I'm going to use this comment as a way to talk about remote hiring generally, rather than respond directly to your comments. I want to help others understand some of the challenges it has been being one of the larger (relatively) fully distributed companies.
I think there is a common misconception that the world is mostly flat and that our company can hire from anywhere. I am commonly criticized when tweeting job postings (almost always remote) when the countries we can hire from is limited to a select few. "Not real remote" "first world remote only" "remote != 8 countries" etc. are common criticisms.
Disclaimer for the remainder: I am not a lawyer and my exact details because of that may be wrong. Please consult your own legal team.
When hiring remote, there are a few things to keep in mind:
1.) You have to adhere to employment laws within the country you're hiring from. Employment laws vary widely between countries and getting them wrong can be very expensive. For example: vacation time will vary, holidays will vary, the ability to let someone go will vary, what you can/cannot expect from an employee varies. In one country, emailing an employee outside of work hours is legally considered harassment; when working with multiple timezones that's a challenge because "in work hours" for one country may be "out of work hours" for another country.
2.) To employ someone full time, many countries require you to have a legally entity within that country. Establishing a legal entity takes a lot of time and a lot of money.
In the past 12 months, we've had at least one member (more now) on our HR/finance teams establishing legal entities _full time_. I've had my signature on at least 8 incorporation documents in the past 6 months. By the way, most incorporation documents require a "wet" signature so if you're remote like we are, be prepared to be FedExing a lot of sensitive legal documents around.
Beyond just paperwork, there are often requirements to establish a legal entity: a real, physical, local address is one. In one country, we had to pay out of a local bank account in local currency (which has its own red tape), and this country also required we maintain a minimum balance to pay 3 months salary in the local account in local currency at all times. For a startup, that much cash "not working" can be problematic depending what stage you're at.
In one country we're establishing an entity in, the process just takes a LONG time. We've been responding to any inquiries and sending paperwork immediately and we're 8 months in and still probably 2 months away from completing the process. Meanwhile, we still can't legally hire there.
A lot of legal paperwork is understandable in the local language of where you're creating the entity. This means that you also have to pay lawyers fluent in that language to vet the paperwork. We employ full time lawyers, but primarily in English, so this requires us to go to expensive outside counsel.
Finally, this is all expensive. There are fees to creating entities but also recall that we have multiple full time employees that spend their entire day establishing legal entities. So we have our own full time salary costs plus filing costs plus legal costs.
3.) Hiring contractors DOES work around some issues, but has its own downsides. First, we can't offer options/stock to contractors and we'd like all our employees to benefit from this. Second, we often can extend the same full time benefits we want all our employees to share such as healthcare, 401K, etc. Put another way: we want all HashiCorp employees to be employees, we don't want to create second class citizens.
Legally, some countries have legal limits on the hours a contractor can work or length of time they can be contracted before they're considered an "employee" by default and regardless of what you SAY the relationship is, the country will consider it employment and points 1 and 2 above all take effect immediately.
So we certainly DO hire contractors but our point of view is that we intend to hire those people full time over time. We'll often hire contractors if we know that we'll have a legal entity established to hire them within X months, and we're up front with the new hire about this. We'll also pro-rate option/stock vesting for their contractor period when they are hired.
4.) We prioritize countries where we have the most interest. We get asked a lot "please hire in X" but if the number of times we've heard X is much lower than Y, then we'll prioritize Y first.
This creates somewhat of an imbalance, since more countries with a more established tech ecosystem generally have more qualified candidates and therefore get prioritized higher.
We WANT to hire from everywhere, but as a startup with constrained capital and timelines, we have to be pragmatic about choosing the locations where we'll probably be able to hire the most roles while we continue to expand our entities.
5.) We are also open to relocating employees into countries where we do have entities. We've done this multiple times, we pay a relocation fee, and its a great way to hire someone from a country where we can't [yet]. Also note they're "relocating" but are still working remote.
Of course, this is highly dependent on the individual and it is unfair of us to ask or force someone to do this if they have an established family, friend circle, and generally just a life in their existing country. So this only works some of the time!
6.) Despite building process around remote-first, we try to a keep a healthy timezone overlap in each of our teams (3 to 4 hours out of the working day is best). We find that teams that have a team member with a non-overlapping TZ struggle for multiple reasons. So, even though we can hire in many countries now, we'll restrict some job postings to certain countries so we can have that overlap.
EDIT, some additions:
7.) Each US state ALSO requires a legal entity in addition to adhering to state-local employment laws, taxes, and more. At this point HashiCorp has entities in ~30 US states.
Further, there is a tax consequence to the business outside of employment taxes. If you hire an employee in a state, you also now have to pay sales tax on revenue from there. You may argue for/against whether that makes sense, but for a startup this can be VERY expensive.
Our corporate tax obligation would be hundreds of thousands of dollars [less] if we didn't employ people in New York state. We've had to weigh this in cases because the tax obligation from hiring _one_ individual could suddenly be that you can't afford to hire _multiple_ other individuals.
Note we don't want to avoid taxes, that's not what we're doing. But startups are capital constrained and we have to determine long term how we continue to grow and hundreds of thousands of dollars can make a difference.
Finally, I want to note that we're 100% dedicated at HashiCorp to remaining fully remote. We WANT to hire from everywhere. We're establishing the entities and process to hire in new countries full time. 18 months ago we could only legally hire in 2 countries, today we can hire in 8. By the end of the year it should be at least 4 more. We'll continue from there.
I could write a LOT more about culture and process within the company. But this comment is already getting very long and I think I'll keep it to this. Maybe in the future I'll write more about "chat literacy", the importance of decision inclusion, things that definitely don't work, keeping people motivated/happy, managing people you can't physically see, the lack of body language for signaling, and a lot more.
I hope this helps someone!
We're a remote team but much smaller and certainly unable to pay a full time employee to create companies.
Do you have, or know where to find, a list of countries that can work without setting up a legal entity? We've lost a lot of time trying to recruit candidates where we've not been to find a workable solution due to local laws and our limited resources (e.g. in France!)
Learning about this stuff basically requires a huge time sink per country in reading local laws, as well as a cost of paying a lawyer to verify your assumptions. It is unfortunate. A "tldrlegal" site for entity creation and employment laws would be amazing.
Also re: France... yeah, that is a tough one. We're just about ready to hire there. The whole process was very difficult, on the harder end of the spectrum that we've experienced so far. :)
Can you elaborate on what is keeping you from offering options to contractors? Sure, incentive stock options can only be given to employees but what about nonqualified stock options? They can be given to anyone.
Whilst you can offer on approved schemes - you might have to offer people in the uk more options to cover this which might make local (US employees) jealous
Tax avoidance is perfectly legal and encouraged to maximize shareholder value. Tax evasion is illegal.
> First, we can't offer options/stock to contractors
Can you elaborate why?
Would you be able to share the actual countries in question? In which country was it required to open a bank account in the local currency? Which one has taken 10 months to complete opening an entity in?
I don't know for the specific case you've posed, but we've had similar things happen. If an employee moves into a state/country we can't employ them in, it causes a bit of a panic. We either have to 1.) establish the correct legal/financial entities to employ them or 2.) let them go. In theory, you can convert the employee into a contractor, but this has ramifications on options vesting and benefits and so on and is a huge mess. I'm sure there are a lot more caveats to this that are under consideration (again, I'm now a lawyer) that may affect this, so I wouldn't generalize this too far.
I don't think we've ever let someone go for this though, we have once to memory panicked and rushed to establish the entity (potentially paying fines along the way). I may be mistaken, I just don't recall exactly. In any case, we kindly ask our employees to notify us of any change of location, since it almost certainly changes payroll tax even if you are moving to a location we CAN employ in (i.e. even between US states). Also, the panicking is not fun for anyone (including the employee, whose job status is suddenly uncertain).
(If the spouse is working for the US military there are NATO agreements which might make German employment law inapplicable but I know almost nothing about that.)