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Ask HN: Is it legal for US companies to hire remote non-US contractors?

• egman_ekki 6y ago
  there's a startup to help companies hire and pay people around the world https://pilot.co/ https://pilot.co/ (not affiliated, just heard about them)
  • Ozzie_osman 6y ago
    There is a whole industry of them. Professional employment organizations or Employer of Record (PEO / EoR). Companies like Pilot (not affiliated either but heard good things) are a modern take on that and try to streamline it as much as possible.
  • matid 6y ago
    Founder of Pilot here. Thanks for the shout-out! To answer the OP’s question: it’s perfectly legal for a US company to hire someone outside of the US as a contractor. But, companies are weary of that for a couple of reasons: 1. Worker Classification Risk. When hiring someone in another jurisdiction, either as an employee or a contractor, you have to comply with local labour laws. Some countries have stricter rules about who can be classified as a contractor v. an employee. Others are friendlier towards contracting as an employment model. Before hiring your first foreign contractor, most companies only have to be concerned with local labour laws in their country. That’s what they know, and that’s what their lawyers have experience with. As soon as you start hiring globally, that’s no longer the case. For smaller companies, risk of hiring a handful of contractors in different countries is quite small. But the larger you get, the 1) more conservative you become and 2) you become more of a target for local authorities to audit. Many companies simply choose to play it safe, and stick to hiring people only in the jurisdiction they are familiar with. 2. IP Risk. When you hire someone as an employee, in most jurisdictions any IP they produce while at work automatically belongs to you, the employer. That’s not the case for contractors. Many companies, rightly so, are worried that by hiring contractors they won’t correctly secure rights to the IP they’re paying for. This is compounded by the fact that some countries have pretty esoteric IP laws, for example prohibiting outright transfer of IP from the contractor to the company and requiring an exclusive license with well-defined terms of use instead. Again, for many companies, it’s easier to avoid that risk by sticking to hiring domestically. 3. Permanent Establishment Risk. This applies to hiring globally broadly speaking, not just as contractors. By having permanent team members in other countries, a company can unintentionally create a “permanent establishment” in the country they’re hiring in. The rules here, again, vary from country to country, and it’s rarely the case that by hiring a single contractor somewhere you’d create a permanent establishment for your business, but it’s something you have to worry about. Why does it matter? Because companies that have a permanent establishment in another country can be subject to taxation for sales made in that country. Have SaaS software you’re selling globally? Well, if you have employees in France, you may have to pay sales tax/VAT in France sooner than you otherwise would. Platforms like Pilot help companies reduce this risk. Sometimes it’s by improving your compliance when hiring people as contractors (to the extent possible). Other times it’s by acting as the local employer (or employer of record as was pointed out by other commenters in this thread). The latter allows the company to almost entirely remove the first two risks (at the expense of generally higher costs than the contracting option). Happy to answer any other questions about hiring/being hired by US companies outside of the US!
• emteycz 6y ago
  It should be as legal as buying any other service or product from foreign businesses.
  • gambiting 6y ago
    Well, not quite. If the remote worker is contracting for you - then yes, it's extremely simple. They do the work for you, send you an invoice, you pay the invoice and that's it. It's on them to pay the correct tax, health insurance, work the correct number of hours etc etc. But if you are actually employing them remotely then yes, it's legal, but you need to make sure to follow the employment law where they are located, not where your company is. So if you employ someone from the EU you need to give them 25 days of paid time off, pay into that country's healthcare system etc etc. It's easier to contract instead.
    • fernandotakai 6y ago
      yup, that. i've done contract work for a bunch of american companies and that's basically how it's done: i do they work they ask, i send them an invoice, they pay by transferring the money to my company's bank account, i pay the proper taxes and then pay myself. it's actually quite nice.
    • kxyvr 6y ago
      Even if the foreign entity sends an invoice and pays their own tax, I don't think it's quite that simple. If the company hiring the contractor wants to deduct their expense from their taxes, the IRS will want to know why because typically a 1099 would be filed. I am not an accountant nor tax attorney, but I think that at the very least something like a W-8BEN would need to be filed: https://www.investopedia.com/terms/w/w8form.asp https://www.investopedia.com/terms/w/w8form.asp https://www.irs.gov/instructions/iw8ben https://www.irs.gov/instructions/iw8ben Long story short, at the very least, the person should speak with an accountant familiar with these filings to make sure all forms are filed. There will be some amount of paperwork to ensure they can survive an audit. These tax issues are separate from any additional legal considerations that may apply.
• sourceless 6y ago
  Yes, but make sure you know what your country's tax laws are. US companies can even hire foreign workers as employees, so long as the contract meets to requirements of each country's working laws (e.g. paid time off and minimum wage in the EU). In that case it's best to get an accountant that has done it before.
  • paulie_a 6y ago
    Isn't that upto the individual tonoaybthpse taxes?
    • ghaff 6y ago
      If they are a contractor, mostly yes. If they are an employee, you have payroll tax, tax withholding, etc. ADDED: And, if you're working full-time for someone as if you were an employee, you may not actually be allowed to be a contractor. See the current Uber discussion going on in California.
    • gambiting 6y ago
      "depends". In the UK the employer pays taxes on behalf of the employee, so if you only work for someone(instead of running a company) you never have to file a tax return, everything is calculated and done for you.
      • barrkel 6y ago
        Until you start earning more than 100k or so, when HMRC will ask you to fill out a return anyway.
    • sourceless 6y ago
      It is, so the individual needs to be aware of what taxes apply to them - and especially if you're making bay area money, it's probably a good idea to have an accountant to make sure your tax returns are correct and efficient.
  • dplgk 6y ago
    I believe the question is about contactors (freelancers) not employees.
• gtirloni 6y ago
  It's perfectly legal to hire non-US contractors that work remotely. That's the easiest part. Getting the visa and relocating the person from overseas is the hard part.
• bob33212 6y ago
  Yes, but there are a couple issues. 1. International wire transfers over 10k could get flagged by your bank as suspicious. Then you would need to work out with your bank how to prove that this isn't money laundering. 2. Intellectual Property laws can be hard to enforce across borders. If a contractor takes your source code you may never get any money from them as damages
  • deleted 6y ago
    [deleted]
  • gruez 6y ago
    >1. International wire transfers over 10k could get flagged by your bank as suspicious. Then you would need to work out with your bank how to prove that this isn't money laundering. Isn't that only per-transaction? Paying $9000 biweekly gets you to $234k annual salary. Unless you're hiring rockstar engineers, this should be more than enough.
    • Spooky23 6y ago
      You need to have a bank that has a clue and understands what you are doing. Some random regional bank may flag it as suspicious, even at amounts as low as $4k.
    • estebarb 6y ago
      No, actually is more complex: banks may share data so the amount moved can include several transactions, across several banks and time. I triggered the system once, just for moving my own salary to another bank and then to another account in the second bank. To be safe, the employee must give the bank a proof of be hired: contract with amount, certificate of salary, proofs of service selled (it depends). Asking the bank before the first payment can help too. In summary: it's perfectly fine to receive sums greater that $10000, but the employee have to justify it, and the company must provide documentation.
    • alistairSH 6y ago
      Not quite. Look up structuring and smurfing. In the US (at least), making deposits in a pattern to avoid automatic triggers is itself something that can trigger investigations and holds. This can be a huge problem for the “legal” marijuana trade in Colorado and Washington. It’s still illegal at the federal level, large sums of cash involved, so banking becomes difficult.
• sinatra 6y ago
  Yes. But the companies need to keep in mind that they’ll have to review the IP laws of not only US but also the country of the candidate. Just because they sign a contract with the candidate that’s valid in US doesn’t mean that the candidate doesn’t have full IP ownership of the code in her own country. And the company needs to do this review of IP laws for each country from where they get such candidates.
• ghaff 6y ago
  The short answer is generally yes. The longer answer is you may need to establish a legal entity in the country in which you're hiring [ADDED: probably just for employees] as well as conform to employment rules etc. See this comment: https://news.ycombinator.com/item?id=17022563 https://news.ycombinator.com/item?id=17022563 The bottom line is that it can certainly be done but the legalities may be more than a small company would want to deal with for a one-off hire. Note that there is some paperwork even associated with hiring someone in a state where you don't already have employees in the US--though those tend to be less and can be somewhat outsourced. If there are a lot of timezones involved, companies may also not want employees who are, say, more than a few timezones away long-term.
  • TedDoesntTalk 6y ago
    For contractors working remotely (not on US soil), this is just plain wrong. My company has employed numerous non-US contractors in about 10 different countries for more than a decade. We never opened an entity in another country, or filed extra paperwork. In fact, IRS Form 1099 does not even need to be filed for non-US contractors. The link you posted is more about W-2 employees. Most of the problems it mentions go away when dealing with a 1099 contract relationship.
    • PaulDavisThe1st 6y ago
      The post did actually talk about contractors: -------------- 3.) Hiring contractors DOES work around some issues, but has its own downsides. First, we can't offer options/stock to contractors and we'd like all our employees to benefit from this. Second, we often can extend the same full time benefits we want all our employees to share such as healthcare, 401K, etc. Put another way: we want all HashiCorp employees to be employees, we don't want to create second class citizens. Legally, some countries have legal limits on the hours a contractor can work or length of time they can be contracted before they're considered an "employee" by default and regardless of what you SAY the relationship is, the country will consider it employment and points 1 and 2 above all take effect immediately. So we certainly DO hire contractors but our point of view is that we intend to hire those people full time over time. We'll often hire contractors if we know that we'll have a legal entity established to hire them within X months, and we're up front with the new hire about this. We'll also pro-rate option/stock vesting for their contractor period when they are hired.
• trevyn 6y ago
  As you develop as a human, you start to understand that legal/illegal is often not a black-and-white thing. There is the obviously legal, and widely practiced. There is the obviously illegal, and clearly enforced. And there is a huge gray area, where people and states just make things up as they go along. Law that crosses national boundaries is particularly exciting in this regard.
• ludamad 6y ago
  I work from Canada for a US contracting firm with little issues. Through them I work for Cisco which does have a Canadian office, however
• deleted 6y ago
  [deleted]
• juskrey 6y ago
  Yes, just be sure to open a legal entity and file a form W-8BEN-E, or IRS will want a 30% cut from US company at the end of the year.
• not_a_moth 6y ago
  Word of caution, the activities of the employee can trigger a PE for your company and expose you to corp income tax, and depending on possible "technical service" clauses in domestic law or tax treaty between the two countries, you can be liable to more taxation in the host country even without a PE. Plenty of tax treaty case law showing audits do happen to all of MNCs, small companies, and individuals in these matters, with financial and even criminal penalties for your directors in some jurisdictions. BEPS is also now cracking down on PE avoidance and types of arrangements/facilitators out there. Sometimes better, and easier, to just declare and manage a PE. Employment services firms don't offer actual legal protection here since doesn't matter if direct or indirect employed.
• mettamage 6y ago
  I didn't know this would blow up. Thank you for answering! :D I know that all of this shouldn't be interpreted as legal advice [1], strictly speaking, but it is hugely helpful that I now have a much more targeted vision on what to think about and to look for. The reason I'm asking this question is because it's Saturday and I'm in a daydreaming mood. But upon reflection, I realized I'd love to work for a US company as I want to see the difference between US software development and Dutch software development. This is especially the case for silicon valley. Reading HN almost daily since 2015 definitely contributed to that. Based on the upvotes, I don't think I'm the only one. So I hope I'm planting the seed for some US companies to think about this option more often. [1] I almost accidentally did interpret this thread as legal advice, which is why I am making this explicit for if others tend to do the same.
  • biztos 6y ago
    Why not just set up a Dutch LLC (whatever the form is there) so it’s easier for US companies to do business with you without worrying about Netherlands labor laws?
    • mettamage 6y ago
      I do have one (a Dutch sole proprietorship), but I never mention it. I guess I should mention it in my cover letters and on my resume.
      • literallycancer 6y ago
        Most clients only care whether you can make proper invoices. Sole proprietorship vs Ltd. doesn't really matter, unless there's something strange about sole proprietorship regulation in the Netherlands.
• sahin-boydas 6y ago
  I am Sahin founder&CEO RemoteTeam.com. In RemoteTeam.com we can help you to pay and manage contractors very easily. We have a solid payments platform (fastest, cheapest and dollar transfers for most popular countries). Also we help you to do in a more compliant way. (W8ben forms and contractor aggrements with specific sections for each countries). Our in house lawyer works with 40+ lawyers globally. We have hundreds of companies with team sizes of 20-40 and they are mostly remote and non-US contractors.
• flowerlad 6y ago
  Recently I hired a graphic artist on https://dribbble.com/ https://dribbble.com/ and paid him $150 for a page design. It was only when it came time to pay that I realized he is located in Bangladesh. Are there any legal issues here?
  • khuey 6y ago
    Tax authorities are not going to chase you around the world for $150.
  • literallycancer 6y ago
    Not really. Most likely the artist is responsible for doing their own paperwork and taxes.
• ghufran_syed 6y ago
  Looks like this startup school company is trying to work on this problem: https://heyportal.io/ https://heyportal.io/ https://www.startupschool.org/posts/36040 https://www.startupschool.org/posts/36040
• yread 6y ago
  What about the other way around - non-US corp hiring a US contractor?
  • mettamage 6y ago
    I know this is possible in The Netherlands, it happens all the time. Dutch companies also specifically state whether they are open to this in their job postings. From my experience, what Dutch companies have trouble with is matching the salaries from US-based companies, and in general they don't. So people from the US that do come to The Netherlands specifically have other reasons than money to come here.