You run a company and need great people to help you out. Jane lives in another country, and is happy to work for you from there. How do you employ her?
As a contractor
Your first option is to hire Jane as contractor. This is possible if Jane offers her services as such, is able to invoice you, and willing to take care of the administrative burdens that come with that.
However, if you treat Jane as an employee, she has the right to be employed directly by you, with the benefits and rights that come with that. Treating an independent contractor as an employee – and not giving them employee rights (and following on other obligations related to employees) constitutes as misclassification.
Both the reason for and risks of misclassification of employees varies country-by-country.
In tech, misclassification cases come up rarely with employees/contractors. Typically, working as a contractor can give the employee a tax advantage, so they’re unlikely to want to seek compensation. In addition, contractors are often rewarded the same benefits in practice that other employees get on paper (e.g. paid vacation time).
As a direct employee
If you hire Jane as a direct employee, that means you have to comply with local labor and tax laws, and provide payroll for Jane. Depending on which country Jane is in, this can either be a little hard or very hard. You’ll want to establish a foreign entity to get ahead of taxation issues between countries, and any issues with local labor laws. You’ll be paying Jane, local taxes, costs of local service providers, and local legal help.
If you’re planning to hire many more people in this one country, this makes sense to do.
As an employee through Remote
Employing Jane through Remote means Jane is employed by a local entity (Remote’s entity in that country). Remote acts as an employer of record, meaning we take care of payroll, taxes, and compliance with local laws.
As the actual employer, you still get to work with Jane as any other employee in your team. You set salary, manage performance, etc. Similarly, Jane works just with you and enjoys the same benefits as her colleagues.
To make sure that Jane complies with local laws, Remote will instruct you of anything you need to be aware of – and help out where necessary. Most commonly this means we have to make sure that Jane takes enough paid vacation days (many countries have a set minimum), and that a record is kept. This is done in our app.
If there is a reason to end the working relationship, that is: either Jane no longer wants to work with you, or you want to fire Jane, Remote will instruct and ensure you comply with local laws. As a local employee, Jane enjoys some protections, and likewise as an employer, you have certain rights that will need to be complied with. Remote makes sure this process is managed – and that you’re aware of the details in advance.
Contractor vs. Employee
It’s easier to hire a contractor today, but you’re less likely to find great talent and retain them. In addition, you technically can’t hire contractors as employees. It happens everywhere, but is an unscalable solution that comes with significant risk.
We’re working on making hiring employees easier than hiring contractors. We take care of all the complex (boring) work, you focus on working together. If that sounds interesting to you, sign up here or send me an email at email@example.com.