Remote Working: Employee or Independent Contractor?
Remote-first companies are made up of people working remotely from many different corners of the world. But hiring across borders isn’t always easy. If you’ve just been offered a remote job, depending on where the company is registered and where you are based, you might find yourself registering as self-employed just to join their team.
But there are other options that will allow you to work remotely for an international company, without sacrificing the security that comes with being an employee. Let’s walk through them. It’s wise to be well informed of the differences so you can ask your future employer the right questions before you start working together.
Hiring a remote team, across borders, can be complicated. As a company, you might be frustrated by the barriers to offering employee status to your new hires. And as a remote job seeker, you might be about to give up all the employee rights and entitlements that you have grown accustomed to.
Remote working with an international company
Consider this example; you are based in Portugal and are offered a remote position. They offer an annual salary of £40,000. The company is registered in the United Kingdom, where the majority of the team is based. And although they have customers all over the world, all of their operations (regulatory, taxes, etc) are based in the UK. When the company draws up your ¨contract¨, it states that you will be hired as a ̈contractor ̈ to work an agreed 40 hours per week. And that all local taxes and social security contributions are your responsibility.
In this example, the company is not obligated to adhere to local employment laws. This means you are not legally entitled to employee benefits like paid holidays, sick pay, maternity pay, etc. Whether they provide these benefits under this type of contract is entirely at the discretion of the company.
Not only will you be self-employed and forfeit the security that comes with being an employee. But your agreed salary with your new employer may quickly start to dwindle when the costs of being self-employed, which hadn’t been factored in during the negotiations, start to add up. Not to mention all of the unpaid holidays that you will need to plan and save for. Buffer did a good job of outlining some of these expenses.
Of course, working for a remote company under these terms is the worst-case scenario. Most well-established remote-first companies have thoroughly tested processes in place for hiring a remote team. They will likely offer full employee status to every member of the team. Or offer a full host of perks as if you were. For smaller remote-first companies, start-ups, or companies who operate on a hybrid model, they may not. The process of hiring a remote team is often developed with different processes being tried and tested. But this takes time. So don’t assume that the company knows how it works. It’s definitely something to be well aware of as you start the process of looking for a remote job from international companies.
The unspoken challenges of being hired as a remote worker
We all know about the real perks of remote working. But we hear less about the challenges that face both employers and employees who actually put it into practice. The benefits are endless, they really are. How we work has gone through a massive transformation. How that will impact our lives is invaluable. Reducing the need to go to an office every day eliminates the commute, positively impacts the environment, reduces the need to be based in expensive cities and improves work-life balance. It also provides accessibility to work for those with disabilities. These are just some of the benefits. But what about the real challenges for both remote workers and remote-friendly companies?
The basic employer-employee relationship from a legal standpoint is not as simple in a remote environment. Accessing a global pool of talent brings unique challenges. The legal and regulatory issues with hiring internationally are one of the biggest challenges with working remotely. If you have a few year’s work experiences under your belt and have experienced first-hand, the value of local employment legislation. You are settled in one place and focused on the typical things like buying a house, paying a mortgage, supporting a family, etc. Sacrificing the security of being an employee may be too large to justify working remotely. But it doesn’t need to be, you just need to know your options and discuss these during the hiring process.
Your options as a Remote Worker
Depending on how clued up your new employer is, they will either nicely tell you to ‘sort it out yourself’. Or they can use an Employer of Record, a third-party to employ you on their behalf. Who provide you full employee status and all the lovely benefits that come with that. Particularly favorable in many European countries where they have a legal minimum of 20-24 days paid holiday days per year. A generous amount when compared to the United States.
Enjoy the security of being an employee, as a remote worker
If working remotely under freelance status, you might come to the sobering realisation that actually, it’s pretty expensive to be a self-employed remote worker. The salary that you negotiate at the beginning of a work contract may not take into consideration additional costs, like, accountancy fees, holiday entitlement, maternity pay (and fees to be freelance if you are based in Spain). Among others. But being adequately informed can ensure you have the necessary conversations with your employer before you start working together. As more and more fully distributed companies emerge, this will likely be as much a learning curve for the companies as it is for the employees.
The uptake of European companies to embrace remote working has been considerably slower than in the Americas. But today there are some amazing European born remote companies, offering remote jobs for people within EMEA time zones. Hotjar, Toggl, Human Made, and plenty more lead the way in showcasing the benefits of hiring a remote team. Encouraging many more to adopt a similar model. The established companies will have processes and procedures for hiring remotely, but new companies may not.
An Employer of Record facilitates full employee status to remote workers
Companies like Boundless and ShieldGEO are solving one of the single biggest problems of hiring a remote team internationally. By offering internationally located team members employee status. An Employer of Record acts as an intermediary between the company and the employee. As defined by ShieldGEO; they are ̈responsible for the legal and regulatory requirements of immigration, employment, and payroll, but do not participate in the day-to-day work activity ̈.
Once an employer of records has been contracted, they fulfill these responsibilities while the company continues to manage the new hire as it would a normal employee. For the employees, they work remotely for an international company while gaining full employee status. And as such, benefit from the local employment laws and everything that brings, holiday pay, sick pay, local bank holiday entitlement, etc. Not to mention the security of being an employee.
So, if you’re self-employed by choice, you are your own boss and all the lovely things that come with that. Great. But if you are a remote worker hired by a company with no operations locally, ask whether they use an employer of record to hire internationally. And work remotely while enjoying all the local employment law benefits. Remote work doesn’t need to come at the cost of the security of being an employee.