September 24, 2021

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A guide to paying foreign freelancers from India

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This article is written by Gursimran Kaur Bakshi, from the National University of Study and Research in Law, Ranchi. This article explains how foreign freelancers can be paid from India. 

Table of Contents

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In the world of employee versus entrepreneur, freelancing is the new light of the day.

Merriam Webster defines a freelancer as someone who pursues a profession without a long-term commitment to any one employer; someone who works independently; or is not affiliated with any organisation. In simple terms, it means someone who is self-employed. But unfortunately, freelancers are often referred to as jack of all trades which is not true. 

Freelancing is a part of gig employment that refers to a work arrangement where persons are hired on a temporary basis by companies and other organisations for short-term commitments. The person offers his/her services to a potential employer in return for monetary consideration. However, the person engaged in offering his freelance work is not considered a regular employer but a disguised employee. 

Freelancing requires a varied set of skills and sometimes, the freelancer is supposed to acquire both a general and specialised set of skills. That is why venturing into freelancing is a tough decision to make. Because it may not offer the stability that a 9 to 5 job does. Still, in recent years, the freelancing market has grown drastically. 

A lot of people may think that freelancing is a new profession. It is definitely not. Freelancing is said to have originated in Italy where medieval mercenary knights, with no allegiance to any side of the party, offered their combat lances to states or rulers in return for monetary consideration. The leader of the group who offered their freelance work was known as Condottiere. However, it was acknowledged properly after Sir Walter Scott published his novel ‘Ivanhoe’ in 1819. The novel has certain references to freelancing as a profession. 

Currently, the freelancing job market in India has led to an increase in hiring to 22% from 2019 to 2021. The number of freelancing job postings during the pandemic exceeded the number of people who were applying for the concerned job. It is currently the new black in the market. It even pays you well. 

Let’s understand what led to this growth and how foreign individual freelancers can receive an advantage from this in India. 

Freelancing in India during the COVID-19 pandemic 

In the times when the COVID-19 pandemic took a serious toll on economies resulting in high unemployment rates, the demand for freelancing has burgeoned. 

The International Labour Organisation (‘ILO’) estimates that more than 114 million people lost their jobs as a result of the pandemic and lockdowns in 2020. There is also a paradigm shift visible in the business market from the traditional in-office work culture to the work from home culture (‘WFH’) because of the lockdowns, in addition to the growing need for technological development and digitisation. 

These factors have led to the significant growth of freelancing in India, especially for the age group of 20-29 years old. This is because of the fact that freelancing during the pandemic in the WFH culture allowed productivity while being in a comfortable atmosphere. It also gave a sense of ownership and creative freedom. 

According to ILO estimates, WFH has allowed the workers to manage their work-life balance and that is why around 80 percent of the people in that survey are willing to give up their full-time job to continue working as freelancers. Out of this, 70 percent will choose self-employment opportunities to gain a better lifestyle. 

Growth of ‘work from home’ culture during the COVID-19 pandemic in India  

The WFH culture was not easy to adapt to, especially in growing economies like India, where there is a disparity in the distribution of socioeconomic resources. It means that not everyone has access to the internet. Despite these issues, India turned out to be the second-fastest-growing market for freelancers as per a report ‘Freelancing in 2020: An Abundance of Opportunities’ published by Payoneer. The freelancing market will touch 25 USD Billion by 2025.

Since many of the workplaces in India have now accommodated the WFH culture, there has been a reduction in the per-person cost of maintenance and incidental costs, thus, saving the overall expenditure of a workplace. This arrangement paved a way for other types of gig employment as well. 

Freelancing challenges in India 

In India, freelancing has failed to receive the due recognition it deserves. For instance, imagine that your child will be graduating from college in a month and he informs you that he would be pursuing freelancing in writing. 

Essentially, the reaction of the typical household for a career option, except for those traditional ones, could be summarised with the famous dialogue from 3 Idiots: ‘Abba nahi manenge (Father will not agree)’. 

This is why freelancing is stigmatised because it is not like a regular job and the person will not get the designation of a regular employee. But now is the time we get over these stereotypical notions of what, how and why you are supposed to do something. It’s time to really introspect what you really want to do and freelancing is a great choice to consider.

The benefit of freelancing is not limited to just Indians. It also includes foreign nationals who are able to offer their requisite skills for a specific work. But engaging a foreign national as a freelancer means that both parties may face some extra set of difficulties as compared to Indian nationals. This is due to reasons like the fact that the foreign nationals are not aware of the basic nitty-gritty of laws, the industry standard for payment, or simply that they are unable to find a freelancing job. 

If you are a foreign national who is just a beginner in freelancing or that you have started and you want to explore the Indian freelancing market, this article is your bible. This article is to help you get through this adventure, to understand what to expect or not expect from a place of hiring, and what is the common industry practice in paying for the purpose of payment. 

Who is a foreign freelancer 

A foreign freelancer is an individual, who is not a national of India and/or is not currently residing in India. However, he/she may be working from India or from any other country by working from home in India. Hence, the place of business remains in India. 

Things that foreign freelancers should remember before engaging in freelancing in India 

  • Since the foreign freelancer is not an Indian national, it is important that the online profile of the person is vetted (verified). This is the job of the employer to verify the foreign status. For instance, in the United States, a foreign individual freelancer has to submit IRS Form W-8BEN to verify their foreign status. In India, Form 16 allows the employer to get all the information of the individual for a particular financial year. 
  • Before finalising a freelancing project, ensure that you take a trial project for a few days to understand the work before venturing into it. 
  • Check the local laws of the employer’s country and check the corresponding laws of your country and ensure that there is no conflict between the two. 
  • Written communications are essential especially if you are working from a different jurisdiction. 

Freelancing jobs for foreign nationals in India

Recruiting foreign freelancers from all around the world helps in increasing the pool of qualified candidates. At the same time, it brings with it issues like managing the working irrespective of the time zone restrictions, language barriers, different industry practices and other issues that the WFH culture may bring. Despite this, there is tremendous availability of freelancing jobs as a content writer, graphics designer, web developer, digital marketing, and software analyst to name a few.

About the freelancing contract 

A letter of agreement is a contract between the freelancer and the employer. The employer can be a business or a company. A letter of agreement is the most crucial component in freelancing as it lays down the responsibility and liability of the freelancer and the employer. 

The contract must have clauses like:

  • Scope of the agreement;
  • Information on the parties to the contract;
  • Terms and conditions of engagement;
  • Payment clause;
  • Termination clause;
  • Confidentiality clause; and
  • Dispute resolution clause.

This article has further dealt with the essentials of a contract under Indian law.

How to find a freelancing job in India 

Most freelancing jobs take place online. But there are too many websites that offer you freelancing which also means that there is a likelihood of getting confused. It is important to do background research on some of the known freelancing websites before engaging with them. 

The pointers to remember while doing background research on different freelancing platforms are:

  • About the Employer: Whether that platform is a company incorporated in India? When was that company incorporated? How is the company performing currently?
  • Read the user agreement of the company: How does it define employer and employee, does the meaning of the term employee include the designation of a freelancer? If yes, does it include it as a regular employee who is eligible to get a pay rise and other employment benefits (if applicable)? Or does it use some other term such as disguised employee?
  • What work does it offer: What is the nature of the work the platform offers? Do they offer flexibility in choosing the nature of work? Is the work temporary, contractual, full-time or half-time?
  • Work hours: How many hours do you have to invest in that job? Does it offer flexibility in terms of sending the work? Is the payment dependent on work done on an hourly basis or monthly basis? 
  • What platform do they use to pay their clients: It is very important to look up this part as well because, in India, platforms like GooglePay and Paytm are used to transfer money. However, since you are a foreign national, please check which platform is often used for online payment outside India. Platforms like Paypal can be used for international transactions. 

The section dealing with the payment platforms is discussed further in this article.

Indian laws to be considered by the foreign freelancers 

The Indian Contract Act, 1872

The parties are supposed to abide by the Indian Contract Act, 1872. A valid contract is an agreement entered by both the parties above the age of 18 years old by free consent for a lawful object and a lawful consideration under Section 10 of the Act. Both the parties are required to refer to some of the most of the important Sections of the Act which are:

  • That the parties must be major which is 18 years old or above as per the Indian Majority Act, 1875 and they must not be of unsound mind. What amounts to the soundness of mind has been defined under Section 12 of the Act. 
  • That the terms and conditions of the agreement must be clear, the acceptance must be absolute and should be made in free consent without any fraud, coercion, misrepresentation, or undue influence as per Section 14
  • That the parties must not be mistaken on an essential fact of the agreement the mistake of which will make the contract void under Section 20
  • That the agreement between the parties should not violate any law of the country including the public policy under Section 23

Further, the agreement must have some of the basic information, like the definition of both the parties, what is the nature of the work they are engaging in, payment and the method of payment, termination and the terms of termination as negotiated by both the parties, and what the dispute settlement mechanism is when the contractual obligations are breached by any of the parties or both the parties. 

The parties can decide whether they want to approach the local courts to seek remedy where the contract has been entered or whether they want to adopt other speedy dispute settlement methods like arbitration. 

Intellectual property rights 

As a freelancer, you should know the basic intellectual property rights laws of a country before signing a contract. 

Copyright 

In India, the Copyright Act, 1957 protects original literary, dramatic, musical, artistic works, cinematograph films and sound recordings under Section 13.

Patent 

The Patents Act, 1970 protects a new invention that involves an inventive step and is capable of industrial application. The invention must have novelty and utility to be protected.

Trademark 

The Trade Marks Act, 1999 protects a mark capable of being represented geographically and which is capable of distinguishing the goods or services including the shape of goods, their packaging and combination of colours. A mark may include a device, brand, heading, label, ticket, name, signature, letter, shape of goods, numerals to name a few.

The Arbitration and Conciliation Act, 1996 

If the parties are opting for arbitration, then this will be termed as international commercial arbitration since one of the parties is a foreign national under Section 2(f) of the Act. The parties can either include a clause of arbitration in the contract or can enter into a separate arbitration agreement for further disputes. 

Usually, if parties have decided the manner in which they will resolve their disputes, in those cases they include the arbitration clause as a part of the main agreement. 

Further, the arbitration clause sustains through the doctrine of separability in cases where one of the parties challenges the invalidity of the contract. Separability is essential in international arbitration as it allows parties to choose a different national law other than the law which governs the main contract. 

Important sections to be remembered by both parties are:

  • That the arbitration agreement must be in writing and signed by both parties as per Section 7 of the Act.
  • That the parties are free to choose the place of arbitration as Section 20
  • That the parties can decide the law that binds the substance of the dispute under Section 28.

Truelancer

Truelancer is one of the widely used platforms in India. It can be used both by the freelancer and the client. It regularly updates opportunities through posts that specify the details of the client, his place of business, requirements, and the budget. 

The budget is both mentioned in Indian currency which is INR and in dollars. You have to make an account first and then choose the most suitable choice of freelancing work that you want to pursue. Further, do a bit of background research on the client. There is an option to send a proposal to the client. This way the platform also allows you to interact with the client. 

LinkedIn

LinkedIn is a professional platform that allows you to connect with people in your professional circle. First, make a simple profile of yourself by adding various details such as your name, qualifications, and what you are looking for. 

Using filters, you can first connect with the people you might know that can help you with finding freelancing jobs. Another option is to make a profile, go to the option ‘Job’ at the upper right of the screen and fill in your details. 

The filters easily allow you to select a location which you have to select as India and then fill in other details such as whether you like to freelance as a content writer, content creator, and graphic designer to name a few; what is your experience, which company would you like to work with, and what is your job type such as is it temporary, contractual, full-time, and part-time. 

Once you fill in all the details, the filtered options appear. Select a particular option and you will find a side-screen appearing, which has all the details about the workplace such as what are they hiring for, what will be the expected pay and other details of the workplace and what all they are expecting from the freelancer. 

Upwork

Upwork is probably one of the best-known platforms for freelancing. You can make an account by simply adding your basic details like name, email id, and which country you want to work as a freelancer. It is suggested that before you proceed, read the User Agreement and the terms of service according to your requirement. 

These agreements mention clearly that Upwork is only a site hosting various contents and opportunities, which allows both the freelancer and the client to select each other as per their requirements. It’s basically an intermediary. In case the parties (freelancer and the client) enter into a service contract, the terms of the contract should not bind Upwork as another party or a third party in any manner. 

FreelanceINDIA 

Freelance INDIA is a platform headed by Mr. L.N. Agarwal of Alumni of BITS Pilani. It allows both the employer and the freelancer to register their account and find their requirements. On the right-hand side of its page, you have the link to the option of freelancing. You will have to register your account by filling in your details such as your name, address, email, and other things. It is suggested that you read the terms of service before registering an account. 

WorknHire 

WorknHire is a product of WorknHire Technologies Pvt. Ltd. which has been co-founded by Kumar Mukul and Manish Prakash who are both graduates of IIT Kharagpur and IIT Guwahati. It has a separate bar that allows you to find freelancing jobs as per your interests, the time you can invest, and in accordance with the amount of money you are expecting. 

Fiverr 

Fiverr is similar to LinkedIn except that it is more specific and is meant for freelancers. Fiverr allows freelancers to promote their services to prospective clients. This is a greater opportunity to sell your work to a global audience. 

You have to create your profile by adding basic details like your name, profile picture, your professional qualification, your interests which must be specific in terms of attracting potential clients and then post a request to find clients. Fiverr is unlike any other platform as it offers freelancing in almost everything from translation and graphic design to astrology.

Guru 

Guru is an Indian freelancing website that offers freelancers an opportunity to find a job based on their skills or post a job based on their requirements. However, Guru charges nominal fees from the freelancers on every invoice they are paid. It offers benefits based on membership. 

Rockerstop 

Rockerstop allows freelancers to register their requests as individuals or through their business and it does not charge any money for the same. It is quite popular amongst Indian students. 

Fixnhour 

Fixnhour is a similar kind of platform to Rockerstop. The only difference is that Fixnhour ensures that the payment of the freelancer from the client or the recruiter is done on time. It has one of the most user-friendly websites. It allows you to chat with the freelancer or the one hiring a freelancer. It also allows the freelancer to check the reputation of the client and has a payment protection system. 

Since foreign freelancers would be based outside India, the uncertainty surrounding the payment may make one anxious. Reasons that could be attributed to this are the difference in jurisdictions in terms of laws and remote-based work to name a few. 

Other than this, the payment may be intentionally or unintentionally delayed from the side of the employer.  According to a survey by Paypal, payment remains one of the consistent issues in freelancing. 

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How are international payments made in India 

In India, making international payments is usually done through wire transfer. Making payments in India is simple and usually requires certain documents like the account number, IFSC code, Permanent Account Number (‘PAN’) card, and Unified Payment Interface (‘UPI’) ID. However, UPI can soon become global. It means that international transactions can soon be through this method. 

Further, the payment can be done through Credit Card, Debit Card and through other online apps such as Google pay and Paytm provided that the user is verified through Know Your Customer (‘KYC’) and has an account connected to these apps.

The law regulating international transactions done from India 

The Foreign Exchange Management Act, 1999 (‘FEMA’) is the main legislation that allows international transactions through two methods:

  • Wire payment; and
  • Demand draft.

The process of the payment is referred to as a ‘current account transaction’ which includes payment due in connection with any current business and services as per Section 2(j)(i). The Reserve Bank of India (‘RBI’) through the Liberalised Remittance Scheme (‘LRS’) provides a method for Indians to make outward remittance (international transaction). All Indians can make outward remittances up to USD 2,50,000 per financial year starting from April to May under the current account transaction. To avail of this, the Indian residents must have a PAN.  

Tax collected at source 

As per the RBI’s LRS scheme and the changes made under the Finance Act, 2017, a new provision has been added to deduce a tax collected at source (‘TCS’) at the rate of 5 percent above Rs. 7 Lacs. 

How international transactions can be done from India 

For international payments, there are few things that are required:

  • Invoice raised by the freelancer and acknowledged by the employer.
  • Details of the receiver are required such as name, address, and details of the bank such as International Bank Account Number (‘IBAN’) and the name of the bank.
  • An IBAN is a standard international numbering system to identify overseas banks. It consists of a two-letter country code, followed by two check digits, and up to thirty-five alphanumeric characteristics.  
  • Other than IBAN, there is also something known as the Society for Worldwide Interbank Financial Telecommunication (‘SWIFT’) code. SWIFT code is also interchangeably used as Bank Identifier Code (‘BIC’). This is a code used to identify a specific bank in an international transaction. 

Platforms through which international transactions can be done

Below are some of the platforms that allows one to carry out international transactions. 

Paypal 

This is frequently used for wire payments. You have to make an account on Paypal. It allows you to either set up an individual account or a business account. If you are a freelancer, you will need to set up a business account. 

Xoom is a service of Paypal, however, the user protection available to the latter is not the same for the former. Xoom can be used for receiving the money to India but not vice-versa. Its User Service Agreement states that the parties can only make payment when they are 18 years old or above and must be eligible to form a contract. 

Also, if an independent person is hiring a foreign freelancer, they can opt for an individual type of account and can enable their debit/credit card to make international transactions.

Steps for setting up a business account are:

  • Select business account from the option. 
  • Select any one option from ‘looking to receive payments from freelance platforms’, ‘via email, links, or invoices’ or ‘on websites selling goods and services.
  • Specify your annual income in USD.
  • Enter your email id, set the password, and then from the option of describing your business select individual account type and you need to add your PAN card details. 
  • Non-resident Indians generating income from taxable services in India should apply under Form 49AA for the allotment of the e-PAN card number. To apply for this, the email-id of the person should be available. 
  • It is advisable to apply for an e-PAN card as soon as possible as it eases the authenticity of payments made between the parties and also allows the government to make a record of the transactions to pay taxes. 
  • According to the checklist from the tax department, foreign nationals applying for a PAN card must have their residential address, letter of appointment/contract, details of the employer including his PAN card number, proof of identity such as passport, and passport size photographs to name a few.

Payoneer 

This allows you to make international business payments similar to that of Paypal.

PingPongX Payments 

PingPong payment specialises in cross border payments. It allows the employer to make international payments at a transaction rate of only one percent. The company has a global presence such as in countries like Hong Kong, the US, and India. 

Wise

This platform allows you to easily receive or send money from one country to another. It provides country-based requirements that are required as well to make an account.

Western Union

Western Union is quite popular in India for wire transfers. Its payment interface is simple and allows the user to enter the amount they want to send and simultaneously shows them the exchange rate of the currency.

For instance, if the amount from the client in India to the freelancer in the United States has to be sent, and the amount is 2,00,000 INR, then the payment interface will ask you to fill in the bank account details of your receiver. Once done, the interface will also show you the exchange rate which is 1.00 INR = 0.0133 USD. The transfer can be done without the need to pay any extra transaction fees. 

Skrill

Skrill is another amazing payment platform that does not charge transfer fees and allows the sender to send payment through credit or debit card to the receiver in more than 120 countries from India. The basic requirement is to make an account and fill in the bank details of the sender and the receiver. It is also advisable to read the money transfer terms of skrill.  

Intellectual property rights will not be applicable to them

Content making is one of the most common freelancing professions. However, there are genuine issues that arise out of that profession. The first issue could be that there are institutions and independent publication houses/authors that may engage ghostwriters. Ghostwriters are those persons who write on behalf of the actual author but the publication is not done in their name. 

This means that they will not be recognised as the original writer of the work and they cannot claim any intellectual property rights over the literary work. There is another scenario to be considered here. In most cases of content writing, the copyright exists with the client only. However, there is a difference in both two cases. 

One is a case where you are writing a whole publication that will be published in the name of another author. Another is a situation where you are creating content for your client. The former situation might be conflicting from the viewpoint of ethics and morality. 

The Copyright Act, 1957, clearly defines copyright in literary work subsisting with the original author who has first published the work as per Section 13. This means that the original author has the right to reproduce the work, to make any cinematograph film or sound recording, for the purpose of translation, and other things as specified under Section 14

Benefits given to employees are not available to the freelancers 

In a usual workplace, an employee received a lot of benefits including a bonus on salary. These benefits include insurance, maternity and paternity leaves, health services. These benefits are not extended to freelancers because they are not considered employees.  

Business insurance is not applicable to foreign freelancers 

Nowadays, since freelancing has been recognized in many parts of the world, there are companies in the financial market that may offer stand-alone policies for freelancers to indemnify the loss they may suffer in discontinuation of the work. This should really be considered by foreign and Indian freelancers who depend solely on freelancing. It is pertinent to understand that even though freelancing is typically common in other parts of the world, it is still developing in India. Thus, concerns over its legitimacy and issues like irregular payment may arise.

Freelancing allows self-control, flexibility, and diversity which is mostly not available for traditional employer-employee relationships. While it is recommended for those who want to keep on experimenting with their career options by venturing into different fields, it may not offer long-term financial stability and security that one looks forward to for living a better life. 

The freelancing market in India is currently experiencing drastic changes as the work from home culture is growing. This allows the marketplace to not just accept people across the world who may be perfect for the job, it also indicates the increase in the level of competition that is now available in these jobs. While India is certainly a potential marketplace to look forward to experiencing freelancing, one needs to keep basic things as mentioned in the article above, in India, because the activity is taking place online and there could be issues of accountability. 


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