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How To Pay Independent Contractors In Uganda

Kihu Stan

How To Pay Independent Contractors In Uganda

Kihu Stan
April 12, 2022
8 min read

How to Pay Independent Contractors in Uganda 

Companies strive to attract the best talents and skilled professionals, even globally. If a company does not have a local entity in the country, using an employer-of-record (EOR) service provider is the best option for hiring workers. Uganda is one of the developing countries where competent contractors for significant industries can be found.

Paying independent contractors in Uganda or other foreign countries, on the other hand, necessitates familiarity with legal requirements. As a result, this article will explain how to pay independent contractors in Uganda correctly and quickly.

Distinguish Independent Contractors and Employees 

Most countries require employers to classify their employees and independent contractors. This is due to differences in worker compensation laws and a negative tax impact. Distinguishing your local employees from independent contractors is critical during the hiring process and before processing payments.

The relationship between an independent contractor and an employee to their employer is what distinguishes them. An employee has a service contract and a continuing relationship with their employer. An independent contractor has a temporary connection with the employer and a service contract. The mode of payment is different. Employees are paid at regular intervals determined by their employment contracts and the applicable Employment Acts. Prices for independent contractors are not fixed and must be agreed upon.

An Easy Process to Pay Independent Contractors in Uganda 

Hiring and paying international contractors can be challenging at times because employers must adhere to the country's employment, tax, and payroll regulations from which they are hiring. There is, however, an efficient and legal way to proceed, particularly for foreign companies looking to hire independent contractors in Uganda.

      Outsource the task to an EOR service provider  

What exactly is an EOR? Employer of Records (EOR) is an organization (a third party) that takes on the legal responsibilities of employing your employees to reduce the complexities associated with market functions, legal compliance, the HR function, and international payroll.

In this case, an EOR provider such as Workpay will assist you in handling several tasks so that you remain in compliance with Ugandan laws. They are as follows:

  • They determine the pay rates of contractors and sign contract agreements.

An EOR calculates and assists in executing a contract agreement on behalf of the employer. This is all done under Uganda's legal framework. Labor, payroll and tax laws frequently change and become more complex.

  • They will invoice for the work done by the contractors.

An EOR will bill you as the employer per the payment terms of the independent contractor's agreement. Invoicing all down payments or other partial payments involved in the project included. In general, they'll be in charge of your payroll.

  • Payments will be initiated following the terms agreed.

Workpay, for example, has an efficient automated system that handles all payments to independent contractors based on the terms of the agreement. They also handle currency conversions and bank transfers. Finally, they keep track of the payments and update the necessary records.

Let’s Talk about Income Taxes for Independent Contractors in Uganda 

As an employer, you cannot ignore the issue of taxes on your side or your employees' side. A resident's gross income in Uganda includes income from all geographical sources while a non-residents' gross income is any income derived from Ugandan sources.

In Uganda, an employer can calculate and process taxes (PAYE) for independent contractors who work for them. However, if you outsourced payroll tasks to an EOR, it will handle it on your behalf.

Another option is to allow independent contractors to calculate their income tax. They fill out a tax return and do everything themselves in most cases.

In Uganda, annual income under UX 1,560,000 is not taxable, but anything above this amount will be taxed at a 10% to 30% rate.

Check out the Uganda Revenue Authority's withholding tax guidelines.

Why Should You Use Workpay to Pay Independent Contractors in Uganda?

  • Legal compliance 

We ensure that your organization remains compliant and that there is little risk of violating any set regulations. It also entails risk mitigation for an international employer looking to hire independent contractors in Uganda.

  • Automated payroll 

Workpay ensures that all of your payrolls are automated on a single platform, making it quick and straightforward to pay independent contractors at any time.

  • Reduced cost of operation 

As an EOR provider, we have a cost-effective solution that saves money you could have used to hire new employees, establish an entity/subsidiary, manage payroll, etc. Workpay is the ultimate system for managing your human resources and processing payrolls on autopilot across Africa.

  • Convenience

   Automation improves the consistency and timeliness of payments to your independent contractors. They can also access and download their payslips from any location and at any time. 

In need of a HR and Payroll software?

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