Ways to hire remote employees around the world

by | Oct 19, 2021

Operating teams fully remotely has become the new normal. With the current situation on the Tech recruitment market employers had to quickly adjust to the high competition and make sure they offer their staff the freedom, many talented people are now looking for.

Speaking to our Clients over the last months, many of them have switched to the hybrid model but more and more companies would also be open to hire employees with the fully remote set up. Yes, they would be open to it but there are many legal challenges that you might need to face hiring remote staff, that is not working from home in your country, but from another place in the world.

  • Can we employ someone living in another country using our regular employment contract?
  • How to pay remote employees?
  • How do we calculate the leave allowance?
  • Is it actually possible to offer paid leave on a B2B contract?

These are only a few basic questions our Clients asked us to clarify before hiring their first fully remote employee for an Estonian company.

Point is, hiring a remote team, across borders, can be complicated. We thought it would be helpful to outline the options you have as an Employer when setting up a remote team.

1. Can’t I just hire contractors?

Yes, you can. In fact, that’s the most common form of remote contracts at the moment. It’s definitely the fastest and most cost-efficient option for the employer and all the employee has to do is register as self-employed and make sure they regularly pay the local taxes, take care of their own health insurance etc.

Sounds easy? It is but there are also quite a few downsides when it comes to this type of set up.

The employees on B2B contracts don’t get the same sense of stability as if they were on a full-time employment contract. They don’t get most of the benefits that come from employment (think healthcare, retirement, private health care, unemployment benefits etc). Quite often they don’t feel as connected to the team. Being self-employed it’s very easy to switch from project to project and many our Clients mentioned that the Retention of the Contractors has actually been one of their biggest challenges.

So what would be the alternative to hiring contractor?

2. You could establish a legal entity in a foreign country

According to Mitchell Hashimoto, CEO of HashiCorp (250ppl+ remote first):

“Establishing a legal entity takes a lot of time and a lot of money: In the past 12 months, we’ve had at least one member (more now) on our HR/finance teams establishing legal entities _full time_. I’ve had my signature on at least 8 incorporation documents in the past 6 months. By the way, most incorporation documents require a “wet” signature so if you’re remote like we are, be prepared to be FedExing a lot of sensitive legal documents around.

As you can see, establishing a legal entity is quite complicated and expensive option. However, it can be recommended to companies setting whole remote teams (rather than just hiring remote individuals). It can also be a good possibility for larger enterprises looking into entering a new market.

Is there an option that would let you employee on a proper employment contract which does not require setting up a legal entity in the targeted country then?  

3. EOR

Good news is yes, there is an option that is not quite as popular as B2B contracts but definitely worth considering.

What does EOR mean? EOR is an organisation that takes over the legal responsibilities of employing your employees. Most of these organizations cover things like:

  • Local legal and compliance paperwork
  • Local benefits
  • Payroll

The main goal of EORs is definitely to make the international employment easy! Most of them handle multiple countries and carry (some) risk for you, making you locally compliant.

The biggest difference between contracting and employment is the employer’s social costs.

For instance, in France employers social security is 45-47% plus EOR fees. Yep, that’s quite a bit! But also, contracting is strongly regulated and the penalties are pretty harsh.

You may be asking yourself, what’s the value of an EOR solution then?

Showing that you value local employment. Meaning, your company has a strong culture of employment and retention, building a long term relationship with the worker.

This means, you’re excited to see workers get the full rights and protections of their local regulations!

Interested to find out more about the EOR option?

What many companies don’t know is that they can easily outsource this part of the process to companies specialized in EOR. Some of these include Deel, Papaya Global and Globalization Partners.

Written By Cam@MagicMondayz

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