Discover more from All Remote - with Mark Wormgoor
Navigating Legal Labyrinths
Contracts with Remote Developers
In today's globalized digital era, talent knows no boundaries. Yet, when hiring remote developers from overseas, an invisible boundary—the legal line—must be navigated adeptly. Always involve a lawyer when creating such contracts. Such contracts are just too complex and usually involves bridging 2 different legal systems. Differences in international law, employment regulations, tax codes, and intellectual property rights all pose significant challenges. When you review your contract, what do you look for?
Recently, I published about finding and hiring a developer. This is the forth post in this series. Read the others here:
Getting it right: An opportunity
Despite these challenges, the benefits of accessing a global talent pool are significant. By carefully crafting your contracts and fully understanding the legal implications of your hiring practices, you can significantly minimize risk, protect your company's interests, and maintain a healthy working relationship with your remote developer. A well written contract can actually foster a healthy, productive relationship.
At Tairi, we work with quite a few remote developers, all from the Philippines. Understanding that a standard contract wouldn’t cut it, we sought legal advice to create a tailored contract. We send it to our developers for review. Their feedback: it’s easy to read and understand, it’s fair and it makes sense to them.
When drafting a contract with a remote developer, several elements should be considered:
Duration, Hours and Rate: How many hours will your developer work? A fixed amount of hours? Forty hours / week? And for how long? Will you start with 3, 6, 9 or 12 months?
Termination Clauses: Conditions for terminating the contract should be defined clearly, including notice periods and any potential severance payments. We often decide to go with a contract for an unlimited period (or 12 months and automatic 3-month renewals at the end), but include a 1-month termination period for both sides.
Intellectual Property Rights: In most cases, you’re paying for the developer to design or develop code for you. You’d expect to own the designs and code, or any other intellectual property created by the developer, but you need to be sure to include this in your contract.
Confidentiality and Non-Disclosure: The contract should stipulate that the developer must keep all sensitive company information confidential, and this information must be returned once the contract ends.
Payment Terms and Taxes: Clearly outline payment terms, currency, method, and frequency of payment. Remember to consider how taxes will be handled; this may differ significantly based on the developer's location. It’s often not possible to pay for any taxes in a remote country if you’re not registered there. In this case, it’s the developer’s responsibility to pay all local taxes. Also make sure to include any mandatory local social security payments for the remote developer.
Liability: Mistakes will be made by your developer, for sure. Everyone makes mistakes. But, mistakes can be costly. Be sure to clarify in your contract who will take the cost for such mistakes.
Independent Contractor Status: You likely do not have a legal entity in the remote developer’s country. If so, you cannot employ them, and they will most likely be a contractor. In your contract, you need to be very clear about this status, to prevent any potential doubt - from developer, but also from the authorities.
Jurisdiction and Governing Law: Identify the governing law that will apply to the contract and decide on a jurisdiction for any potential legal disputes. Consulting with a local attorney in the developer's country can be very beneficial.
And, there’s more of course… These are the main topics to look out for though.
Legal stuff is hard, but it doesn’t have to stop you from hiring a remote developer. Either make use of an experienced developer, or make use of an intermediate company that already has the right legal structure in place. As laws differ per country, you’ll need to customize your contract for each country you work with.
Hiring overseas remote developers offers great opportunities, but it comes with its legal complexities. Navigating through jurisdiction and governing law, intellectual property rights, confidentiality, payment terms, termination clauses, and liability can be a tough task. But, armed with a keen understanding of these factors and possibly some legal assistance, you can have a contract that serves both parties well.
Are you looking to hire remote developers and don’t want to invest in legal council? Reach out to us at Tairi, and let's see if one of our Philippine developers could be right for you.
Now that we’ve covered hiring and contracting, in my next story, I’m going into onboarding. If you haven’t already, subscribe below to receive it!