What to watch out for when hiring specialists with an IT outsourcing company? Outsourcing and the law

Outsourcing a team of programmers can be challenging. There are issues regarding liability, finances, and taxes. How can you manage all this? We decided to answer these questions with Tomasz Wiese, a specialist in labor law and intellectual property law.

From this article, you will learn:

· why it is not profitable to hire a freelancer from abroad on your own

· about the risks associated with this type of employment in an international environment

· about the responsibilities of a company providing IT outsourcing services, and the issues that remain the responsibility of a client

· what clients should pay special attention to before signing an IT outsourcing contract

Many CTOs ask these questions, so we have decided to answer them with our legal counsel. We want to share the experience we have built over the years in the IT outsourcing market.

Tomasz Wiese is an attorney-at-law, partner at JWMS law firm specializing in areas such as intellectual property law, personal data protection, labor law, and contracts. j-labs has been cooperating with Tomasz for years, and he has never disappointed us.

j-labs team: Why is it not profitable to hire a freelancer from abroad on your own? In theory, the elimination of a middleman should be a viable option.

Tomasz Wiese: It’s all about legal and practical issues. If a foreign company wanted to hire IT specialists without intermediaries, it would (more often than not) have to set up a company in Poland. Moreover, it could be a tax-inefficient solution that additionally raises doubts of the tax office due to the pricing of intellectual property.

Transfer pricing concerns assets that are difficult to evaluate, such as intellectual property (IP) rights. Transferring IP abroad might make the tax office suspicious because it can look like moving income out of Poland, which would mean tax evasion. To avoid such risks, a company must prepare transfer pricing documentation.

They also need to be familiar with Polish law or hire a law firm specialized in this domain. It is also necessary to have a local HR department responsible for the recruitment process.

Companies looking for employees prefer to use the services of professional IT outsourcing companies, such as j-labs, because if they were to hire people on their own, they would need to build an HR department and train the staff, which entails extra costs.

j-labs offers know-how that companies do not need to acquire on their own. Thanks to a team of experienced lawyers, a client gets legal assistance. Additionally, a dedicated HR team is trained to recruit IT specialists. 

Hiring on your own is relatively easy only when a company needs a small number of professionals for a short period. If they need to hire a whole team of specialists, they prefer to use professional IT outsourcing services. It saves valuable time and money, and allows companies to focus on their businesses.

j-labs team: The pandemic has forced many companies to adapt to remote working conditions. What are the legal risks associated with such a work model in an international environment?

Tomasz Wiese: It depends on the contract.

An employment contract when working remotely is associated with certain risks. A company needs to be aware that in the event of an accident, Polish regulations will apply. It is quite burdensome because the labor law in Poland is not adapted to the current realities of remote working.

If an employee works for a company with a branch in Poland but resides outside the European Union, they need to obtain a work permit. If an employee works only from their country, they do not need a visa. However, if they have occasional meetings in the company’s branch in Poland, both documents become necessary.

That is why most programmers sign B2B contracts. Most legal issues become the employee’s responsibility. Then they pay taxes and social security contributions. In such a case, the labor law does not apply. This solution has many advantages for developers as it gives them more flexibility.

However, if a company wants to hire people on a B2B basis on their own, they still need an HR team to talk to the IT specialists. The team should speak fluent Polish and know the market rates. 

j-labs team: What does hiring through an IT outsourcing company look like? What issues remain a client’s responsibility?

Tomasz Wiese: Companies like j-labs provide their developers with a working space, a sense of belonging, and entire company culture. It is important, especially with regard to mental health. They also provide the opportunity to work in a hybrid model. Integration with co-workers helps create social bonds and meet friends, which makes new recruitment easier as it can be done through a system of internal recommendations, something a client can’t do on their own. 

For example, j-labs manages and supervises programmers and draws up contracts. It ensures competitive advantage. j-labs cooperates with companies mainly from the DACH market. Additionally, German and Austrian legal systems are similar to Polish, so companies seeking employees know what to expect. 

j-labs team: What legal obligations related to outsourcing are assumed by j-labs? What should a client pay special attention to before signing an IT outsourcing contract? 

Tomasz Wiese: A client can be sure that j-labs will take care of the intellectual property and acquire rights from programmers. j-labs provides warranties and is responsible for the confidentiality and data security where innovative products are discussed, and a client’s know-how is used. 

However, there are differences in warranties when a client designs a product “from scratch”, and when a product is only improved by hired programmers. j-labs precisely describes a project scope and includes it in a contract. Additionally, j-labs has liability insurance policies and guarantees full solvency.

j-labs team: What distinguishes j-labs offer from other IT outsourcing companies in Poland?

Tomasz Wiese: j-labs is a company with enormous know-how, a great pool of programmers, a recommendation program, and an extensive and experienced HR department. It has offices in Krakow, Warsaw, and Munich. Compared to other IT outsourcing companies in Poland, thanks to reliable legal support, j-labs can afford greater flexibility in contracts and quickly negotiate agreements tailored to clients’ needs. It has a separate department specializing in personal data protection. The contracts j-labs creates reflect the facts, so clients can be confident that the company will comply with the agreements.

j-labs team: Thank you for the interview and a recommendation.