3 minThe rise of the contractor
The remote-working practices introduced at the start of the Covid-19 pandemic in 2020 have accelerated long-term staffing trends. Companies all over the world have come to recognise the benefits of offering staff the chance to operate from any location. At the same time, the rapid take-up of the latest communication and collaboration technology means that, when it comes to recruitment, businesses can take a more international approach to sourcing the best talent.
Digital nomads: financial and lifestyle advantages
The pandemic saw a sudden, sharp increase in the number of individuals – either company employees or contractors – taking advantage of new remote working policies to move to a completely new location, either permanently or on a temporary basis. The term ‘digital nomad’ was coined to describe people who are no longer constrained geographically by where their employer is located, and who rely on digital tools to work and communicate with colleagues or customers.
At the same time, there has been a major pandemic-driven rise in the number of freelance workers and contractors as people all over the world seek a better work-life balance. Recent statistics suggest that independent contractors added $1.3tn to the US economy in 2021, while there are thought to be more than 2 million freelance workers in the UK alone at present.
The benefits of remote contract work and digital nomadism can be significant: workers can move to countries or regions where the cost of living is lower, and where they can enjoy lifestyle improvements such as better weather or a more relaxed pace of life. The relatively high salaries paid in the United States mean that Americans make up a significant proportion of digital nomads. Figures published in March 2023 indicate that almost half of the world’s digital nomads originate in the US.
Businesses can benefit too
This approach can also benefit employers: by implementing a remote-working policy, businesses can become more attractive places to work while also increasing the range of talent available to them. The introduction of systems that make it possible to operate anywhere in the world enables firms to advertise roles in new markets where the skills they need may be available at a lower cost.
This was particularly valuable during the pandemic, when it was difficult for workers to move across borders to join a new employer. Today, on the other hand, it means companies who might previously have relied on migrant workers can in many cases access the same talent from a distance without requiring those individuals to relocate.
The challenges of cross-border working
While the benefits are clear, there are of course a number of challenges associated with allowing workers to move to new jurisdictions, or indeed with hiring staff or contractors who are based in different countries. These include:
- Adhering to local employment laws: Depending on the nature of the relationship between the business and the worker, it could be necessary to ensure that local taxes are paid, and employee rights are respected.
- The impact on domestic taxes: Employers may also face issues relating to staff who spend part of the year abroad and the rest of it in the domestic market.
- Cybersecurity risks: Remote working can increase the chances of data loss or IT equipment being hacked, and employers need to make sure they have robust cybersecurity measures in place.
- Payroll problems: Getting payments to staff or contractors in a variety of locations and using a wide range of currencies can present significant hurdles. Traditional international payment services offered by mainstream banks may not be flexible enough to handle regular changes in where employees are based.