Hiring Software Developers from Eastern Europe: The Legal Aspects

by | Jul 29, 2023

In this blog post, we will discuss four distinct strategies for hiring Eastern European software developers:

  • Hiring Remotely as Full-Time Contractors
  • Hiring Remotely as Full-Time Employees via a Payroll Service
  • Establishing a Legal Entity and Hiring a Team Remotely from a Certain Country
  • Assisting Relocation to Your Country and Hiring as Regular Employees

Each method presents unique advantages and potential challenges, designed to cater to a range of business needs and

Hiring Remotely as Full-Time Contractors

This approach provides flexibility and allows you to scale your team up or down as needed. The advantage of this method is that you can source talent from multiple countries within Central/Eastern Europe.

Hiring remotely as contractors often means that the software developers will function much like full-time employees, contributing their skills and expertise to your projects on a regular basis. However, they are technically self-employed or run their own business, which can provide significant advantages, especially when it comes to international hiring.

For tax purposes and to ease the difficulties of hiring across borders, it is often beneficial for these contractors to establish a legal entity in their home country. This can be a sole proprietorship, a Limited Liability Company (LLC), or another type of business entity specific to their country’s legal and tax system.

Establishing a legal entity comes with several benefits. It provides a clear structure for income reporting and taxation, making it easier to manage financial and tax obligations in their home country. From your perspective as an employer, it simplifies the hiring process as you engage in a business-to-business relationship rather than dealing directly with the complexities of international employment law and tax systems.

It’s also worth noting that setting up a legal entity such as a sole proprietorship or LLC is usually a straightforward process for developers in Eastern Europe. In fact, it’s a widely adopted practice in the region as it allows for a more flexible work arrangement and is often more financially advantageous for both parties.

Hiring Remotely as Full-Time Employees via a Payroll Service

This method is similar to hiring contractors but adds an extra layer of administrative support. Payroll services can help ease the burden of international payroll processing, and you still have the freedom to recruit talent from various countries.

Using a payroll company to handle remote hiring can significantly simplify the process and save you from many complexities associated with international employment, tax law, and ongoing payroll management. These companies manage the full spectrum of payroll, from setting up to processing monthly salaries, handling tax deductions, and ensuring compliance with local laws and regulations. They also take care of the administrative tasks, such as employment contracts and benefits administration.

However, these conveniences come at a cost. Typically, payroll companies charge a fee for their services, which can add to your overall operational expenses. The cost can vary based on the level of service provided, the number of employees, and the countries in which your employees are based.

Three notable payroll companies that have made a name for themselves in this space are Deel, Remote.com, and Papaya Global.

Establishing a Legal Entity and Hiring a Team Remotely from a Certain Country

For a more permanent presence in a specific Central/Eastern European country, you might consider setting up a legal entity and hiring local developers on payroll. 

This approach offers a higher level of control and commitment but also comes with
additional legal and administrative responsibilities. Establishing a legal entity in a certain country can certainly offer many benefits, particularly when it comes to hiring remote software developers from that country. It tends to be a cost-effective solution, as it allows you to directly employ talent in the country, negotiate salaries based on local market standards, and manage payroll in the local currency. 

Additionally, this approach ensures that your business operations are fully compliant with local labor laws and regulations. It’s worth noting that setting up a legal entity, such as a subsidiary, is typically straightforward in many Eastern European countries, thanks to favorable business environments and clear processes for foreign companies.

However, there are certain limitations to this approach. By establishing a legal entity in a specific country, you essentially limit your talent pool to that country alone. While Eastern Europe as a region has a rich pool of skilled software developers, by choosing to set up a legal entity in one country, you may miss out on talent available in other countries.

Overall, while setting up a legal entity in a specific country can be a viable option for certain businesses, it’s important to weigh these considerations against your business’s specific needs and objectives.

Assisting Relocation and Hiring as Regular Employees

By helping developers relocate to your country, you can hire them just like any other local employee. This approach enriches your local team’s diversity and expertise.

Assisting in the relocation of software developers from Eastern Europe to your own country can be a beneficial choice for several reasons. Many talented professionals in this region are interested in the opportunities that come with relocation – such as exposure to new work cultures, advancement in career prospects, improved living conditions, and potentially higher salaries. Thus, offering relocation assistance can make your company more attractive to these individuals and help you tap into this pool of motivated and ambitious talent.

Relocation assistance can take many forms, from covering moving expenses and providing temporary housing, to helping with visa processes and offering language classes or cultural orientation. By offering such support, your company can ease
the transition for new hires, helping them to settle in quickly and start contributing effectively to your team.

Moreover, once these developers relocate, they become local employees, which simplifies a lot of the complexities that come with managing remote teams, such as coordinating across different time zones, dealing with cross-cultural communication issues, and handling international payroll.

However, it’s important to consider that assisting with relocation can entail significant upfront costs and requires a solid onboarding process to ensure new employees adjust well to their new environment. Also, immigration policies and
employment laws will need to be carefully navigated.

Despite these challenges, if managed correctly, this approach can prove to be a strategic move, strengthening your team with dedicated, highly skilled individuals who bring diverse perspectives and valuable experience to your organization.

Relocation in the EU

It is important to note that the ease of relocation is particularly prominent within the European Union (EU) due to the principle of free movement. EU citizens have the right to live, work, or study in any EU country without any special formalities.

For software developers from Eastern European countries that are part of the EU, this makes relocating to another EU country relatively straightforward. There are no visa requirements, and administrative procedures, such as registering residence or obtaining a work permit, are typically simplified or non-existent for EU citizens.

This freedom of movement makes it easier for companies in the EU to hire talent from across the region and assists in their relocation. It can also make the proposition more attractive for the developers themselves, knowing that they can move freely, enjoy the same rights as nationals of the host country in terms of employment, and access to social security and benefits.

Therefore, if your company is based in an EU country, you will find it relatively simple to assist the relocation of software developers from other EU countries, broadening your access to the rich talent pool in Eastern Europe.

Hire with euDevelopers

We are a recruitment agency specialized to connect developers, software engineers, and other IT professionals from Central and Eastern Europe with companies from all over the world. We are located in Hungary and have personal experience with all
of the Central/Eastern European countries.

We are specialized on Central and Eastern Europe, we can find remote workers in the region, or people that are willing to relocate. We can do the entire hiring process for you, including sourcing, initial screening, testing, interviewing, and offer management.

Contact us here for a free 30-minute consultation about your recruitment needs!


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