The world currently experiences lack of qualified software developers who are in high demand among the leading IT-companies. Ukrainian IT specialists are of particular interest due to the market need in talented developers and efficient digital solutions at a reasonable cost. Large companies are rushing to hire highly qualified specialists, at the same time lacking the vision of adequate legal solution regarding formalization of customer-contractor or employer-employee relations with a foreign citizen. It is not enough just to find a good developer; what is needed is setting up the procedure for collaboration between the company and a developer.
First of all, such relations must be formalized. This serves the interests of both the company (customer), who requires protection with regard to all rights to intellectual property developed according to the request thereof, and the developer (contractor), who needs reassurance of payment for the work.
There are several ways to formalize cooperation with the specialist. First way is when the developer relocates to the company’s host country. This makes it very easy for the company; cooperation is formalized pursuant to the procedures and requirements of the host country.
However, not all companies are willing to invite specialists to actually relocate and reside in the company’s host company. Majority would opt for the remote performance of work by the developer. In such a case, there are two ways to proceed as detailed below.
The first one would be preferred should the company aim to expand. If this is the case, opening a subsidiary in Ukraine with subsequent employment of developers as staff members of the Ukrainian subsidiary is the most efficient solution.
The second way is preferable if the company is not planning to set up new offices in other countries. In such a case, IT-company can arrange cooperation directly with the developer; this will, however, require the developer to get the status of a private entrepreneur (self-employed person).
The first option will require more investment and further comprehensive accounting support for the new enterprise; the company, however, will get reassurance of its rights to intellectual property, and will also get an opportunity to gradually increase volumes of production, which will, in time, enable increase in profit.
The second option will require minimum expenses, which will actually include the developer’s remuneration only; this will, however, require particular attention to the text of the contract to govern the relations between the customer and the contractor to protect the customer against any disputes over copyright.
Before finalizing the decision, assessment of the required investment should be done, and a financial plan should be developed. It will help to compare several possible options for arranging the work, and to determine the most suitable model for formalizing relations with IT specialists.
If the second option is to be chosen, which is the fastest and the least expensive, registration of the developer as a private businessperson and signing a contract to govern rights and obligations of the parties shall be the first step in formalizing work relations.
Contract for software development must govern the following:
- Amount and payment procedure of the contractor’s (developer’s) remuneration;
- Terms of reference for the product (software);
- Conditions for the contractor’s access to the workplace;
- Procedure for transfer of the product and right thereto;
- Deadline for product development;
- Rights and obligations of the parties; liability, confidentiality, etc.
The second step in organization of work follows from the first one: such type of work often requires brainstorming rather than proceeding with individual tasks to different individual contractors; therefore “open space” offices are quite popular. Working remotely, individually, IT specialists will be disabled to brainstorm, which may complicate performance of tasks requiring joint efforts of several people. This is not efficient, thus specific environment promoting team work and increasing the efficiency of each individual specialist must be created, which will contribute to well-coordinated work of the developers, will streamline management and work processes. The company will need to lease office premises to locate the whole team.
Lease of office premises in Ukraine by a non-resident company sounds like an easy job, but there are certain pitfalls. Business centers are often not willing to work with a foreign company directly, without it having to set up a representative office in Ukraine; tax authorities may regard lease of office premises without opening a permanent representative office in Ukraine as commercial activities, which may entail currency control issues in both countries.
Thus, to avoid possible problems, a memorandum shall be signed between the company and the developers to establish the location of the leased premises as the address of the joint work.
Lease agreement for office premises shall be checked for hidden payments or increase in lease payments. At the time of accepting the premises special attention should be given to the condition thereof, and all deficiencies should be listed in writing to disable non-justified claims for compensation of losses. In addition, if installation of equipment is planned, Certificate of transfer and acceptance may list the equipment available in the premises as of the moment of transfer thereof.
It would also be advisable to enter into the loan agreement with the developers to indicate the specific equipment provided for their use for performance of the identified tasks.
As a conclusion it is worth mentioning that the specific nature of the activities and the terminology characteristic to IT sphere is the major difficulty in preparing the documents to formalize non-resident’s work with the developers. In all other respects, ensuring the efficient work requires a clear vision from the company (customer) on the exact way it wants to cooperate with the developers; on how it envisions the work process. To develop such clear vision, the company may need to clarify certain organizational and financial issues, where a high-quality accountant’s or legal consultation will be of help.
Managing Partner Law Firm «Legal Consulting Center»
PhD in Law