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Alex Yumashev
Alex Yumashev

Posted on • Originally published at

Legal Stuff They Don't Tell You About Remote Work

My company - Jitbit - is an all remote company. We are 100% distributed, we don't have an office and our teammates literally work from around the globe (currently it's the UK, the US, Latvia, Israel and Turkey).

So it might seem strange for me to warn people against remote work. But let's have a look from the employee's angle.

This is what you need to know when you're about to work for someone remotely and internationally.

You're a CONTRACTOR now

This part is crucial and all the other points more or less come out of this one, so let me stress every sentence in this paragraph:

You're not officially employed any more. Legally you're self-employed now.

You're not protected by employment law and/or your country's labor authorities.

"Employee rights", benefits, labor unions, regulations - do not apply to you anymore.

You're on your own.

The only thing that regulates your work is your contract.

Your CONTRACT is super important

The above mentioned issues make your contract crucial. It is the only thing that protects you. Once you become a contractor - as opposed to an employee - your country's employment law (very strict in most European countries) just stops working. No more minimum wages, no wrongful terminations, your new employer can fire you any moment and get away with that.

This is why your contract needs to cover everything, even the parts that seemed "obvious" when you were working in the office. Everything: employee benefits, medical insurance costs, layoff procedures, holidays and vacations, promotions and - of course - compensation. Lawyer up! (just kidding... although, it's never a bad idea to have legal help).

You probably need to register as "self-employed", "sole proprietor", "individual entrepreneur" or similar

In most countries it's illegal to perform "business activities" without actually registering a "business". And since you're now a contractor doing business with the remote company, you will need a legal entity. There's no need to register a whole big ass company, since most countries offer "self employed" registration of some sort. Sometimes called "sole proprietorship", "individual entrepreneur" or a simpler "self-employed" form (although registering an actual company might be a good idea, more on that later). This "entity" will then sign the contract with your employer, receive the money and pay taxes.

You will also need a bank account for this entity (obviously). And in some rare cases your bank, your country's tax office or even the company your work for might also ask you to issue an invoice for every monthly payment your receive. Don't let this freak you out, this is totally normal, and the invoice will just mention "Monthly web-development services for June 2019 - q-ty: 1" or something, nothing too complicated.

Exception #1 - Authorship

In some cases you can get away without registering a business and get your paycheck as an "authorship royalty". Like, you're the "author" of the source code, who "licenses" that code - to the remote company. And the company pays you "royalty". This way you're not in a "buyer-seller" relationship, you're in an "author-publisher" relationship, and this usually does not require registering a legal entity. But this might involve more paperwork and more lawyers (duh).

Exception #2 - PEO

Another way to be hired remotely without registering any business is through an "employer of record" service, which acts as a proxy between the remote company and an employee such as yourself. Here's how it works: a global company like ShieldGeo (not affiliated) which has local legal entities in many many different countries, becomes the official "employer of record" for tax purposes and paperwork only. This way you are officially employed and can simply skip the rest of this article. Ask the remote company if they use a service like this (called "professional employer organization" - PEO) or even suggest using one - why not!

You're doing your own taxes now *

In many countries taxes are "done for you" by the employer and companies usually publish job descriptions with "after tax" salaries in those countries. Employees sometimes do not even know how much would they earn "before tax" and in some countries (believe it or not) people are not even aware of the current tax rates.

[Political nerd mode on] Actually there's a pretty clear correlation between how "free" a country is, and whether people do their own taxes or not. Turns out, countries where people know their taxes are more liberal and civilly active (because you actually see how much money you give away every month), while countries where taxes are "done for you" tend to be politically indifferent and often end up in some form of authoritarianism.[/off]

Anyways. If your taxes were done for you by the employer in the past, well, that's going to end. You will have to report to your Tax Office, file the tax return and actually pay taxes in the end.

You will probably need an accountant too. They will advise you on how to save on taxes, which expenses are deductible, whether registering a company is better than "self-employment" (might also help save some taxes), and generally save you a lot of time and headache. It shouldn't be very expensive either, I pay my accountant approximately 100 Euro a month ($120).

Benefits and other stuff to negotiate with your remote employer

Here at Jitbit we cover: medical bills, insurance costs, some of the taxes (in countries where being "self-employed" results in bigger taxes than being employed "normally"), work expenses (like a new laptop allowance etc). We even provide 0-interest dateless loans to our employees - since we do realize that it's harder to get a mortgage when you're "self-employed". By the way, that's another reason to register a company, rather than "sole proprietorship", because "a company" always looks better for your bank (and your grandma too).

Anyway, you will have to negotiate all that after getting the job offer. Don't be shy, it never hurts to ask. Also, their reaction is a good way to tell the good guys from shady outsourcers who simply want cheap workforce (and then they eff-up Hertz website ;).

On the other hand, do remember, that this whole "remote" thing is still very new. Some companies are only trying these waters for the first time, they might simply not know what to offer and how to pay. Give us a chance, we're still learning.

Further reading:

If you know more good posts on the topic do let me know in the comments, I'll add the links.

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