4 ms·

Isn't the simple way to setup a company and issue invoices? Any thoughts on how common this is, and benefits/pitfalls/challenge?

ghaff 5y ago
There's nothing simple about setting up a company. Hiring people as contractors rather than employees probably does simplify things. But a contractor may, for example, not be able to work for you full-time and you may not be able to offer them benefits beyond base salary. The bottom line is that, for a small company especially, hiring an individual who requires a lot of special care and feeding is probably more trouble than it's worth.
- Ekaros 5y ago
  You may not even be able to offer them salary. But instead some other payment for work done, or just hourly/daily rate.
- tw20212021 5y ago
  Why would a contractor require special care? On the contrary. They supply you the work, you pay for their services, like you would a software company. The benefits they choose for themselves and factor those in in the rate they ask you. There are differences of course, an employee may be more loyal, but that's a different discussion.
  - duped 5y ago
    It may be illegal for certain roles in your organization to be filled by contractors.
  - ghaff 5y ago
    Because if you've been following gig work/contractor debates, there are constraints on who you can classify as a contractor in many places. And depending upon the circumstances, that person also loses out on things like RSUs--and hourly rate probably won't compensate. To be clear, companies do do this but it's not as simple as we'll pretend you're a contractor and you can send us an invoice each month.
  - isbvhodnvemrwvn 5y ago
    In Germany that would be seen as fraudulent employment, because they work 100% of the time for one client. and it is de-facto employment. It depends on the country of course.
- aunty_helen 5y ago
  >a contractor may, for example, not be able to work for you full-time Hire them on a project basis. When one project ends, setup a new contract.
- littlestymaar 5y ago
  > There's nothing simple about setting up a company. If it's easy enough for the average Uber driver, I'm sure the average HN reader can figure it out (because that's exactly how Uber works).
bjelkeman-again 5y ago
Each team member a self employee with their own company. We always tried to solve it that way. We paid everyone the full cost of taxes, healthcare etc. Full cost to the company for an employee in the HQ country, was the same for one outside, in the same economic region. We set up long term contracts. We had maybe 30+% of the team working that way, if we got big enough in a country outside the EU we set up a subsidiary there. Often a real pain to administer with a team of 100 people:, but sometimes the only way to make it work. Indonesia, India, Kenya, Burkina Faso, Mali.
simonbarker87 5y ago
You'll likely have massive IR35 (UK legislation specifically) issues doing this unless you set the contracts etc up just right. But in theory yes this is probably the best approach.
maccard 5y ago
That's not being employed, that's running a business.
- hackerfromthefu 5y ago
  You can also use an umbrella contracting company to run the business for you, and employ you with normal salaried employment structure, including pay your pension, healthcare or other salary packaging. Of course the original hiring company benefits/RSUs etc can't be passed through easily, you need to get those as cash.
  - maccard 5y ago
    Again though, that's not being employed by the original company. The advantage of being employed is the access to those benefits that you lose out on by using a middleman. Getting those benefits as cash defeats the point of them being those benefits in the first place.
crypt1d 5y ago
Exactly. This is quite common and is done all the time for remote workers, myself included. The hiring company cannot treat you as a regular employee though (you are essentially a contractor), so you may have less 'rights' than a regular employee - i.e. your contract can likely be terminated a lot easier than a regular employment one. You may also not be able to get some benefits that a regular employee gets - ie contributions to pension funds, etc. These are often compensated by simply increasing your daily rate. I personally prefer it that way as I often find the benefits offered by the companies unnecessary. There are also companies like deel.com that offer employers to hire people through their local branch office in pretty much every country in the world. FWIW I haven't used any myself but I have heard good things. Hence I honestly consider remote working to be a solved problem already, but to each his own.
- xtracto 5y ago
  With respect of working rights, sometimes it goes the other way: I've worked for American companies from Mexico through a PEO (the ones in charge of hiring you). Given that these usually hire you as a full time employee, you are protected by the state rights. In Mexico that entails several things: Access to social healthcare, at least 25% of vacation bonus (additional pay for each vacation day you take), 3 months severance if the company fires you at will, compulsory contribution to the 401k equivalent, among others. At some point us working in Mexico like this had better benefits than our peers in the US.
  - maccard 5y ago
    > At some point us working in Mexico like this had better benefits than our peers in the US. I work for a small company who has set up a legal entity to employ me and others in the UK while being based in the US themselves. Our US employees outnumber our UK employees 20:1 and yet our UK employees have better benefits than the US employees, _and_ we cost less for an equal salary (basically US healthcare is so expensive that it ends up being roughly equivalent to employing people in countries where you don't have to pay 10% of someone's compensation on healthcare) even when you have to put up with all the legal headaches

ghaff 5y ago

There's nothing simple about setting up a company. Hiring people as contractors rather than employees probably does simplify things. But a contractor may, for example, not be able to work for you full-time and you may not be able to offer them benefits beyond base salary. The bottom line is that, for a small company especially, hiring an individual who requires a lot of special care and feeding is probably more trouble than it's worth.

Ekaros 5y ago
You may not even be able to offer them salary. But instead some other payment for work done, or just hourly/daily rate.
tw20212021 5y ago
Why would a contractor require special care? On the contrary. They supply you the work, you pay for their services, like you would a software company. The benefits they choose for themselves and factor those in in the rate they ask you. There are differences of course, an employee may be more loyal, but that's a different discussion.
- duped 5y ago
  It may be illegal for certain roles in your organization to be filled by contractors.
- ghaff 5y ago
  Because if you've been following gig work/contractor debates, there are constraints on who you can classify as a contractor in many places. And depending upon the circumstances, that person also loses out on things like RSUs--and hourly rate probably won't compensate. To be clear, companies do do this but it's not as simple as we'll pretend you're a contractor and you can send us an invoice each month.
- isbvhodnvemrwvn 5y ago
  In Germany that would be seen as fraudulent employment, because they work 100% of the time for one client. and it is de-facto employment. It depends on the country of course.
aunty_helen 5y ago
>a contractor may, for example, not be able to work for you full-time Hire them on a project basis. When one project ends, setup a new contract.
littlestymaar 5y ago
> There's nothing simple about setting up a company. If it's easy enough for the average Uber driver, I'm sure the average HN reader can figure it out (because that's exactly how Uber works).

bjelkeman-again 5y ago

Each team member a self employee with their own company. We always tried to solve it that way. We paid everyone the full cost of taxes, healthcare etc. Full cost to the company for an employee in the HQ country, was the same for one outside, in the same economic region. We set up long term contracts. We had maybe 30+% of the team working that way, if we got big enough in a country outside the EU we set up a subsidiary there. Often a real pain to administer with a team of 100 people:, but sometimes the only way to make it work. Indonesia, India, Kenya, Burkina Faso, Mali.

simonbarker87 5y ago

You'll likely have massive IR35 (UK legislation specifically) issues doing this unless you set the contracts etc up just right. But in theory yes this is probably the best approach.

maccard 5y ago

That's not being employed, that's running a business.

hackerfromthefu 5y ago
You can also use an umbrella contracting company to run the business for you, and employ you with normal salaried employment structure, including pay your pension, healthcare or other salary packaging. Of course the original hiring company benefits/RSUs etc can't be passed through easily, you need to get those as cash.
- maccard 5y ago
  Again though, that's not being employed by the original company. The advantage of being employed is the access to those benefits that you lose out on by using a middleman. Getting those benefits as cash defeats the point of them being those benefits in the first place.

crypt1d 5y ago

Exactly. This is quite common and is done all the time for remote workers, myself included. The hiring company cannot treat you as a regular employee though (you are essentially a contractor), so you may have less 'rights' than a regular employee - i.e. your contract can likely be terminated a lot easier than a regular employment one. You may also not be able to get some benefits that a regular employee gets - ie contributions to pension funds, etc. These are often compensated by simply increasing your daily rate. I personally prefer it that way as I often find the benefits offered by the companies unnecessary. There are also companies like deel.com that offer employers to hire people through their local branch office in pretty much every country in the world. FWIW I haven't used any myself but I have heard good things. Hence I honestly consider remote working to be a solved problem already, but to each his own.

xtracto 5y ago
With respect of working rights, sometimes it goes the other way: I've worked for American companies from Mexico through a PEO (the ones in charge of hiring you). Given that these usually hire you as a full time employee, you are protected by the state rights. In Mexico that entails several things: Access to social healthcare, at least 25% of vacation bonus (additional pay for each vacation day you take), 3 months severance if the company fires you at will, compulsory contribution to the 401k equivalent, among others. At some point us working in Mexico like this had better benefits than our peers in the US.
- maccard 5y ago
  > At some point us working in Mexico like this had better benefits than our peers in the US. I work for a small company who has set up a legal entity to employ me and others in the UK while being based in the US themselves. Our US employees outnumber our UK employees 20:1 and yet our UK employees have better benefits than the US employees, _and_ we cost less for an equal salary (basically US healthcare is so expensive that it ends up being roughly equivalent to employing people in countries where you don't have to pay 10% of someone's compensation on healthcare) even when you have to put up with all the legal headaches