Have you ever hired remote developers before? While it comes with great perks like greater efficiency and access to a global workforce, it also brings legal issues which aren't immediately clear. However, by learning some "basics," you can significantly reduce your legal liabilities. Our team of experts has done thorough research to walk you through the legal issues of hiring remote developers. Let’s start.
1. Ensure Compliance With Local Labor Laws
One of the most common concerns when you hire remote developers, is compliance with local labor laws. And it makes sense: how can you be sure that a developer working for you in Estonia is getting paid all of his or her entitlements? How can you know that they’re not being taken advantage of?
To a certain extent, compliance with foreign labor laws is beyond your control. It’s hard to know exactly what rules exist in other countries, much less know whether your employee is following them or not.
You can take steps to protect yourself against breaching foreign employment laws, including ensuring that your employment agreement complies with the laws of the country where the remote employee works. In addition, you will be required to keep records of all of your payments to them, both for your own taxes and theirs.
In most cases, you can avoid non-compliance by hiring a reliable partner that handles payroll, benefits, other legal compliance, and other H.R. functions on your behalf.
2. Registering Your Own Company to Hire Remote Developers
The most straightforward way to hire remote developers is to incorporate your own company that would be hiring them. This gives you the flexibility to operate globally and employ a team of people worldwide.
Another good news is that despite being a US-based company, you won’t have to deal with U.S. employment law. Instead, you will be governed by the laws of your home country.
However, this option does come with certain drawbacks. Registering your own company costs money and time. To start a company from scratch to hire remote workers, you need to understand the various legal requirements. Depending on the country, the process can be burdensome.
In order to obtain it, you will need an address in the U.S., which can prove problematic if your company is based abroad. Luckily, things like virtual offices can help you get around this challenge.
Suppose you don't want to register your company in other countries. In that case, you can simply find developers on micro1 and let experts handle everything for you. Micro1 will find top talent and then take care of all the legal compliance issues while dealing with payroll on your behalf. Of course, you have to let them know what you need and relax.
3. Taxation and Related Issues
Taxation is indeed a serious concern.
The biggest legal challenge of hiring a remote developer is making sure you follow all necessary tax laws. Every country has different rules about when and where to pay taxes and whether those taxes should be deducted from the employee’s pay.
You need to determine what forms of payment are allowed in the developer’s location, the tax rate, and how often those taxes need to be remitted. You also need to know if they are entitled to any tax credits or other incentives that could reduce your costs. Then you need to manage payroll so that every worker receives their fair wages in a timely manner.
You need to confirm these details with a legal professional who is familiar with the tax laws of both countries before hiring a remote developer. If you fail to follow these guidelines, you could face serious legal consequences. Alternatively, by partnering with micro1, you avoid having to deal with all tax-related issues!
This is a severe complication with remote work, but it doesn’t have to be complicated or expensive if you know what needs to be done ahead of time.
4. How Do You Handle Reimbursements When Working With Remote Developers?
How do you handle payments when working with remote developers? There are several options here. You could pay them via check or electronic transfer or use a PayPal or Google Wallet service. If you use PayPal or Google Wallet, they will be subject to processing fees. If the developer is being paid by the hour, it may be worth it to absorb those fees yourself as part of doing business with him or her.
The IRS has ruled that if you pay a non-US citizen for work done outside of the U.S., you do not have to withhold any taxes on that payment. However, suppose the worker is located in the United States. In that case, you will have to withhold taxes and get a W-2 form dully filled like any other employer would for an employee.
Suppose you want to keep things simple and don't want to deal with withholding taxes. In that case, you can hire your developer as an independent contractor and pay them through PayPal or Payoneer. This way, they deal with all the tax issues themselves, and you don't have to worry about it.
5. Work Product Ownership
Who owns the work product if you hire someone to write software for you? If it’s your employee, this isn’t an issue — you paid for their time and owned the end product. In the case of a contractor, however, this can be trickier. Often it’s a good idea to have an agreement upfront as to what happens if a developer leaves your project or if you leave them.
If You Want To Hire Remote Developers, It's Important To Be Aware Of These Legal Issues
Suppose you're on the fence about hiring remote developers to work with your company. In that case, these legal issues are a reality of the situation. While these legal issues surrounding remote developers can seem overwhelming at first, you can take steps to avoid these issues.
If you're overwhelmed by the thought of hiring a remote developer, consider expert help from talent pool like micro1 that help you find and hire the right person without worrying about tax and compliance laws.