other half by the employer. For instance, if a freelancer earns €50,000 per year, they would need to retroactively spend approximately €9,450 in social contributions. The client would also be responsible for the same amount, totaling €18,900 for the year. These costs tend to accumulate if false self-employment spans several years.
Solution 2
Become a member
of the Qaori Cooperative and be protected under Swiss and EU law. Qaori.Coop is registered under the jurisdiction of the Swiss DAO Association.
Contractors do not need their own legal entity
As individual members of the Qaori Cooperative, they are legally covered and don’t need another structure. Anyone can become a coop member with any type or location of entity, LLC, LTD, GmbH, UG, etc. We offer the most flexible settings in the market. Qaori saves contractors the cost of setting up and maintaining their own legal entity if they wish.
Tax liability
Contractors still need to pay taxes in your home country, but you as the employer is not reliable anymore for their punctual tax payments. The same applies to social security or retirement payments. You know only Qaori as your unique partner.
Contractors outsource their invoicing to Qaori
Qaori.Tech OÜ will invoice you as the employer or client from our Estonia entity and you pay conveniently in any currency via bank, wallet, crypto, or cash.
We will provide you with a monthly statement and a unique invoice for the whole team.
Your freelancers and you are now fully compliant with local or international laws.
Fast and secure Payouts
Qaori is super fast and flexible with payouts. We use IBAN, Swift, ACH, wallets, and crypto in any currency. We always look to optimize the transfer costs. Most of the payments are processed within 2 business days.
Qaori is the most cost-effective compliance protection
The cost of the cooperative service is minimal compared to classic commercial solutions. The reason is that Qaori is a billionaire-free zone and not based on extraction economy principles.
Qaori Governance
A cooperative belongs to the members and has a defined internal governance structure. The members decide on the pricing and service catalog. You can easily become a voting member of the DAO.
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