
Ask HN: Remote engineer or contractor? A nuanced hiring situation - BayezLyfe
Joanne is a rockstar SW engineer in Canada, working as a contractor for several years bringing in ~$150k annually. The Boston-based startup Foobai want to hire her as one of the first few engineers. They&#x27;ve agreed to the following comp: $90k salary, 2% equity. The salary isn&#x27;t quite enough to support herself financially, so Joanne wants to pick-up a side gig. Foobai agrees to this, as long as Joanne fulfills her responsibilities. Some questions:<p>1. Should Foobai hire Joanne as a contractor or an employee [1]?<p>2. Are health and other insurance benefits given to independent contractors?<p>3. How are those benefits given to international employees&#x2F;contractors?<p>[1] https:&#x2F;&#x2F;gusto.com&#x2F;blog&#x2F;hiring&#x2F;hire-employee-or-independent-contractor
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davismwfl
I have dealt with remote issues both as a founder (since ~2003) and for the
last few years as an employee for a startup. There are differences in
expectations depending on the size of the startup and the funding etc. But
I'll assume a very early startup with minimal funding.

1\. Hire as a Contractor. An international employee adds significant
difficulties to your company in terms of tax compliance and wages, even an
employee in another state can increase costs, reporting and compliance. You
should also pay slightly more to the contractor because the contractor is also
accepting tax liability when you do this. However that is easily acceptable
because it will still be far cheaper than if you tried to setup an employee
relationship, especially in another Country.

2\. Benefits for contractors are usually very few if any, but in the case you
want/need to provide health care; I would suggest you provide a slightly
higher pay and have Joanne source health care locally. Not quite sure for
Canada as they also have nationalized healthcare so you'd have to research the
expense there some. But IMO, it is always good to provide some small addition
to cover local health care. In the U.S. it is not uncommon to have them pick
up a local plan and the company pays for it, or at least a portion of it
($200-500/month is fairly common for single people depending on health, age
and plan details).

3\. As I suggest you hire as a contractor any/all benefits should be spelled
out in the contract. Your standard equity agreement can be used likely but I'd
check with an attorney real quick to see if you should also put it in the
agreement. As a contractor I'd want it in the agreement as well, just so it
was clear. Essentially I'd want a basic statement that says XYZ is being
offered 2% equity as defined in the "equity contract document title".

4\. You should also be very specific in your contracting agreement about the
relationship, there are some very specific rules the IRS uses to determine if
you are just misclassifying someone to avoid paying taxes.
[https://www.irs.gov/newsroom/understanding-employee-vs-
contr...](https://www.irs.gov/newsroom/understanding-employee-vs-contractor-
designation) is a good start to see what they look at. The fact the person is
in another Country is in your favor here where you could likely violate some
of the guidance and still be on safe grounds for classification as a
contractor (an attorney is best to answer in specific).

~~~
BayezLyfe
This is immensely useful. Thank you for taking the time and for explaining
clearly/succinctly!

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planetburgess
(1) Beware of misclassification if hiring someone full time as a contractor in
Canada. In this case the fact that the employee is planning to pick up a side
gig is a good indicator they are a genuine contractor instead of a disguised
employee. Similarly it helps if the worker provides their own equipment and
has responsibility for their own working hours.

(2) Do not offer health and other benefits directly or via an allowance as
this is the act of an employer. (3) Instead build them into the total salary
e.g. increase salary by 5k.

Lastly if engaging as a contractor make sure it is for a fixed term (e.g. 6-12
months). Towards the end of the contract initial duration both parties can
assess whether the setup still works or whether an employed solution might be
more appropriate.

This article might be helpful: [https://www.hrreporter.com/workplace-
law/39422-independent-c...](https://www.hrreporter.com/workplace-
law/39422-independent-contractors-riskier-than-ever/)

