The Rise of 'US-Only' Remote Jobs: Decoding Legal, Tax, and Security Drivers

The landscape of remote hiring by US-based companies has seen a significant shift, with a growing preference for 'US-only' candidates. This trend, observed by a Hacker News user seeking employment, marks a departure from a few years ago when global remote hiring was more common, at least within the 'Who is hiring' threads. The discussion delved into several compelling reasons for this change.

Legal and Compliance Complexities

A primary driver is the intricate web of legal and compliance issues associated with hiring internationally. As commenter csomar pointed out, directly employing someone not currently in the US or lacking a US work permit is legally challenging. While services like Deel can facilitate payments, the fully legal route often requires establishing a foreign entity in the employee's country, a significant undertaking that doesn't scale well for hiring individuals. There's a sentiment that the US legal system has become less accommodating to globally distributed teams, with laws no longer 'turning a blind eye' as they might have previously.

Furthermore, itake highlighted the burden of navigating diverse international labor laws, including different holidays, worker protections, parental leave policies, and tax regulations. The complexity of handling equity or stock options in countries like China adds another layer of difficulty.

Impactful Tax Changes: Section 174

A critical and concrete financial disincentive, brought up by walterbell, is the 2022 Section 174 tax changes. These changes mandate that non-US software engineering (R&D) expenses be depreciated over 15 years, compared to 5 years for US-based R&D workers. This has a direct negative impact on a company's cash flow, as they effectively make larger advance tax payments. For startups, particularly those relying on US investors and featured in 'Who is hiring' posts, this cash flow implication can be a decisive factor against hiring overseas R&D talent, even if the nominal salary is lower. The discussion highlighted that even if a foreign engineer costs a third of a US one, the 15-year depreciation can be prohibitive from a cash-flow perspective.

Market Dynamics and Domestic Talent Pool

scarface_74 suggested that the US market itself offers a plentiful supply of remote talent. Companies can hire developers from lower cost-of-living areas within the US (e.g., "MiddleOfNowhere South Dakota") who may work for more competitive salaries without the added complexities of international employment. With a market reportedly "flooded with unemployed 'full stack developers,'" companies find it easier to source 'good enough' talent domestically, especially for common CRUD development roles.

National Security and Government Contracts (CIFUS)

For companies operating in or adjacent to sensitive sectors, registeredcorn introduced the role of the Committee on Foreign Investment in the United States (CIFUS). If a company deals with critical technologies, infrastructure, or sensitive data, having a significant portion of its workforce, particularly in influential roles, composed of foreign nationals could trigger CIFUS oversight. Even if not immediately applicable, many CEOs might prefer to keep their options open for future government contracts, which could be jeopardized by a heavily international workforce, thus favoring US-only hires to avoid exhaustive bureaucracy related to national security.

Practical Considerations: Time Zones

Simple logistical challenges like time zone differences, mentioned by jamesgill and FajitaNachos, continue to be a factor, making synchronous collaboration more difficult with globally dispersed teams.

Workarounds and Their Viability

The discussion also explored potential workarounds:

• B2B Contracting: Commenter quacksilver shared a personal setup: operating as a foreign corporation and engaging with US companies on a B2B outsourcing basis. This involves obtaining an EIN, filing forms like W-8BEN-E, 1120-F, and 8833. This structure avoids employee status and associated rights but provides flexibility. However, csomar cautioned that such arrangements could be deemed 'disguised employment' and might not be legal in many jurisdictions, even if both parties were in the same country. sbacic countered that 'disguised employment' has specific criteria and that freelancing can be compliant.
• Outsourcing Firms/EORs: As thuanao noted, hiring through outsourcing firms or Employer of Record (EOR) services is common, even among startups. The US company pays the firm, which then handles the employment of the international worker. However, this adds a layer of cost and complexity, and as csomar implied with Deel, it might be a stopgap before realizing the need for a proper foreign entity for long-term, scalable hiring.

Broader Trends

TheCapeGreek suggested that the initial "remote hype" from the COVID era has subsided, and political winds might be shifting towards favoring local hires, with some regulations potentially tightening to prioritize local employment before contracting abroad. This sentiment is echoed in the UK and parts of the EU, though the EU is sometimes seen as more timezone-aligned rather than strictly regional.

In conclusion, the move towards 'US-only' remote hiring is driven by a confluence of heightened legal scrutiny, significant tax disincentives, national security considerations, a readily available domestic talent pool, and persistent logistical challenges. While workarounds exist, they carry their own risks and costs, pushing many US companies towards the simpler, albeit more restrictive, path of hiring within their own borders.