Ask HN: My full-time offer is now an independent contract agreement?
43 comments
I've spent a good chunk of my career as a hiring eng. manager at Fortune 500 companies. IANAL, and I don't work in HR, but I'm getting old, am American, and have managed a lot of individual contributors. :D
There are some details missing, like what your country of residence is, but most large US-based multinationals use HR vendors that make international hiring straightforward. In my experience, that usually translates to being hired as an employee of a regional subsidiary of the parent company, operating in your country.
If it's a small company, that's probably way too expensive and they would need to set up the appropriate operating entities, etc. The contracting offer makes sense in that scenario, but it's a contract and you should negotiate comparable terms.
IMHO, it's okay to be polite and direct with the hiring manager or recruiter. You promised me <x> but offered me <y>. I understand that this might be a result of complexity hiring in <home country>, can you help me understand the detail and work with me to make this new offer equitable? My concerns are that I am no longer guaranteed <x>, <x> or <x>. What can we do?
If they're not willing to have that conversation or resolve those gaps in compensation or equity (totally agree with other folks here that US-employment is generally at-will on the part of both the employer and employee -- your rights as a worker here generally suck compared to other places, and let's not even start on the topic of healthcare and insurance), then I agree with the "this is a bait-and-switch" sentiment.
At that point, you get to choose to take the role under the offered terms (you've got money coming in, and you can keep looking for a better opportunity while performing that role), or you can pass and find a less shady employer.
There are some details missing, like what your country of residence is, but most large US-based multinationals use HR vendors that make international hiring straightforward. In my experience, that usually translates to being hired as an employee of a regional subsidiary of the parent company, operating in your country.
If it's a small company, that's probably way too expensive and they would need to set up the appropriate operating entities, etc. The contracting offer makes sense in that scenario, but it's a contract and you should negotiate comparable terms.
IMHO, it's okay to be polite and direct with the hiring manager or recruiter. You promised me <x> but offered me <y>. I understand that this might be a result of complexity hiring in <home country>, can you help me understand the detail and work with me to make this new offer equitable? My concerns are that I am no longer guaranteed <x>, <x> or <x>. What can we do?
If they're not willing to have that conversation or resolve those gaps in compensation or equity (totally agree with other folks here that US-employment is generally at-will on the part of both the employer and employee -- your rights as a worker here generally suck compared to other places, and let's not even start on the topic of healthcare and insurance), then I agree with the "this is a bait-and-switch" sentiment.
At that point, you get to choose to take the role under the offered terms (you've got money coming in, and you can keep looking for a better opportunity while performing that role), or you can pass and find a less shady employer.
This is great advice. Thanks for offering it.
The company is small (sub 30 people) and I don't think they are acting in bad faith. I just went back with this:
---
Hey <CEO>,
Thanks for getting me the paperwork and for working to accommodate my pre-existing condition (of being a <COUNTRY>ian)!
A little confused though? In my conversation with <CTO> I was offered full-time employment @ $XXX,XXX USD with benefits, vacation, and an equity package.
While I understand that it might not be possible to employ me as an FTE, I hope that we might be able to come to terms that are closer to what was originally offered.
I'm free after <TIME> if you'd like to chat!
<SIGN OFF> <PHONE>
The company is small (sub 30 people) and I don't think they are acting in bad faith. I just went back with this:
---
Hey <CEO>,
Thanks for getting me the paperwork and for working to accommodate my pre-existing condition (of being a <COUNTRY>ian)!
A little confused though? In my conversation with <CTO> I was offered full-time employment @ $XXX,XXX USD with benefits, vacation, and an equity package.
While I understand that it might not be possible to employ me as an FTE, I hope that we might be able to come to terms that are closer to what was originally offered.
I'm free after <TIME> if you'd like to chat!
<SIGN OFF> <PHONE>
Maybe look in your country for PEOs and suggest one (ideally their HR would do this, but small company). They should cost about $1k/month, plus whatever benefits they're giving you.
The equity may be entirely impossible though; depending on your country, that can be a landmine of laws.
The equity may be entirely impossible though; depending on your country, that can be a landmine of laws.
It's definitely not legal to employ you as an FTE
Just like if someone from the US came to your country, your country will 100% prevent you from hiring them without significant life-changing effort.
Hopefully your negotiation for additional pay goes in your favor.
Good luck!
Just like if someone from the US came to your country, your country will 100% prevent you from hiring them without significant life-changing effort.
Hopefully your negotiation for additional pay goes in your favor.
Good luck!
How did this work out for you? Super curious about how your experience went in practice.
As an aside, I stumbled across these guys earlier today. They seem like they're trying to make global HR practices more accessible to smaller companies.
https://remote.com/
https://remote.com/
I run a small company in the US and hire internationally. There really is no easy way other than hiring as a contractor unless I have a subsidiary or branch in your country of residence. So the only option is either you are hired as a contractor legally (and then you fill out W8-BEN) or there are services like remote.com that offer something called Employer of Record (EOR). HOnestly, I didn't get far with remote.com when I approached them recently (no response really) so I only hire as a contractor with exception of 1 country where I have multiple people so we actually did setup a subsidiary (a nightmare process)
Lot of people are making assumptions here saying it is in bad faith etc. I don't know the other company but most likely they cannot do anything else. So the option is either NOT to hire you or hire you as a contractor. Benefits cannot be provided to you legally so you will need to work out a deal built in the cost. That is all you can do really.
Some people are saying that equity can still be offered. Well that depends. If the US company is setup as an S-Corp, guess what. You cannot get equity in an S-Corp unless you are a US Citizen or a Legal Permanent Resident (popularly known as Green Card). So again, ask the company if they are structured as S-Corp or not. If they are, tough luck with equity.
I just hired a senior VP of customer success from the UK and they are on a contract as well. I am still trying to see what is possible.
Lot of people are making assumptions here saying it is in bad faith etc. I don't know the other company but most likely they cannot do anything else. So the option is either NOT to hire you or hire you as a contractor. Benefits cannot be provided to you legally so you will need to work out a deal built in the cost. That is all you can do really.
Some people are saying that equity can still be offered. Well that depends. If the US company is setup as an S-Corp, guess what. You cannot get equity in an S-Corp unless you are a US Citizen or a Legal Permanent Resident (popularly known as Green Card). So again, ask the company if they are structured as S-Corp or not. If they are, tough luck with equity.
I just hired a senior VP of customer success from the UK and they are on a contract as well. I am still trying to see what is possible.
There's a mixture of useful advice in this thread, but take a deep breath before you go for any of the more enthusiastic responses.
I also work for a US company, but it's done through a wholly owned UK subsidiary. It's not uncommon to start these arrangements as contracting, especially if you're their first non-US employee, while it works on company incorporation and bank and payroll to be set up.
What you should expect in terms of fairness is for them to be upfront beforehand in terms of how they propose to proceed so the paperwork wasn't a surprise when it arrived.
I wouldn't assume malice right away in this. It could be a deliberate switcheroo, but it could have been simply bad communication due to ignorance.
Have a talk with them, if they insist that the contracting arrangement is only temporary while they set up, then you can reasonably ask for some conditions to be in the contract in terms of financial penalties if they don't go through with them. If they're serious, they shouldn't mind provided it's reasonable.
I'd agree with the other comments in that you're under no obligation to accept these arrangements.
I also work for a US company, but it's done through a wholly owned UK subsidiary. It's not uncommon to start these arrangements as contracting, especially if you're their first non-US employee, while it works on company incorporation and bank and payroll to be set up.
What you should expect in terms of fairness is for them to be upfront beforehand in terms of how they propose to proceed so the paperwork wasn't a surprise when it arrived.
I wouldn't assume malice right away in this. It could be a deliberate switcheroo, but it could have been simply bad communication due to ignorance.
Have a talk with them, if they insist that the contracting arrangement is only temporary while they set up, then you can reasonably ask for some conditions to be in the contract in terms of financial penalties if they don't go through with them. If they're serious, they shouldn't mind provided it's reasonable.
I'd agree with the other comments in that you're under no obligation to accept these arrangements.
Great point.
I would only add that it may make sense to try and figure out what what additional costs it would cost you as a contractor.
The billing rate for an agency contractor is usually a multiple of salary. Assuming this a good faith thing, the parties should be able to come to an arrangement.
I would only add that it may make sense to try and figure out what what additional costs it would cost you as a contractor.
The billing rate for an agency contractor is usually a multiple of salary. Assuming this a good faith thing, the parties should be able to come to an arrangement.
Isn't it significantly easier to hire internationally by having the worker become a contractor? Does the company have other employees in your country?
Yes, I believe that's why the company has done this...
Its a bit weird that they never talked about it with you. It is such a big change that its a bit of red flag for you to only find out about it when you receive contract.
I'd walk. This didn't happen by accident and it is a good harbinger of what's to come.
I don't think that's entirely fair...
That's what I mean. This is new to them so you're going for guinea pig status and that means that your situation will be very unstable. Better aim for a company that can deliver on their promises. Again, this is not an accident, it is a sign of complete incompetence.
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If you roll over and accept these terms, you've set the precedent that this company can mislead/abuse you in the future.
Don't be a doormat. Ask why the change. If they still push for contractor, your pay expectations just went up. There isn't going to be a unilateral change to an employment contract that is ever good to both parties, so you'd better equalize it with adjusted compensation.
Don't fall in love with companies, either. If they won't budge, you walk away.
Don't be a doormat. Ask why the change. If they still push for contractor, your pay expectations just went up. There isn't going to be a unilateral change to an employment contract that is ever good to both parties, so you'd better equalize it with adjusted compensation.
Don't fall in love with companies, either. If they won't budge, you walk away.
I'm definitely not going to roll over and just accept. Just trying to arm myself with some cogent arguments before I go back to them!
The only argument is need is that this offer isn't equivalent to the verbal offer and if they want you, they'll make you whole either by honoring the verbal offer or upping the $$$ to match whatever it is you ask for.
If you're willing to walk away, that's all you can do.
If you're not willing to walk away, ask for more money or accept the contract.
If you're willing to walk away, that's all you can do.
If you're not willing to walk away, ask for more money or accept the contract.
Someone in legal probably informed them that hiring outside of the US is a massive headache. But they could do it if they wanted to. The equity and vacation is more suspect. I would ask them for more money in place of the vacation (and lack of security) and also for equity. You don't need any excuse or tactic more sophisticated than "We talked about X, Y, Z as comp but you are offering X."
If you're not experienced doing it by email is better.
If you're not experienced doing it by email is better.
If they want to hire a contractor then offer them contractor rates, i.e 50% above the current offer.
I've worked for US based companies in the past from Germany and that was the setup at the time because it was a legal and bureaucratic hassle to set up proper employment. That said, both times I received equity - that's, at least to my understanding, straightforward to set up.
Given that job security is almost non-existent in the US it never bothered me to not be an employee - I just always assumed that today could be my last day (well, in theory at least). You do miss out on the usual health benefits, 401k, etc. and will have to cover that yourself in your country.
Given that job security is almost non-existent in the US it never bothered me to not be an employee - I just always assumed that today could be my last day (well, in theory at least). You do miss out on the usual health benefits, 401k, etc. and will have to cover that yourself in your country.
Yeah for smaller companies this is the norm. Even within Europe, if you work for a company in another country it will usually be as a contractor on paper, as it's a lot of work to setup payroll etc for one person (it needs to be done in each country). A lot of the time you can end up paying less taxes that way compared to an employee though, so it might actually be in OPs advantage.
Be transparent with the company.
Tell them what you expected vs. what you got and work it out.
Tell them what you expected vs. what you got and work it out.
Is there an alternative mechanism (outside an employment agreement) through which options can be granted?
From another Hacker News: discussion on the topic: "The rule of thumb when I started contracting was that your hourly rate was your annual salary divided by 1000"
So if the offer was $100,000, your hourly rate as a contractor is now $100/hr
So if the offer was $100,000, your hourly rate as a contractor is now $100/hr
That would be over double the offer amount!! I don't think that would fly.
I have done some contracting before and my rate is far higher than my employment rate, but it's always been for smaller contracts... not for something that is effectively a full time position.
I have done some contracting before and my rate is far higher than my employment rate, but it's always been for smaller contracts... not for something that is effectively a full time position.
I am not an accountant or anything but I think a rule of thumb is employment costs 50% more than the employees salary. Don't feel too bad asking significantly more, after all you are not getting any equity which sounds like your main motivation.
That sort of rule of thumb is going to be most accurate for average salaries, because large amounts of the non-salary costs are relatively fixed (e.g. health insurance costs the same amount whether you earn $50K or $200K annually). As salary goes up, so does its share of total compensation.
Full time positions are dealt with using payrolling companies or SPVs as daughter companies under the mothership, not by independent contractors (with all of the associated risks) and a reduced rate.
You are making a lot of excuses for this company in this thread.
You are making a lot of excuses for this company in this thread.
Make sure you factor in extra taxes, in addition to the premium for being a contractor (that on its own should be at least 20%)
And the risk of being canned overnight, of receiving no severance pay, on being unable to collect on your bills in case things end up going South, not being paid when you get ill and so on. 50% is more like it.
Contractors charge more than employees for a reason.
Contractors charge more than employees for a reason.
Well, obviously you should ask for something of equivalent value. If they value equity at their company at zero, and they’re well-informed, then why would you believe in it?
Listen, if you believe it’s a rocket ship, you need to get a seat. But you don’t want to be the guy servicing the plane on the ground. He doesn’t come along for the ride. Being bullish on a company you have no skin in is pointless.
$x plus equity and benefits is not equivalent to $x. But in the end, it’s all about BATNA. If your true BATNA is nothing, then you’re screwed.
Listen, if you believe it’s a rocket ship, you need to get a seat. But you don’t want to be the guy servicing the plane on the ground. He doesn’t come along for the ride. Being bullish on a company you have no skin in is pointless.
$x plus equity and benefits is not equivalent to $x. But in the end, it’s all about BATNA. If your true BATNA is nothing, then you’re screwed.
Note: I think I'm most bummed out about the lack of equity. I know that options are tricky and rarely convert into real lottery tickets (but I still want some skin in the game at this company).
It's definitely possible for a US company to provide stock options to a non-US contractor. There may be some tax specifics for your country of residence (or country of citizenship, perhaps) which make it more difficult?
You'll likely need to do the preliminary legwork to show the company it's feasible, and to figure out what your tax obligations are. Some countries may tax options as compensation when they vest, rather than when they're exercised, for example.
You'll likely need to do the preliminary legwork to show the company it's feasible, and to figure out what your tax obligations are. Some countries may tax options as compensation when they vest, rather than when they're exercised, for example.
Equity in a company not in your jurisdiction is something quite complex, I'd go for a much higher pay rate rather than the equity to balance things out without the headaches.
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Certainly … ask for 60% more in total.
Run away
The same happened to me 5 (?) years ago. I was young, dumb and excited about the opportunity. It was downhill from the moment I signed with constant extensions to my contract and excuses (like how my salary was lower because they wanted it to be close to what I would get after taxes when I became a W2 employee)
They have no respect for you or your time, and it's endemic in the company culture. Don't even try to negotiate this: walk away and MAYBE tell them why. IF they come back with EVERYTHING they promised you (unlikely that their benefits even exist) then you can consider joining if you don't have something better on the table. But even then I would still walk away 100% of the time
Don't listen to their bullshit about how it's a risk hiring you etc. You take an equal risk in a clown show of a company. There's plenty of opportunities out there at the moment to even try negotiating this one
The same happened to me 5 (?) years ago. I was young, dumb and excited about the opportunity. It was downhill from the moment I signed with constant extensions to my contract and excuses (like how my salary was lower because they wanted it to be close to what I would get after taxes when I became a W2 employee)
They have no respect for you or your time, and it's endemic in the company culture. Don't even try to negotiate this: walk away and MAYBE tell them why. IF they come back with EVERYTHING they promised you (unlikely that their benefits even exist) then you can consider joining if you don't have something better on the table. But even then I would still walk away 100% of the time
Don't listen to their bullshit about how it's a risk hiring you etc. You take an equal risk in a clown show of a company. There's plenty of opportunities out there at the moment to even try negotiating this one
Appreciate the perspective and sorry that that happened to you. There are some red flags, but I don't think this change is in bad faith. They're a small company, and haven't pulled the "you're a risk card". Plus the contract is really simple and open-ended. Just adding a bit more colour...
This is a bait and switch. If you’re comfortable with your employer using dark patterns against you, go for it. If not, maybe consider another employer.
The offer was for full-time employment @ $XXX,XXX USD + benefits, flexible vacation, and "equity" (unspecified).
It was a decent offer. (And, importantly, I'm bullish about the company and excited about the opportunity.)
After a couple of weeks I've now finally received the paperwork. (Likely delayed because of the Christmas break, and due to the fact that I don't live in America and I'm not American.)
The offer is still $XXX,XXX USD. But no benefits, or equity... as it's no longer an offer but an agreement to become an "Independent Contractor".
I'm fine to become a contractor. I would prefer to be an employee. But it's probably legally easier for the company to "employ" me this way.
But if I'm not an employee, and I'm not getting benefits or equity... should I not push for $XXX,XXX + some percentage USD.
How should I handle this situation? Any and all advice appreciated!