Remote companies tend to hire people from all over the world. This sounds like a great idea to reduce the costs of having an office, as well as have a more diverse workforce and also reduce labor costs.
How is it done in practice?
There are two ways: Contractor agreement or Employee agreement.
Most companies require that the people they hire set themselves up as self-employed contractors and they then bill the company once a month.
As you might expect, some countries are not very enthusiastic about such a setup, as technically speaking, the company should setup a branch in every country they will be hiring in. This is very cumbersome in practice, and that’s why the self-employed route is the most straightforward way to do it.
Germany, for example, has very strict labor rules, and it’s pretty difficult to hire someone on this basis there. It is very likely that the German people you’d be interested in hiring will themselves not want to get set up in this manner. On the other hand, Eastern European countries, to cite another example, have pretty lax rules and enforcement, so it is straightforward to hire from there.
The 4 litmus tests that governments use to determine if people are contractors or actually employees are the following:
- Control – most frequently used, this test assesses the ability, authority, or right of the payer to control the actions of the worker, including the amount, nature, location, and management of the work to be done including the right of the worker to delegate work.
- Economic Reality – this test explores the economic practices of the worker, including whether s/he bears the ultimate responsibility for any profit or loss of the contract. An individual who faces financial risk, bears all responsibility for profit or loss, and accounts for all costs incurred in the pursuit of profit, is likely to be determined a contractor. The absence of these factors likely reflects an employment relationship.
- Fourfold – this test incorporates elements of the Control and Economic Reality tests above. The presence of the following factors indicates an employee/employer relationship: (a) control; (b) ownership of the tools; (c) chance of profit; and (d) risk of loss. Control in itself is not always indicative.
- Organization/Integration – this test considers an individual’s role within an organization and presupposes that integral services more accurately reflect an employee relationship. However, if the services are ancillary or separate altogether, then the individual may be better viewed as a contractor. Note however that the ever-increasing complexity and inter-dependency between businesses renders this test increasingly archaic.
In practice, most contractor-company relationships in the remote work realm would fall foul for these 4 litmus tests, hence the setup lies in a grey area.
How to Hire Remote Workers Successfully
Here are some notes I took at a conference talk by Mads Singers on recruitment.
Focus on the needs of each person you’re interviewing. What is the role, skill set and type of personality you’re looking for? If you hire people for a role they like doing, it’ll be a success.
Be very clear on the essential qualities and tasks that you can’t live without. Don’t make the mistake of falling in love with a prospect and consequentially waiving away the essential qualities that you were looking for as not that important after all.
Take a look at the Empire Flippers job descriptions as they are some of the best around. When recruiting your job is to sell your company. Be realistic but talk about your company, who are you, what’s your culture like. Make it very clear that it’s a tough job. You don’t want to be selling a “relaxed, work from home job”. Better to make it sound tougher than it really is than the other way round.
What to look for
Where to look
The best people are already employed. Networking is absolutely key. The bigger your network is the more likely it is that you already know the person you want to employ. Knowing someone means you already have a good idea what you’re getting.
When contacting people on Linkedin they tend to hire one of those people’s contacts rather than the person they originally contacted. If you’re approaching someone from a competitor, you don’t need to be afraid of being seen as a poacher. You can ask: “hey we have a cool job opening, would you happen to know anyone in this field who would be a good fit for this?”
What to look for
Focus on personality and culture before skillset. You can always train the skills but the mentality is much more difficult to train and is the sum of the person’s genetics and life experiences which is very very had to change. A good rule of thumb is 10% skills, 90% personality. Unless you’re looking for highly specific roles like a programmer; there you want skills.
Focus on full-time as it costs less to train and they are much more likely to be looking for other jobs and eventually leave.
How to ask
Use job posting sites and sites like LinkedIn. If you want to hire from competitors you could ask those people whether they know anyone who would be interested in the job.
The Last Steps
Make sure you have a good pile of candidates so you can have a full choice for filtering and choosing. Check for trust and honesty. Job hopping is a no-no. People who have lived in several countries are favored.
Ask everyone the same questions. Ask stuff that helps understand who they are. Ask about their weaknesses. Try to understand if they’re telling you the truth or bullshitting. What you’re looking for is whether this person can be honest or not. Another good question is: “Do you prefer working by yourself or in a team? Many candidates stumble on that one.
Hire the right one
People hire the best person if they’re not good enough. This is one of the biggest mistakes in recruitment. Don’t hesitate to avoid hiring any of the candidates if none of them make you excited to work with them.
Let people know that they were not suitable for this job but leave the door open for them to apply for future jobs, if that’s what you want.
“We don’t think you are a good fit for this company” means don’t apply again.
“We don’t think you are a good fit for this role” means we might have another job that is indeed suitable.
Call previous companies they worked for, especially those ones they didn’t list any references for. The ones referenced are usually going to provide a glowing review, so they are not very helpful.
These extra notes are based on my experience and chats with other entrepreneurs about recruitment.
- Add a recruitment page on your website.
- Post in targeted FB groups, for example, if you need a web developer go to web developer FB groups and post there. Communities are very powerful for this stuff.
- Tell your own team – maybe they know other people like them, you can even incentivize them with a bonus.
- Connect with people on Linkedin.
Eastern European countries are good for programming tasks. Croatia, Serbia, Ukraine, Montenegro great for design and development. It’s also very important to hire from the same culture if possible. This facilitates communication and expectations.
With incentives I prefer not having specific targets to unlock specific bonuses. It’s best to set business targets and KPIs, but then the decision for bonuses (which can be given in July and December) rests with the management team. You can also reward people who go above and beyond what was asked for them. Bonuses can be 0.5 to 1.5x the monthly salary.
Another interesting idea is to tie part of the salary every month to the company’s performance. For example, if employees are earning €1,500, part of that, say €300, would be tied to whether the company hits its monthly targets.