Hi, I'm Rodolphe from Remotive, helping remote companies hire since 2014.
I was Buffer's Director of Operations & Finance, paying out $8 million/year of salaries to remote team-members in 15+ countries. Paying people internationally is my pet peeve!
This guide answers a popular question from our community:
"How do I legally and easily hire international employees remotely?"
Disclaimer: I'm not a lawyer. My thoughts don't constitute legal advice. This is meant as an FYI, take it with a grain of salt. Please do your legal homework :)
Companies want to offer the best to their remote/international employees.
Most remote companies easily hire international team-mates as contractors. All they have to do is to set up recurring payments and... that's it!
Beyond compensation, this also makes remote companies less competitive versus a local employer that can offer full, local benefits.
Also, contractors may have to face local authorities reclassifying them as employees, which can be terrible for them.
Most companies don't intend to treat international employees as second class citizens, unfortunately this happens often.
It shows through pay, benefits, employee status, breaks, sick time, overtime pay...
For instance, US-based companies often offer 401k and health-insurance locally but not internationally. Does this look familiar?
> What message are you sending to those foreign workers when you treat them differently?
Let's dive in…
Can't I just hire contractors?
Sure you can! That's what most companies do with international team members. They hire contractors and hope for the best.
It's fast and economical. Companies wire money to team-mates, impose at-will employment and ask their team-mate to sort out local laws and regulations.
...That's not always the best solution though. Why?
- Your employees want more. Contractors don't get local benefits that come from employment (think healthcare, retirement, unemployment benefits, equity...)
- Your lawyers want more. Adhere to local law should be top of mind, especially when you have 5+ employees in a given country.
- Your VCs want more. Will you raise funds or sell the business at some point? Employment status WILL come up during bankers due diligence.
So, what are your alternatives? You can either:
- Establish your (local) legal entity and hire yourself.
- Contract a third-party company (Employer of Record, or EOR) to hire for you.
Why don’t companies hire everyone as employees rather than contractors?
The biggest difference between contracting and employment is the employers 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!
Should I start with opening up local legal entities?
Plot twist: My default answer would be "no".
Unless you're a "notable exception" listed below, you shouldn't start with a new local entity. Here's why:
Huge remote companies employing 1,000+ people, such as Automattic and GitLab, don't even think about setting up local legal entities when they have less than 5 people in a given country.
Think of it as a LONG term commitment. Here's what GitLab says about it:
"Each country has unique and complex rules, laws, and regulations, that can affect our ability to conduct business, as well as the employability of the citizens of those countries."
Also, here’s 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.”
Assuming you don't have a billion-dollar valuation, a local legal entity may not be your first choice.
Instead, ask yourself those four questions:
- Timing: How fast are you looking to solve international employment?
Setting up ONE local entity may take 6-12 months.
- Scope/Concentration: How many employees/countries need to be addressed?
Unlikely to be "worth it" if you have less than 5 team-mates in a given country.
- Compliance: What's your risk appetite? Is internalizing/externalizing OK?
Local counsel, tax and legal implications + bureaucracy may be significant.
- and of course Budget: How much will you spend here?
Are you authorized to spend $30-100k to investigate this?
Opening up a local entity makes you liable to local taxes. Not only employment taxes, sales taxes as well. Did you know that hiring in a given US state makes you liable to Sales taxes there? Same applies to most countries. Ask your CFO about it!
Many companies, esp. US-SaaS companies are VERY careful around this topic. For instance, opening up a brand new entity in mainland Europe may have you liable to apply Euro VAT on the local payments you collect.
Finally, you'll need local counsel, possibly a health bank balance and physical address...
- If you have 5-10 people in a given country with straight-forward legislation (say, Canada, the UK, Ireland, Singapore...), it could be a no-brainer to open-up a local entity.
- If you're looking at opening up a new market with a physical office, it may be worth it to consider setting up shop.
How can I legally and easily hire international employees remotely?
Employing people in a different country isn't a new problem. It's been around for a while, many companies solve this today:
They are called Employer of Record, or EOR: an organisation that takes over the legal responsibilities of employing your employees. Some (not all) handle pay/benefits. The term “PEO” (Professional Employer Organisation) is also often used.
Let's zoom out for a second. Most international remote companies fall in either four levels:
- Level 1: Mix of local employees and independent contractors.
Examples: Nearly every remote startup that's getting started.
- Level 2: Mix of local employees, independent contractors and EOR.
- Level 3: Mix of local employees, independent contractors, EOR and employees through your own entities.
Examples: ShieldGeo, Buffer.
- Level 4: Most employees through own entities (domestic+local), some EOR and contractors.
Examples: Automattic, GitLab, most FANG companies…
Let's chat about EORs...
Even though this is an old problem, a new wave of EOR/service providers appeared in the last five years. They want to make international employment easy!
Most of them handle multiple countries and carry (some) risk for you, making you locally compliant. Why just "some" risk? Every EOR covers you differently, you need to read the fine prints. For instance, local Terminations can be hairy, they help you navigate it.
Most of them handle:
- Local compliance and paperwork.
- Access to local experts.
- Offer local benefits.
- Process Payroll.
Other notable companies include: Just Payroll Services (UK only), TMF Group,, Safeguard, CXC, Elements Global Services…
My Overall Advice...
Here's my rule of thumb, as shared within our community:
- Hiring a mix of nationalities outweighs the complexity of it all.
- Fair is fair. Match local/international perks and benefits as much as possible.
- Hiring people as contractors is a good way to get started.
- Moving on to EORs is better for legal, if you can afford it.
- Only set up a legal entity if you have many workers in 1 country and sufficient funds to cover legal/operational fees. Beware of tax and accounting implications.
- EU companies hiring in the EU, some exceptions exist. For instance, FR<>DE & FR<>UK. Many examples within the European Economic Area (EEA).
- US companies, hiring isn't possible in countries under U.S. sanctions: Iran, North Korea, Crimea, Syria, Soudan, Cuba.
- Some countries have notoriously complex local employment law, such as: France, Italy, Germany…
- Here's a great lawyer firm perspective on hiring Independent Contractors.
- This HN thread is one of the best write-up on the topic: "I'm the founder of a company that is ~250 people, remote first".
- Have questions? Happy to help. Email me! ("rodolphe" at remotive.io).