Insight Report for Employers: Candidates on Employment Status

The challenge: we are often in the position of helping fast-growth companies establish their first market presence in the United States. Employers turn to us to navigate a complex set of both cultural, economic and legal circumstances. How you choose to employ a candidate (whether as an independent contractor, full-time employee or other) will affect the desirability of the offer.

Of course the companies we work with want the best sales performers, and so they want to know: how do they make the employment offer as attractive as possible?

Because we have a database of thousands of candidates who evaluate employment offers, we decided to ask them directly, and share the answer with you.

We ran a poll asking candidates:

If a foreign entity wanted to hire you as their first (and/or) only US representative, which would you prefer:
Be employed (W2) on the payroll of their US legal entity (if any) without benefits.
17%
Be hired as an independent contractor (1099) or via your own legal entity (if you have one) without benefits
15%
Be employed (W2) by a third party company, acting as a service provider for your "employer" but able to provide you with health and retirement benefits
34%
No preference/depends on the offer
50%
Would not accept any of these options
4%
Key takeaways:

US candidates are flexible: the largest response (50%) went to those who would consider any offer. We of course see this as a reflection of a strong market for job-seekers.

Third party options are attractive: the second most popular option (34%) involved a third-party company (we’ll explain how that works in a moment).

How candidates think about employment status and how it affects you

For the most part, candidates often think of job offers as falling into one of two buckets:

  • Independent contractor: the candidate handles his or her own taxes. They tend to work more independent, and have less of a “locked in” relationship with their employer.
  • Employee: the candidate signs up to be a full-time employee of the company. In the case of foreign entities that are just getting started, employment of this sort often comes with little or no benefits.

But…there is a third way

A third party company can be retained to offer a new hire benefits that mimic what many Americans would expect from a full-time employment contract. This includes but is not limited to: health insurance, disability insurance, transit benefits and other nice-to-haves.

Why would you want to work with a third-party company?

Many of the foreign entities we work with need great sales performers but are not yet in a position to offer regular, on-the-payroll employee. Rather than hiring a great candidate as an independent contractor, they can retain the services of a third-party provider to take the burden of benefits administration and payroll off their hands. For a fee or percentage, these third party companies make this process easy for your operation.

Advice for using a third party company in your hiring and/or expansion planning

  • Be clear about expectations: use the process of contracting with the third party company as an opportunity to establish your plans for expanding your staff, including the terms on which you will employ new American hires.
  • Establish a realistic budget: a big challenge for the foreign entities we work with is establishing a budget for a position that will help them expand in a very competitive American market (where the labor market is also tight). Look at resources like Salary.com to understand where the market is.
  • Stay in the loop: communicate with the third party company to make sure that expectations are being met vis a vis your candidate and his or her benefits administration.

Other resources for expansion planning

As we frequently advise foreign entities on this process, we’ve developed the following resources on the subject:

Cultural Differences Matter: The Art of Making a Successful Cross-Cultural Hire

The Hidden Costs of Developing Business in the US

Successful Expansion in the United States: It Starts with Your First Hire(s)

FREE DOWNLOAD: Your First American Hire

You’re ready to make a hire — how to make sure it’s the right one?

After successfully guiding hundreds of businesses through this process, we’ve developed an expertise in hiring and now we’d like to offer it to you in the form of a free guide, which covers the key areas you need to know about:

  • How the stage of your business will affect your decision
  • Legal and tax implications of how you hire
  • How to budget for this position
  • What to look for in a candidate

Download now 

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