A Common International Hiring Approach

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How do you decide to approach hiring internationally ultimately comes down to your company’s philosophy, growth rate, and risk tolerance. Smaller startups often fall below the threshold for certain kinds of benefits requirements or privacy and data security laws—as they grow and scale their remote workforce, their risk exposure grows, but they also then tend to have more capital and people to invest in establishing and scaling programs to ensure compliance with local laws.

You have a few options for how to proceed:

• Hire people as contractors.

• Hire through a temp agency or local business partner.

• Work with a PEO or GEO.

• Incorporate your company in that country.

Some companies, like website optimization tool company Convert, prefer to employ everyone as a contractor. It’s logistically easier, and for them supports a philosophical belief that grants everyone the same status. They’re also only about 40 people total, and not growing at an aggressive pace.

Companies also need to consider the costs—incorporating in another country is expensive and time-consuming; and working with a PEO can also be quite costly (though Remote Year CEO Greg Caplan suspects these prices will start to come down as competition in this space increases in the coming years*).

In talking to dozens of remote companies, the pattern we’ve seen appears to be:

1. Dipping a toe in with contractors in new countries. Many remote startups start here, and choose to stick with remote employees as contractors as their long-term strategy.

2. Working with a PEO either as they add more people, or if that country has trickier local laws with which to keep up.

3. Officially incorporating in countries where they have achieved critical mass (typically over ten employees). All the ins and outs of international incorporation are outside the scope of this guide, but what we have seen is that most companies start researching incorporation as an option when they reach around 5 contractors in the same country, and typically move forward once they get to somewhere between 10–20 people there.

While some companies persist with a model where everyone is a contractor, more seem to be following in GitLab’s steps and mixing in different approaches at different stages of growth or for different business needs. GitLab is arguably the largest remote company that has pioneered this approach—they still have a mix of all three options and are incorporated in ten regions.

​important​One notable thing GitLab does is to pay contractors 17% more than they would receive as a salaried employee. That helps them cover all the things they’re responsible for, making it less of a burden to remain employed as a contractor.

The easiest, quickest, no-frills way is to tell people up front when you’re interviewing them, “We’ll just pay you more.” Setting up an entity is expensive; PEOs cost a lot of money as well and have a ton of unknowns. Having contractors becomes a big deal when there’s 20–25 people, and that’s when the economics flip towards thinking about incorporating.*

​important​Thanks to GitLab’s dedication to public, open documentation, you can get a leg up on figuring out which countries might be trickier than others by checking out their Hiring Status page. It shows how many employees they have in each country, whether they work with a GEO or not, and if they have any “holds” in regions due to complexities hiring or establishing an entity there.

Let’s look more closely at the two most common approaches: hiring international workers as contractors, or working with a third-party company.