Product Design
February 22, 2021

How to Hire Offshore IT Contractors: Three Payroll Strategies

Rootstrap is here with several strategies for ensuring you have all the know-how needed when hiring offshore IT talent. 

Before outlining payroll strategies, let’s talk about how IT outsourcing can help your company. 

Benefits of Outsourcing IT Roles 

While outsourcing may not be the right solution for every company, it has offered many startups and even Fortune 500 companies an opportunity to expand their horizons. 

Here are just a few of the benefits organizations can glean from outsourcing IT positions: 

Opens up Deeper Talent Pools

Your company may wish to hire locally but find that the talent pool for IT roles is relatively shallow. Highly technical positions such as software developers and engineers require specific education and a skill set that not everyone has. 

Even in metropolitan areas, top tech talent is often in high demand and is quickly snatched up by larger companies willing to pay more. 

When your organization decides to look beyond US borders to fill IT needs, the talent pool becomes much deeper. 

Gets Your MVP Built Faster

As a startup racing against the clock to convince investors that you’re worth it, you need a minimum viable product (MVP) as soon as possible. 

If your in-house team has yet to acquire the dev muscle needed to bring your ideas to fruition, or you don’t have the time or resources to devote to talent acquisition, offshore IT contractors can fill in the gaps. 

Experienced developers can help your company conceptualize and build your digital products without unnecessary lag. 

Cuts Costs

Outsourcing specialized IT positions offshore helps many organizations minimize costs. These savings are possible partly because software developers in Latin America and elsewhere can often work for less than in the US due to the lower cost of living. 

For example, the average cost of life’s necessities in Uruguay is generally lower than in more developed US cities like Los Angeles. According to Numbeo, rent prices in Montevideo, Uruguay are over 80% lower, and grocery prices are nearly 50% lower than in Los Angeles.

Beyond that, outsourcing remote IT talent saves companies from allocating resources toward hiring in-house employees and paying for additional office space.  

Keeps You Agile

Hiring a full-time employee requires a level of commitment from your company. On the other hand, onboarding outsourced IT talent can be done temporarily with fewer obligations. 

With outsourcing, you can grow your IT department as needs arise and then scale it back down post product launch. This type of flexibility keeps your company agile and ready to adapt as your company expands.

Fuels Innovation and Minimizes Bugs

Has your in-house team ever hit a dead end on a project? Whether you’ve run into bugs or you’re frozen in the middle of development with stakeholders tapping on your shoulder, bringing in outsourced IT talent can be like launching a rescue mission. 

Offshore devs can bring a fresh outside perspective and help your team innovate. The project will still be yours, but they can help you work out your product’s bugs and reach its potential. 

Innovation outsourcing is also beneficial for companies who need new, cutting-edge ideas or help to map out technology strategies and refine processes. 

Where Should You Hire Offshore? 

US-based companies are not short on choices when it comes to IT outsourcing locations. As with all business decisions, each option carries its pros and cons. 

While far offshore countries like India have been popular IT outsourcing destinations for years, many companies are turning to nearshore options. More recently, Latin America has gained traction as a significant source of IT talent. 

“Outsourcing IT projects to Latin America can offer your U.S. company cost savings, while still providing access to a highly educated talent pool with high English proficiency,” advises the Atlas of Science. “Additionally, you’ll have the benefits of a nearby time zone to allow real-time communication and proximity for travel. For these reasons and more, Latin America has become the latest outsourcing hotspot.”

For example, Argentina has earned the spotlight as one of the best places for nearshoring software development. The cost of contracting IT talent in Latin America may run higher than outsourcing further offshore. Still, the benefits highlighted above may add enough value to make it worthwhile for your company. 

Read more about the Pros and Cons of Outsourcing to Latin America

3 Payroll Strategies for Hiring Offshore IT Contractors

Now that you know what benefits outsourcing can bring to your company, it’s time to address how to go about it. 

Before you find IT talent and sign on the dotted line, exploring legitimate ways to hire an offshore software developer can help your company avoid common outsourcing pitfalls. 

Onboarding contractors living outside of the US can expose your organizations to legal risks and task violations.

“Paying U.S. personnel in countries where the employer has no registered presence can be tricky,” warns the Society for Human Resource Management. “Many organizations fail to realize the risks and run afoul of payroll and tax compliance requirements.”

To save your company from the legal and financial ramifications of outsourcing the wrong way, here are three business-smart strategies for handling payroll for offshore IT contractors: 

1. Using an IT Staffing Agency

Most IT staffing agencies offer startups and enterprise-level companies multiple ways to gain access to a wide range of IT talent. Whether your organization needs a single engineer or an entire software development team, a staffing agency can help build out your IT department with extra tech muscle. 

When shopping for an IT staffing agency, find answers to questions like:

  • Where does this agency source its talent?
  • Will this agency handle taxes, payroll, and other key HR responsibilities?
  • What type of IT talent and services can this agency deliver? 
  • What is this agency’s onboarding process? 
  • How much will it cost to hire an offshore IT contractor through this agency? 
  • What is this agency’s history (see case studies and portfolio)?  
  • How long will it take to hire a developer through this agency? 
  • What development methodology does this agency use (i.e., waterfall vs. agile)? 

The Better Business Bureau advises, “Often outsourcing with firms with a massive pool of employees can...equip you with the latest technology and equipment.” 

Indeed, well-established IT staffing firms typically have the resources it takes to find top global talent and deliver cutting-edge digital products. More prominent agencies are often in tune with dynamic market trends, the latest technologies, and industry best practices. 

Here at Rootstrap, we offer IT staff augmentation services to cut out the headache of recruitment and provide your company with the resources you need without the red tape. With Rootstrap, you get top-notch dev talent ready to collaborate with your in-house team as needs arise. 

When you outsource through our firm, Rootstrap acts as the official employer, handling all the taxes, payroll, employee benefits, and other technicalities. We carry the legal responsibility and take care of all the paperwork. 

While Rootstrap remains the official employer, we make sure our devs will incorporate well into your team, adopting your company culture and complying with your company’s policies. 

Beyond our US headquarters in Los Angeles, we have talented teams in Montevideo, Uruguay, and Buenos Aires, Argentina. Our devs have serious coding chops, are fluent in several programming languages, and are ready to work efficiently with your team to roll out your next MVP. 

Recently, Clutch named Rootstrap as one of the leading B2B companies in Argentina in 2020. 

2. Making a Direct Contract Through a GEO

A Global Employment Organization (GEO) is another sensible route for US-based organizations looking to hire abroad. GEOs aim to de-risk the process of hiring international candidates by handling payroll and other legalities for you. 

Globalization Partners is a leading GEO in the industry and happens to be a client of Rootstrap to boot. Talent scouting is left to your HR department. Still, once you find the right fit for your team, Globalization Partners will help you officially onboard your client and provide a platform for managing your international workforce. They handle payroll, employee data protection and comply fully with regulations in each respective country, depending on where your talent is sourced. 

A more practical route for startups and smaller companies is to use a global payroll platform like Papaya Global, Deel, Safeguard Global, or Panther. These platforms facilitate hiring international employees while complying with local standards.  

3.Hiring Through a Freelancing Platform

The final option for hiring offshore IT contractors is to use a freelancing platform like Fiverr, Freelancer, and Upwork

These global freelance marketplaces allow organizations to connect directly with talent. If your company opts to use a freelancing platform for outsourcing, you’ll need to create a profile and job posting. From there, freelance devs will have the opportunity to apply, or you can seek out and contact candidates that seem fit for the job. 

Given current world events, more and more professionals are choosing to work from home and sign up on freelancing platforms. 

“Upwork’s seventh annual study surveyed more than 6,000 U.S. workers over the age of 18 and found that 59 million Americans performed freelance work in the past 12 months, representing 36% of the U.S. workforce, an increase of 2 million freelancers since 2019,” says Upwork in a recent press release. 

Of course, this data represents US-based talent, but it may suggest a global trend toward freelancing. If this is the case, the talent pool is only getting deeper, giving small companies more options.

Using a freelancing platform to hire contractors can help minimize red tape and make payroll easier. That being said, freelancing platforms often retain hefty fees and may not be worth it for your company if you’re planning to hire multiple devs. 

Note: Before making any legal decisions, consult with your organization’s HR reps, tax consultants, and legal experts. 

What to Look for in an Offshore Dev

While onboarding international talent requires a bit of extra forethought, the three payroll strategies we cover above show it’s possible to comply with local and international standards while benefiting from offshore IT talent. 

Beyond properly handling payroll and taxes, what should you look for in an outsourced dev? Take time to create a comprehensive wish list of qualities, skills, experience, and educational criteria you’d like to see in a candidate. Defining your priorities can help you find the right dev for the job.  

Here are a handful of top considerations when looking for offshore IT talent: 

A Balance of Cost and Quality

One of the main draws of outsourcing is cutting costs, but cutting corners to reach that goal is often counterproductive. 

Whether you’re looking for domestic or international talent, it’s in your company’s best interests to avoid searching for rock-bottom pricing. Remember, you often get what you pay for. 

It’s true, talented devs located outside the US can usually work for less, but your organization should still budget enough to hire a qualified candidate. Screen for programming skills and knowledge of industry best practices. 

While it’s unnecessary to drag out the interview process, make sure you ask enough questions to find out if they will be a good fit. An in-house employee with an IT background should be on the interview panel. Further, providing a sample task or doing a trial run can help narrow down the candidate pool.  

Aim to strike a balance between pay rates and quality. Hire the best talent your company can afford, bearing in mind that high-quality digital products can go a long way in reaching your audience and boosting your revenue. 

An Industry-Standard Dev Methodology

At this stage in the IT industry, Agile methodology rules among world-class software development companies. 

“Agile innovation methods have revolutionized information technology,” says the Harvard Business Review. “Over the past 25 to 30 years they have greatly increased success rates in software development, improved quality and speed to market, and boosted the motivation and productivity of IT teams.” 

If your organization runs on Agile, seek IT contractors that can fit seamlessly into your processes. Working with devs who are already used to attending a Daily Scrum and delivering a demo at each sprint’s close will likely reduce lag and increase efficiency.

A Strong Team Player

As important as it is for a candidate to have a wealth of experience, they also need to be trainable and ready to cooperate with a team. 

At times, seasoned professionals in highly-technical roles can get in their own way by relying too heavily on their personal know-how and failing to adapt. At any level and in any industry, successful professionals must be team players. The need for teamwork is especially crucial for highly collaborative projects such as software development. 

During the interview process, try to gauge how the prospective offshore devs will integrate with your team. Are they willing to follow directions? How do they handle constructive yet candid feedback? What will they do daily to be a present part of your team, even from afar? 

How to Prepare for Onboarding Offshore IT Contractors

When your company decides to enlist the services of offshore IT contractors, it’s essential to prepare in advance for the onboarding process. That way, new talent will come in with a clear goal, and the on-ramp can be as short as possible so you can all get to work. 

Define Your Needs

Whether you need help automating processes, updating existing client-side or internal technologies, or developing a brand new digital product, you and your team should take the time to make a plan. 

Hold a meeting to identify why your organization’s IT department needs help and what you hope to get out of hiring offshore IT contractors. 

Answer questions like:

  • Does our company need ongoing IT assistance, or is it a one-time project that will end after the launch date? 
  • What kind of IT contractors does our company need (software engineers, software developers, QA testers, etc.)? 
  • Does our company need to hire a team of several IT contractors, or just one? 

For non-tech-based companies, it may be challenging to articulate your IT needs, but the more your team can define your end goals, the better equipped you’ll be to onboard the right talent at the right time. 

Ready Your HR Team

Even if you plan to use an IT staffing agency, a GEO, or a freelance platform to onboard outsourced IT talent, your HR department will still have several things to do on its end. 

Here’s an HR checklist for onboarding offshore IT contractors:

  • Decide on an agency, GEO, or freelance platform. - Once your company picks a hiring method, the HR department should follow through by communicating with an agency, creating a job posting, or initiating other processes related to your method of choice. 
  • Choose project management tools. - If this will be your company’s first time working with remote contractors, the HR department should consider selecting a project management platform such as Slack, Asana, or Basecamp. These platforms create an organized virtual workspace and can help facilitate communication throughout the project. 
  • Strategize how to handle time zone differences. - Hiring offshore IT contractors means facing the challenge of working together across different time zones. Decide on how to work around differing in-office hours and what tools you will use for scheduling meetings. If your company hires candidates closer to home, such as Latin America, the time difference will be minimal compared to hiring further offshores.
  • Determine oversight. - Before a contractor’s start date, map out who will train them and who they will report to. 

Don’t forget to supply new contractors with an employee handbook and inform them of important company policies. Adapt your company's existing SOPs to guide you through onboarding offshore hires. 

Bear in mind that contractors may be coming from differing cultural backgrounds, and English may not be their first language. Ensure expectations are clear but make allowances, and stay empathetic, remembering that all new hires face a learning curve, whether domestic or international. 

Set a Price Point

If your company is looking to hire offshore IT contractors, the HR department should work with upper management to set budgeting parameters. 

Your budget will depend on your IT needs. For example, if you are planning to outsource the development of a mobile app, the price will vary widely on the app’s scope and the features you want. 

Custom mobile apps can take a dev team hundreds of hours to develop and costs thousands of dollars, so it’s important to be realistic when budgeting for how many devs to hire and what the project will cost. 

While hiring IT contractors can require a bit of an investment, hiring offshores can help defray costs. Remember, hiring high-quality devs — whether from the US or abroad — will cost more, but you’ll likely end up with a much better product and yield a better ROI. 

Keep it Fluid

While onboarding talent is key, it’s also crucial to have an offboarding strategy. Unlike full-time employees, working with IT contractors provides an opportunity for your company to receive temporary technical backup. Typically, a contract will outline the process for termination by either party.

Your organization’s HR department should plan to identify when it’s time to cut back. As a company, be ready to adapt and scale as projects rev up and wind down. Using an IT staffing agency can help you stay agile by providing on-demand talent as needed.  

IT Staff Augmentation Services

At Rootstrap, we’ve already done the bulk of the HR leg-work for you. With our IT staff augmentation services, our team is ready to supply your team with top-level talent quickly.

We offer a full suite of IT services tailored to fit the needs of your organization, including: 

  • Web development                      
  • Mobile development                  
  • Emerging technology (e.g., AI, VR, AR, etc.) 
  • Product strategy                        
  • UX/UI design

Our designers and developers are ready to collaborate with your team to create a world-class app or another digital product. 

Startups, mid-size companies, and even enterprise-level tech giants benefit from our IT staff augmentation services. Contact us to find out how your company can too.