Hiring Across Borders

The following is a borderline ubiquitous statement: Covid-19 has accelerated the incorporation of remote work into our lives. There are no limitations from where you can work, and that doesn’t just include your house, the beach, a coffee shop, but anywhere in the world.

But that’s not true.

While many people may wish working anywhere were as simple as just moving to that place, or working for a company located elsewhere than their hometown, the reality is altogether different.

Covid has only given us a taste of this new phenomenon, but countries around the world (and in Europe) have still to catch up.

In other words: Employees want the freedom to work from anywhere or for anyone anywhere, and employers want to be able to hire anyone, from anywhere. The problem is that hiring people across borders, be it remote, or through location, is still a major headache for most European companies.

This brings us to today’s topic.

 
Hiring Across Borders

Let’s start with the obvious (or not so obvious): why would companies (specifically startups) want to hire people from anywhere in the world? My answer has two parts:

  1. There’s a talent shortage in most European countries.
  2. Hiring from anywhere unlocks access to the best talent.

Let’s break these down a bit more.

 
Talent Shortages

I and many others have been talking about how the European Tech scene is growing and growing and growing. But what we don’t talk about as much is that with growth comes one ugly problem: the need (and lack of) talent.

The Nordic countries, as one example, grapple with a deficit of around 70,000 tech workers by 2020. The UK, on the other hand, will by 2030 “fail to realize almost 9% of TMT sector potential revenue due to skill shortages”. A recent study indicates that Germany will need more or less 250,000 immigrant workers per year, or risk not meeting labor demands.

The talent market is not local anymore. It’s global. Companies will compete with you for your best talent.

 
Unlocking The Best Talent

This is key: hiring across borders (remote or through relocation) gives companies access to the best talent not just in their city or small town or country, but everywhere in the world. They have, in other words, access to a bigger talent pool.

Employees, on the other hand, get a benefit for themselves: while talent is evenly distributed across the world, opportunities are not. That, and the fact they get to fulfill their dreams of living in a different country or working for the best company they can.

 
Hiring Across Borders — Continued

As I mentioned in the introduction, there are two types of ‘cross-border’ hiring possible. Startups can either 1) hire remote workers living somewhere else or 2) hire foreign workers and relocate them.

But both come with their difficulties.

For remote hiring, up until recently you could hire most people as contractors. But many employees don’t actually want to be contractors. What they want is local contracts and all the benefits that come along with them: insurance, pension, job security, etc. In other words: French citizens want French contracts with French social security.

But this is, more often than not, extremely difficult for companies to pull off. You can’t offer your employees local benefits unless you have set up a local subsidiary of your company in the employee’s city/country. And setting up local subsidiaries is both expensive and slow, and requires an inordinate amount of ongoing maintenance. Then there’s the fact that you actually need to do this in every country in which you’d like to hire someone.

One way of side-stepping this issue is to go through the (somewhat archaic) Employer of Record industry, where you have another company (based wherever your desired employee is based) hire that employee in your stead. But this is often too expensive, too slow, and not transparent enough for employees, who usually want things to be as simple as possible (this is their livelihoods we’re talking about, after all). And, again, you’d have to do this for every country in which you’d like to hire someone.

For hiring foreign workers, and then relocating them things are a bit better for your employees, but not by much. You could secure a work permit for your incoming employee yourself, or work with a local relocation agency and have them do it in your stead.

But the problem is that most relocation processes (in most European countries) are needlessly bureaucratic, complicated and time consuming for both companies and employees. Add to that the fact that, in most European countries, nothing guarantees a visa/work permit application’s success. You might waste 3 months applying for a permit for your employee, and then get denied with no clear reason whatsoever. And most growing startups need employees now. They can’t wait months for an engineer, let alone have to start the process again from scratch, and wait another three months.

To (somewhat) side-step this problem, you could work with an expensive recruitment agency. But those agencies give you zero visibility into their process, which comes with a ton of uncertainty, which most startups can’t afford.

 
So how do we fix this?

There’s good news, and there’s bad news. The bad news is that, as I mentioned in the introduction, while covid has broken down borders at an unparalleled rate, it is still unnecessary hard to hire people from abroad if you’re a European company.

The good news: there are multiple European companies working on solving the cross-border hiring problem, of which there are three kinds:

Remote-work enablers help other companies with the complicated process of navigating all practical, technical and legal details entailed in hiring someone remotely, or running a completely remote team.

Benefits:

  • Possibility to offer contractor or local contracts in dozen of countries.
  • For employers, you manage all contractor or local contracts, payments and taxes from a single place.
  • For employees, they can choose how, when, etc. they get paid.

Immigration & Relocation enablers deal in a very tricky arena: that of helping companies hire people from abroad, solving all practical, technical, and legal complications.

Benefits:

  • Shorter process via software and specialized agents.
  • Visibility into the entire process.
  • Affordable at scale.

Cross-border-focused job platforms are, as the name implies, platforms for both companies and employees to post and find jobs that either a) are remote or b) in a different country, with relocation included.

Other than these companies, the usual path for hiring people across borders, at least when it comes to relocation is…

 
EU Tech Visas

Thankfully, many EU countries have been working hard on implementing “tech visas” for foreign founders and/or tech employees to come work in their tech ecosystems. The most notable example of this is the “French Tech Visa“, which allows highly-skilled workers to work in the French tech ecosystem for 4 years, with the possibility of an extension. All they need is:

  • A gross annual salary of at least twice the French minimum wage (€36,509.20 as of January 1st, 2019)
  • A work contract with a minimum duration of 3 months with a French company eligible to recruit via the French Tech Visa

For more information about European Tech Visas, both for founders and employees, check out this spreadsheet.

 
The Elephant In The Room: Brexit And Its Impact.

Brexit is making things very complicated for UK-founded or UK-based startups since the country has yet to figure out exactly what it wants in terms of immigration and trade. Several key areas in the UK’s immigration regulations are yet to be decided, which are given UK startups two problems:The Elephant In The Room: Brexit And Its Impact.

First, they risk losing a portion of their customers in the EU. Startups in the UK dealing with customers elsewhere in Europe used to be able to offer their services without a problem. Now… Well, it isn’t clear. To safeguard themselves from potential trouble, some startups have been forced to establish subsidiaries in other countries, which of course costs money and a lot of time spent on previously unnecessary paperwork.

This is slightly beside the point of today’s edition, but I mention it because it leads us to the following point:

If UK companies are scrambling to figure out how to retain their EU customers, what do you think it’s like to hire someone from the EU? Not easy, I’ll tell you that.

There’s a new immigration system in place, which means before you can hire anyone from outside, companies now need 1) to sponsor said hires (i. e. paperwork + money) and 2) those potential hires need to meet certain requirements, and apply for permission to work in the UK.

 
Investor’s Appetite

Ever since Covid-19 started, investors have been holding off from investing in the hiring sector as a whole, and that includes cross-border hiring. In fact, capital invested in job recruitment platforms fell 300% in 2020 vs 2019 (that’s a $655 million difference) according to the 2020 State of European Tech.

That said, things might be starting to change. On January 21st of 2021, remote hiring enabler Omnipresent​ raised a $15 million Series A round, led by an undisclosed investor, with participation from Episode 1, Playfair Capital, and Truesight Ventures. Previously, they had raised a $2 million seed round (in July of 2020).

Here’s a list of other investors focusing on the cross-border hiring space:

 
Funds

 
Angels

  • Aaron Levie (invested in Remote)
  • Khaled Helioui (invested in Remote)
  • Zach Weinberg (invested in Remote)
  • Kevin Hartz (invested in Remote)
  • Julia Hartz (invested in Remote)
  • Ian Hogarth (invested in Omnipresent)
  • Andrew Goodman (invested in Omnipresent)
  • Srin Madipalli (invested in Omnipresent)
  • Charlie Songhurst (invested in Omnipresent)
  • Akash Gupta (invested in Omnipresent)
  • Justin Mateen (invested in Deel)
  • AltaIR Capital (invested in Deel)
  • Elad Gil (invested in Deel)
  • Daniel Gross (invested in Deel)
  • Andres Kull (invested in Jobbatical)

Predictions

While many companies are facilitating the implementation of cross-border hiring, when it comes to remote work there is one sub-section of this sector that remains largely untapped: the “institutional” layer.

What I mean by this is things like Health Insurance, Social Security, Pensions, etc, for remote workers. I believe we might see a rise in these kinds of technologies, with companies like SafetyWing (who is working to create global health insurance products for remote workers) leading the way.

Another phenomenon we might see in the European Tech ecosystem, enabled mainly by the rise of cross-border hiring, is an upping in salaries for tech workers. As things stand now, EU salaries are significantly lower than US salaries, which drive the best talent to work for US companies.

As I wrote in this Twitter thread, “a decade ago if you $200k/y you either waited or moved to Silicon Valley.” But that’s no longer the case. Now that European tech workers can work for Silicon Valley startups remotely, European tech companies will be forced to increase their salaries offered or risk losing talent (or not attracting talent at all.)

And last but not least, the hiring market is becoming more and more efficient, which will create a bifurcation: the best employees will switch jobs more and more as companies from all around the world compete to recruit them, while employees with “more commoditizable skills may be more loyal” to differentiate themselves from other similar talent that might be acquired for cheaper.

Gonz Sanchez

Πηγή: seedtable.com

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