Hiring is one of the things that is very different to a traditional company. In a traditional company, the company usually stems from the area you're hired in, or at least has set up payroll there. Hiring people is easy and a normal employment contract is usually enough to get people hired full-time.
The responisibilities of a employer are very regulated too: PTO days are usually fixed, payroll knows how to deal with possible deductions, such as taxes, social and benefits, and local specialities are usually accomodated. Not so much with remote work.
When hiring remote, you have to keep a few things in mind:
- Deductions can differ in every country, so you with those and taxes in mind, you might need to pay quite a bit something on top of the net salary.
- Local benefits need to be accomodated and change in every country
- PTO days: In Europe, 25-30 PTO days and 10-15 public holidays are often standard, in the US and Asia it's usually lower
- In some countries companies are expected to pay healthcare benefits, in others they are not
- In many countries, there are forms of social responsibilities (jury duty, military service, ...)
- Depending on the hiring method, there might be substantial time commitment involved for you or your employee
- Hiring as a contractor is not legal in every country
There is a lot to watch out for, but if it's at the time, how can you legally hire a remote employee?
Setting up a sub-corporation
If a company is planning to set up a hub in a specific country, it can be worth it to establish a permanent sub-corporation in that state or country. In that case, the company officially incorporates there, sets up payroll (which usually involves hiring an accountant or accounting consultant) and then has the ability to legally hire people in that country or state.
This is not trivial and probably not an option unless you're a bigger corporation looking to hire 10+ people (depending on country) there. The time commitment and cost is simply too high and things can get complex with multiple sub-corporations in terms of administration and taxes.
The advantage of it is clear: There's no substantial additional administration cost per hire, employees are employed with a local employer (often taking a lot of effort off their shoulders) and while the initial setup is taking a lot of effort, the maintaining of the corporation isn't so much work compared to some other options.
Hiring as a contractor
Often a preferred way to hire people in remote companies is to simple list them as a contractor and getting invoiced from them on a monthly basis. This puts much of the needed effort on the shoulders of the employee, which in small companies is often more preferable.
It's absolutely needed to give employees time for administration in this case. Additionally to their work, they will have the handle any or all of the following, depending on country:
- Declaring themselves self-employed (if possible) or form a LLC
- Company taxes additionally to their personal taxes
- Figuring out all deductions required and invoicing them
- Possibly following up on invoices
- Handling governmental notices, reports and bills
- Local nuances, e.g. handling retirement funds and healthcare
While this sounds like a lot of work, a lot of these are once-per-year activities. Most remote companies still tend to go with this options. It's the cheapest, possibly fastest, simplest and most flexible way to get someone hired.
Utilizing a payroll service
In some countries, getting hired as a contractor is just not so easy as it might seem.
When I started working remotely personally, I looked into this for my home country Switzerland, and quickly realized that this came with too many disadvantages. Namely:
- To count as independently self-employed, I'd have to send invoices for at least three different clients to the government every month. Not possibly if you're technically with a single employer
- I'd have to have opened a local LLC to work for a single client, requiring a security of $25,000.
- I'd have to calculate my social security and pension funds every year, and invoicing them separetely to my employer
- I wouldn't have gotten paid my full salary during military services (it's still mandatory here, government reimburses salary)
So we went ahead with a local payroll service.
A payroll service or global employer is a company that has set up payroll in a country. They're able to hire people locally, do all the work required for a local employee, and invoice the "real" employer accordingly. This service often costs $100 - $300 per month per employee, so as things scale up, can get costly. But else it is the least amount of effort required to hire someone remotely.
I like payroll companies so much, that I've put together a list of them, one for (almost) every country out there. Whether you're looking to hire someone in Canada, Australia, Germany or Barbados, there is a payroll company there.