How to pay international contractors in Georgia [2024]
There are lots of benefits to hiring self-employed contractors in Georgia, whether it’s in Tbilisi or beyond. After all, Georgia ranks 7th in the world for ease of doing business and 1st in their region, according to a 2019 World Bank study.
However, complying with Georgia's labor laws can be complex and requires international companies to take different steps than hiring Georgian full-time employees to avoid misclassification.
Learn how to correctly classify independent contractors and pay them according to Georgia's local laws and Labor Code in this step-by-step guide.
Step #1: Classify your workers in Georgia
Correctly classifying employees and contractors in Georgia is crucial, as misclassification can result in legal consequences including:
- Back taxes
- Back pension contributions
- Back wages and benefits owed
- Additional penalties
Employers in Georgia are responsible for various expenses related to their full-time employees upon onboarding, including income taxes, pension contributions, payroll deductions, notice periods, and benefits like paid leave. Unfortunately, Georgian law lacks clear rules to differentiate between employees and contractors. The table below outlines a few differences:
Payroll Aggregators
Rippling
High level of worker control. Contractors have autonomy over their schedule, determining how and when to complete their work.
More direction from the employer. Employees are subject to a higher level of control and direction from their employer on how to perform their work and when to do it.
Equipment and tools are owned by the worker.
Equipment and tools are typically provided by the company.
Less integrated. Contractors can set their own schedules, work remotely, and use their own tools and equipment.
Highly integrated. Employees are typically more integrated into the organization with specified working hours, often working at their employer’s location.
Not entitled to benefits. Contractors are responsible for their own taxes and do not receive the same benefits and protections as employees.
Entitled to benefits. Employees legally receive certain employment benefits and protections per the Labor Code, such as minimum wage, overtime pay, and parental leave.
Time-bound contract. Contractors are typically engaged for a specific period of time or project for many clients.
Indefinite contract. Employees are generally hired indefinitely per their employment contract.
Increased liability. Contractors are liable for any risks associated with their work.
No risk of loss. Employees generally aren’t liable for work-related issues.
Subcontracting. Contractors can delegate work to another person in their business as they see fit.
No subcontracting. Employees must do their work themselves unless they have permission to delegate it.
Step #2: Determine the best way to pay your contractors in Georgia
The first step to paying contractors in Georgia is deciding on a payment method. With remote work becoming more common, employers have a wide range of options for paying international contractors. Here are a few options available:
Bank wires. You can easily open a local bank account in Georgia and deposit funds or send a global wire transfer to pay a contractor. Keep in mind that global wire transfers come with fees and are subject to fluctuating exchange rates.
International money orders. This traditional payment method can be slow because the employer has to buy a money order, which the contractor must physically pick up and deposit upon receipt. Money orders can also have fees and unfavorable exchange rates.
Digital wallets or payment platforms. Not all digital payment platforms are available in Georgia. For example, Venmo is only available in the US, but PayPal and Wise are supported in Georgia. Please note that exchange rates may change daily, making it difficult to predict your expenses.
Global payroll services. Contractors are typically not included in the payroll. Instead, they invoice separately for their services to many companies. However, with Rippling, you can pay contractors from Georgia and around the world in one system.
Step #3: Use global payroll software to process payments for Georgian contractors
There are many options to pay independent contractors in Georgia, but most are time-consuming. Adopting a global payroll software like Rippling is crucial to achieving global team scalability and staying compliant.
With Rippling, you can pay contractors across the world quickly and compliantly, in a single system. Here’s a preview of how the system works:
Step #4: Ensure your Georgian contractor has the right tax information
Independent contractors in the Republic of Georgia must file and pay their own taxes if they are registered as a business entity.
As a sole proprietor, all they need to register at the Tbilisi Public Service Hall is:
- Passport
- Pay state taxes (GEL 55)
- Local phone number and email address
- A designated bank account
There is also a value-added tax (VAT) in Georgia, which is 18%. Contractors may pay VAT in USD, Georgian Lari, or EUR. Only sole proprietors with annual transactions under GEL 100,000 are exempt from VAT.
Effortlessly manage contractors around the world
Growing your global workforce has never been easier. Pay contractors with Rippling, whether they're based in Georgia or elsewhere in the world.
Frequently asked questions about running payroll for contractors in Georgia
Do you need to withhold taxes when paying contractors in Georgia?
No, foreign companies aren’t responsible for withholding income taxes when paying contractors in Georgia. Contractors must pay all of their own taxes and pension contributions.
Does the Georgian minimum wage apply to independent contractors in Georgia?
No, minimum wage laws only apply to employees in accordance with their employment contracts and collective bargaining agreements.
Do Georgian contractors get benefits?
No, independent contractors in Georgia are not entitled to benefits.
Can you pay contractors in Georgia in your home currency?
It's best to use a contractor’s local currency when paying them. However, if they agree to be paid in another currency, make sure it's outlined in the contract.
Can you manually pay contractors in Georgia?
Processing contractor payments manually to reduce costs can be time-consuming and lead to errors. Payroll complexities increase as your business grows and you add more foreign contractors to your workforce.
Some risks of manually running payroll include the following:
- Compliance. Manually entering payroll information raises the chances of making mistakes or leaving out important data.
- Security risks. Spreadsheets and paper records pose security risks to sensitive contractor information due to potential loss, theft, or misuse.
- Contractor experience. Manual payments can be slow and lack transparency. This makes it challenging for contractors to understand exactly what they're being paid for and when to expect their money.
How do you turn a contractor into an employee in Georgia?
Converting a skilled contractor to an employee can be a great addition to your team. However, before bringing them on, you must ensure compliance with Georgia's legal requirements and provide the necessary benefits.
Compliance can be tricky in Georgia, which has strict local laws from the Georgian Labor Code. Additionally, you'll need to decide whether to establish your own entity or hire employees through an employer of record (EOR).
Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
