When (and Why) You Might Need to Convert Contractors to Employees

Admin Team September 10, 2024

Protect your business, stay compliant, and retain your best global talent. As U.S. companies increasingly hire remote international talent — especially in affordable markets like Vietnam — many start with a simple solution: 'Let’s bring them on as a contractor.'

The Contractor-to-Employee Shift: Why It Happens

You might start with a short-term freelance project. But as your business grows, so does your reliance on certain individuals — and the nature of the working relationship starts to change.

✅ 1. They’re Working Full-Time Hours

If your contractor works a 30–40 hour week, every week, they’re no longer 'independent.'

✅ 2. You Control How and When They Work

If you're dictating their hours, tools, processes, or giving them performance reviews, that’s called 'control.'

✅ 3. You’re Their Only or Primary Client

If your contractor earns the majority (or all) of their income from your company, it weakens their legal claim as an 'independent business.'

✅ 4. They’re Integral to Your Core Business

Are they leading product strategy? Managing internal tools? Owning customer service? If they perform work central to your value delivery, they’re more than a freelancer.

✅ 5. You Want to Offer Benefits and Long-Term Growth

Conversion shows commitment. It helps you retain top talent before someone else makes them a better offer.

🚩 Why Misclassification Is Risky

Misclassification can lead to back taxes, penalties, fines, legal disputes, and blocked expansion into new markets.

💼 What to Do Instead: Use an Employer of Record (EOR)

If you’re not ready to open a local entity in Vietnam, but want to convert a contractor to an employee legally, use an Employer of Record (EOR).

🧮 Is It More Expensive? Not Necessarily.

Many U.S. employers worry that switching from contractor to employee adds cost. But in reality: lower legal risk, reduced turnover, improved productivity, and brand protection.