
Ask HN: How do you pay remote employees in different countries? - skrebbel
I&#x27;m on of the founders of a small but fast growing startup. We&#x27;re a team distributed across Europe, and so far we&#x27;ve had the fortune that everybody we employed had a sole proprietorship lying on the shelf somewhere.<p>But as we&#x27;re growing, we can&#x27;t keep asking every single employee to begin a company, right? Also, starting a mailbox firm in every country where &gt;0 employees live sounds like administrative hell. How do other distributed teams (across borders) solve this?
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michaelanckaert
The best way to go about is ask you remote 'employees' to invoice your
company. They are independent contractors and are responsible for their own
taxes and social security payments.

Don't think that being a contractor is hard, in some countries you can just
start invoicing without any company creation or registration as long as you
declare the income and pay required taxes.

The downside is that anyone working as an independent contract can up and quit
at moments notice. If you try to enforce exclusivity or a full time, fixed
'employment' roster some countries can sue you for fraud. The idea being that
you are using contractors for full time employees and thus your company should
pay employer taxes in that country.

~~~
paulcole
>The best way to go about is ask you remote 'employees' to invoice your
company. They are independent contractors and are responsible for their own
taxes and social security payments.

This isn't legal in the Us except under specific circumstances. Whether I'm a
contractor or an employee isn't my choice – the IRS has a pretty clear
distinction between the two.

[https://www.irs.gov/newsroom/understanding-employee-vs-
contr...](https://www.irs.gov/newsroom/understanding-employee-vs-contractor-
designation)

~~~
lovich
Just send your employees all their work through an app that has a take it or
leave it option on the price you'd pay them with no negotiation. Now they are
all magically contractors while still acting like FTEs

~~~
paulcole
I like the way you think! Ever considered using that idea to take on the taxi
industry?

------
kylehotchkiss
Transferwise Business offers an international payroll solution:
[https://transferwise.com/gb/business/international-
payroll-v...](https://transferwise.com/gb/business/international-payroll-via-
batch-payments)

(I don't work for Transferwise, just a huge fan of their service)

~~~
skrebbel
Thanks! But I don't see much about payroll there, only about transfers. Do
they also do actual payrolling? I.e. dealing with taxes, employment laws, etc
etc?

~~~
rootsudo
No, and no company will because of the liability and fraud.

They freelance, you pay them what you promise and that's it.

------
codegeek
You have 2 options:

1\. Hire them as "freelancer/self employed" and let them invoice your company.
They can either invoice as individuals or through their own company if setup.
But laws get tricky depending on countries. For example, if you are an
employer-based out of the US and the freelancer is NOT a US person (US person
has a specific definition) , you need them to fill out something called W8-BEN
form but you need to talk to a CPA/tax lawyer to determine if that's the right
setup.

2\. If you have more than 1 person from the same remote country, you may have
to setup a subsidiary of some sort which again depends on where your business
is setup and where the remote team is setup. That subsidiary can then still
provide services to the parent company etc. But it then adds tons of overhead
for the remote country laws, business setup and also something called
"Transfer Pricing". Can get complex for smaller companies. But the advantage
of this option is that you have an official local company that can pay
employees on payroll, follow the local employment and tax laws etc.

~~~
konschubert
That's seems pretty convoluted. Are the any companies that can take care of
these things for you?

~~~
konschubert
Apparently there is this:
[https://news.ycombinator.com/item?id=18170086](https://news.ycombinator.com/item?id=18170086)

EDIT: I think the comment is wrong actually, trinet only offers this service
for companies and employees in the US.

------
relix
As far as I know, the only way to avoid creating a tax nexus in each country
where you have "employees" (or contractors) is to make sure the contractors
invoice you. The way this usually works is indeed the contractors have a sole
proprietorship or legal entity from which they invoice you.

If you just pay them without an invoice but as payroll then congratulations
you're now on the hook for all taxes and social security payments in the
country your now-employee works in, no matter what's in the contract. In fact
you might have committed a crime against local labour law by putting in the
contract that you're explicitly not liable for social security payments,
benefits or business-side taxes. By not registering a mailbox firm in that
country you're probably also committing some crime because this means you
couldn't meet any of the local labour law obligations.

This may work while everything is peachy while you pay them a higher amount
which they can use to pay their social security themselves, but if your now-
employee ever gets a grudge against you, they can easily file a lawsuit
against you, and it'll be hard for you to defend. Your now-ex-employee will
keep the inflated salary, having not paid the security benefits, and you'll be
on the hook for back-paying all tax and social security payments with interest
plus a fine.

Especially as a startup you don't want to deal with all these administrative
overheads. Just request that each person sets up a business from which they
can invoice you, and that they get an accountant to help them with whatever
obligations that comes with. You can suggest to pay for the accountant. It's
not actually that big of a deal and will allow each person to meet the local
obligations, which they (or the local accountant) will know better than you.
Note that they themselves then become liable for taxes and social security
payments, as someone always is.

~~~
slgeorge
This works if you have a person(s) for a period of time. But, the longer they
work for you 100% of the time, and the more team members you have in a
jurisdiction the more likely the team members are to be considered employees
and that you have established a business in the jurisdiction. At least in the
UK the separate company and 'invoice' rule is important, but there are a
number of other questions used to determine if someone is an employee.

As you note, the other big problem is that it places you in a very uncertain
situation with labour law / labour relations.

~~~
em-bee
how can a remote country force me to open a local business entity? i am not
there, so they can't get me. they can only get my contractors which would hurt
them, not me. (the worst is i could loose them, and they'd be out of work)

the remote country would have to have an agreement with my country to be able
to force me to change anything.

(the european union counts as one country here, so i am asking about the case
where at least one party is outside)

greetings, eMBee.

~~~
slgeorge
Well it depends on whether doing things the legally correct way is important
or not to you?

For a small team it's unlikely as the cost of enforcement outweighs the
benefit. But as you grow the amounts become more significant and there are
plenty of impacts of not doing things properly. Here are way this could impact
a business:

* The business won't be able to legally carry out business (e.g. sales) in the jurisdiction because there'll be an outstanding court judgement or tax judgement against you.

* The business' auditors or professional company directors may either (a) ask you to keep money on your balance sheet to account for the outstanding judgement, (b) or refuse to sign-off your accounts.

If you refuse to tell them about the outstanding fines/judgement then you will
be taken to have lied to them at which point you may be struck off as a
company director. It's extremely difficult to find a professional finance
professional to work for a business where ethical and reporting standards are
not followed because they will risk being censured and losing their
livelihood.

* You won't be able to travel to the jurisdiction (if you are a director/owner of the business) as you'll risk being put in jail/civil fine.

* The state in question can use international tax treatments and bring a court case or enforcement against the company within their main jurisdiction. Unlikely for a small company.

------
rando444
A sole proprietorship is not a business entity. There is zero difference
between a sole proprietor business and a person.

I'm not sure how you got this confused, but it sounds like you need to speak
to an accountant.

As far as how you pay people, you just transfer them money from your bank
account. All of their accounts will have SWIFT or IBAN numbers or both, and
you just transfer the funds.

Your accountant will take care of the rest, and they will be responsible for
taxes on their end. No, they will not need to be companies, but you will need
to pay them as companies, as these individuals will be responsible for their
own expenses typically covered by a business (healthcare, union, taxes, etc.)

~~~
skrebbel
> I'm not sure how you got this confused

Mostly because it holds for zero of the countries our current team lives in.
:-) I appreciate your help though, but so far accountants have been less than
helpful. The ones I talked to seem to know international employment stuff
worse than I do.

------
ed_balls
The best option is the be Sole Proprietor/company/contractor. Then they send
you an invoice once a month. You can use Transfer wise, online currency
exchange or your bank (bank fees tend to be high)

There are other ways to hire someone, but it's a legal and paper work
nightmare.

------
dnh44
I would have expected that anyone looking for remote international work would
have things set up to make it as easy as possible for any potential employer
to be able to pay them without running into local issues.

~~~
DrNuke
Problem is employers very often just need, want and look for full-time or
part-time employees, not on-call contractors. In that case, they also have to
manage the legal hassle.

------
petervandijck
One of my startup ideas is to start a service that makes it easy to hire full-
time remote employees (not contractors) and we handle all the
paperwork/hassle. Anyone interested?

~~~
txomon
Europe too?

------
imhoguy
From my experience: sole proprietorship, invoices and SEPA - that is the right
way to go. Some people create Limited companies. Some "employers" create one
HR proxy company to group all contractors as a shield and a way to offload
administrative burden from the mother company.

Unfortunately EU currently has no framework for cross-border remote employees,
local laws are too different to unify them all. This is not going to change
soon.

------
barrow-rider
Nothing to add, just glad to hear that folks are asking this. I work remotely
for a US firm and I'm baffled in their choices viz-a-viz payment sometimes.

------
cultofmetatron
Been remote for a year and a half and I've taken payments in several forms
including bitcoin. My preferred method when getting paid by European companies
is transferwise since they let me get paid in euros and convert them to usd or
whatever local currency of where I am residing. In a Pinch, I'll use paypal
but its far from ideal.

------
expertentipp
From my anecdotal observation, in case of EU usually a company is set up in a
"permissive" country like Netherlands or Luxembourg, and the employees are
implicitly required to handle the taxes and social insurances by themselves,
the salary adjusted to the "cost of living" in where the employee is located.

------
tixocloud
Thanks for posting this as I'm anticipating to be going down the same journey
as well.

I'm surprised that there isn't already some sort of service that handles this
although it does sound like quite an administrative entanglement.

Off topic: Do you get requests around embedding AI/NLP in your chat program?

~~~
skrebbel
> Off topic: Do you get requests around embedding AI/NLP in your chat program?

Occasionally, but not too often. Thing is, relatively few of our customers use
TalkJS for customer support - the usual suspects (Intercom, Zendesk, etc) are
usually better than TalkJS for those use cases. Turns out most services that
need the flexibility that TalkJS offers (eg for user-to-user chat instead of
user-to-helpdesk chat) need it for direct communication between real humans.

But there's a number of edge cases, so we do have a few customers who've
connected TalkJS to chatbot AIs via our REST API / webhooks.

There are other fields that AI could solve that we get requests about more
frequently though. For instance disallowing people to share "real world"
contact information such as street addresses (some of our customers are
marketplaces who are afraid to lose their transaction markup if customers can
easily bypass them). Given how insane street names can be this is an
impossible problem, but decent AI could do better at that than any regex can.

Curious why you ask!

~~~
tixocloud
I run an AI enablement company. Basically, what we do is make it easy for
startups to embed AI in their apps. We can also do the actual development of
the AI solution as well. Chat programs are an area of interest for us and in
general, I am just curious by what people make/think about AI and how they
perceive it can solve their problems.

The detection of contact information is an interesting one although would not
be able to solve this by just pinging the Google Maps API and then if it shows
up, assume that it's an actual address at which you can discard it?

~~~
skrebbel
The problem is when people share stuff like "sure, just drop by our office on
one infinite loop in cupertino". I'd have no idea how and when and what to
pass to Google Maps to get an idea of which part, if any, of that message to
suppress.

~~~
tixocloud
Indeed that sounds like something NLP would be useful to pick at. Do you have
any sample chatter that would be ok to analyze?

------
anotheryou
Buffer have published their formula (and all salaries)

[https://open.buffer.com/salary-formula/](https://open.buffer.com/salary-
formula/)

it's basically: base reference salary * cost of living * role * experience

edit: oh you where talking about payrole, sorry, I'm OT

------
danieltillett
You don't have remote employees, you have remote contractors who send you a
bill for their services which you pay. They deal with their countries tax and
other issues.

Of course you have to treat them as real contractors and not employees. This
means they chose where and when to work.

------
tasuki
I've participated in similar setups before. Everyone was self-employed,
working as a contractor, invoicing the German company. As we were all in the
EU, this was pretty smooth.

Why would you need to start a mailbox firm in every country with employees?

~~~
slgeorge
There are two problems, employment taxes/benefits and employment rights.

Lets say you have a German company and you have people working across Europe.
For the sake of argument lets say that you have 15 people in France. Let say
that all the people work for you 100% of the time, so they are effectively
employees.

On the employment taxes/benefits front how are you paying the French state
those 14 peoples payroll tax, and how are you paying in for their state
pension? Pragmatically, you can't do this (AFAIK) without establishing a
company in the jurisdiction and registering them as employees.

On the employment rights front, which jurisdictions are you following? As you
have 15 people in France they are due to have a workers representative, does
that fall under the French or the German system? If you have an issue with one
of the team do you follow French or German employment law? Again,
pragmatically each jurisdiction assumes that you fall under their employment
laws and logically they'll assume you have a company in that geo.

~~~
tasuki
The 15 people in France are self-employed. They pay their own taxes to the
French state, they pay their own social and health insurance. It's very
simple.

Wrt jurisdiction, usually the employer's jurisdiction. You don't follow
"employment law", you follow "international business" law or some such,
because that's what it is.

------
butternick
What’s the best solution if you’re a CEO but work in a different country to
where your company is founded?

Will the contractor model still work?

N:B I’ve created a company in the UK but I’m thinking of moving to Denmark.

~~~
skrebbel
Fwiw, in the Netherlands most startup founders have a limited liability
holding company to own the shares, and also use it send invoices from the
holding to the startup. We don't, because being employed by our own conpany
instead of sending invoices allows us to benefit from some R&D related tax
cuts. But at least for Dutch law, founders sending invoices is allows and
super common, maybe the same holds in the UK.

------
wmboy
OrbitRemit works well for the countries they support, they also periodically
throw in free transfers if you use them regularly enough.

------
slgeorge
1\. Individual service companies / Sole proprietorship

One thing to be aware of is that in many European companies a person who works
for you full-time is considered to be an 'employee' even if they come in
through an individual service company. In particular if they have no other
active 'customers'.

The more you treat people as 'employees' the more at risk you are: if you give
them holidays, if you monitor their work closely etc, if they don't invoice
you, etc.

The risk is that you will have to pay employment taxes and benefits and you
may be fined.

Pragmatically, you are unlikely to be at risk at a low number of team members
within a jurisdiction: say up to 10-15. But, at some point you will be
considered to have created a permanent establishment from a tax position.

2\. PE vs Limited Company

Many people talk about establishing a company in a jurisdiction and then
employing people etc. There's actually a state before this where you have a
'permanent establishment' from a tax position even if you don't have a limited
company in the jurisdiction. You can be considered to have employees at this
point and you are responsible for payroll taxes, but don't yet incur the
business taxes (e.g. corporation tax). Unfortunately, it varies by European
jurisdiction how likely this is.

This state is essentially supposed to handle the idea of someone having an
employment contract in one jurisdiction (say France), while living in another
(say Germany). Practically, it doesn't work yet because the rest of the
employment rights assume that you have a company in each jurisdiction. You can
sort of hack it for an intermediate step.

3\. Pragmatically expanding in Europe

How you handle this is up to you in terms of how comfortable you are with the
risk profile. The elements are too long (and boring) to go into here.

In my personal opinion it makes sense to:

1\. Hire team members in a limited number of jurisdictions. Basically where
you believe you will eventually establish a full company: you might pick three
jurisdictions you're comfortable with.

2\. Handle team members as employees: this is a basic decision about how you
want to handle your remote team but it has big impacts. If you treat them as
'employees' then make it clear to them that they are responsible for their
employment tax, pensions, etc.

3\. Risk the permanent establishment tax problem

4\. When a jurisdiction gets to 10 or so people form a company. In many
European countries this is around the stage where employment rights also kick
in.

5\. Reverse the people into the company and pay the employment taxes/benefits
etc. This will cause problems because you will have to adjust pay since you
will now be incurring payroll taxes and public pensions etc.

~~~
skrebbel
Thanks a _lot_! This is an extremely insightful comment. I'm confused it isn't
higher up the page.

~~~
slgeorge
No worries. I dealt with this (with a bunch of fantastic professional
legal/hr/finance people) to handle about 40 jurisdictions. I appreciate how
NOT fun it is :-)

Oh and I find it so odd that none of the famous "remote first"
bloggers/talkers address these operational issues.

------
John_KZ
I don't want to sound rude, but if you don't know how this works perhaps you'd
like to hire legal and accounting professional services from the country where
your company is registered. HN comments won't shield you from thousands of
euros in fines, double taxation, possibly tax evasion charges and other issues
you really should know about before trying to manage a business.

------
em-bee
the european union has free movement of labor, so you should be able to just
employ them just as if you would employ someone living in a different city in
your own country.

greetings, eMBee.

------
shanth
it's called Bitcoin.

~~~
duiker101
I would never accept payment for possible thousands of dollars in a currency
that is not stable and I can't use for everyday transactions.

~~~
barrow-rider
Maybe, if the BTC payment was at a higher rate that could help offset the risk
and inconvenience.

------
_pmf_
You are asking "we're currently requiring our employees to commit tax fraud,
how can we streamline this".

In Germany (and a lot of other EU countries), there are laws governing bogus
self-employment ("Scheinselbstständigkeit").

~~~
skrebbel
No I'm not. I'm asking "how can I pay my people". Your snark doesn't help. If
you say that asking people to be contractors is tax fraud, then I ask you what
the alternative is. It's an honest question, we're an honest company. Don't
assume the worst.

