Read This Before Hiring Software Engineers in Eastern Europe

There’s some debate about which countries are in Eastern Europe. To make it easier, we decided to go by what the United Nations geoscheme says: Belarus, Bulgaria, Czech Republic, Hungary, Moldova, Poland, Romania, Russian Federation, Slovakia, Ukraine. Ten countries with their own legal systems, cultures, and salaries.

We understand that direct-hiring software engineers abroad can seem overwhelming (reading tax codes translated from a foreign language, yikes!), so we focused on five main points to give you a better understanding of what you should know before jumping into remote hiring.

We’ll look at what makes Eastern Europe a good place to source talent from, how to deal with legal compliance (taxes, payroll, etc.), whether or not it’s a good cultural fit for your company, the level of talent/expertise available, and how much it will end up costing you to hire remotely.

#1: Why Should I Consider Eastern Europe for Hiring Tech Talent?

Remember in school when they taught us how to rephrase a question when answering it? Let’s try it. I should consider Eastern Europe for hiring tech talent because…the tech talent pool has 1+ million IT experts. It’s true. Plus, that number is growing, not only in quantity but in quality (we’ll look at tech talent & domain expertise in more detail later).

Like in our guide on Latin America, where we mentioned the incredible number of emerging startups and entrepreneurs, Eastern Europe is taking advantage of the proximity to Western Europe and remote working to take the world by storm. Many US companies are setting up R&D offices all over Eastern Europe, and those teams are expanding.

Eastern Europe has long ago broken out of its Soviet shell, and in our opinion, it’s a talent hotspot that cannot be overlooked.

#2: How Do I Deal With Legal Compliance (Taxes, Payroll, Labor Laws)?

Entering any new market, whether physically or as a legal entity, comes with complications. Obviously, countries should be interested in lowering the bureaucracy bar to make barriers to entry a thing of the past. However, this isn’t always the case, and not every company has the money to hire additional staff to handle the mountain of paperwork. Luckily, even the most lagging countries like Ukraine are taking steps to abolish outdated laws. Ukraine is introducing a new legal framework called Diia City, the world’s first virtual city.

Let’s explore the legal compliance you need to be aware of, regardless of if you do it on your own or with the help of an employer of record.

Guide to Payroll and Taxes For Domestic and Global Remote Teams

A Snapshot of Ukraine’s Labor laws

• Standard income tax is 18% (applies to salary, benefits, and foreign income)+ 1.5% military tax.
• The normal duration of working time cannot exceed 40 hours a week.
• Overtime work must not exceed four hours on two consecutive days and 120 hours a year for each employee. Overtime hours are payable at double the hourly rate.
• The statutory minimum amount of annual leave for each employee in Ukraine is 24 calendar days.
• There are eleven public holidays a year. Public holidays are paid and not included in the minimum annual holiday entitlement.
• The general notice period for termination of a permanent employment agreement by an employee is two weeks (except where there is a justifiable reason for earlier termination).
• The employer and the relevant employee jointly own the proprietary rights created during work by a company’s employees, unless otherwise provided by the agreement.

A Snapshot of Czech Republic’s Labor Laws

• Employers pay a social security contribution of 24.8% of gross earnings and health insurance of 9% of gross earnings for each employee.
• Employees pay a social security contribution of 6.5% of gross earnings and health insurance of 4.5% of gross earnings.
• Personal income tax is paid at a flat rate of 15% of gross salary.
• Standard annual leave is 4 weeks.
• Employees are entitled to overtime pay at an increased wage of 25% of their average earnings or compensatory time off.

#3 Is Eastern Europe a Good Cultural Fit?

Culture can be a loaded word. What does it really mean to be a good cultural fit? In our opinion, you can’t label an entire region a “good fit” or “bad fit” based on generalities.

We believe cultural fit can be measured by looking at soft skills:

1. Communication — Beyond English knowledge, communicating with your team members shouldn’t require you to bend over backward (and vice versa).
2. Behavior — Not shirking responsibility and taking command of tasks.
3. Values — A get-things-done attitude is common in Eastern Europe, especially in the software development industry.
4. Attitude — No one wants a toxic person on their team. Eastern Europeans take workplace relationships very seriously.

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Also, direct-hiring (aka running the interview and selection process) means you can gauge whether the candidate fits your company’s culture. You’re not hiring a mercenary that’s razing a town of villagers — you’re hiring a teammate, someone that you trust and value, and someone you want to build something with.

#4 Is There Enough Talent & Domain Expertise in Eastern Europe?

If you’ve looked into tech talent outside the US, this will seem like a rhetorical question. With nearly a million IT experts, Eastern Europe is the perfect place to find talent.

Any technology or tech stack you can think of — Eastern Europe has it. As the region is outsourcing-heavy, software engineers are molded by new technologies. They think differently, more openly, show initiative, and they’re not afraid of walking on a path less traveled by.

Google’s Thoughts on Tech Talent in Eastern Europe

In a recent Google article looking at the 5 reasons to watch startups in Central and Eastern Europe, the #1 reason was Tech talent pool has real game—literally. Google went on to cite a few important figures: Since the Google for Startups Campus opened in Warsaw, the startup community has hired 43,000+ employees across a range of industries. They stated that there are about 1 million software developers in Central and Eastern Europe (50%) in Poland, Romania, and the Czech Republic. And if you rolled your eyes at the “literally” part, it turns out that Poland has 400+ gaming development studios, churning out hundreds of new games each year.

Startups That Are Making It Big

Warsaw is a good example of a tech hub that has really taken off in the last five years. From Bucharest to Kyiv to Moscow, almost every other tech hub is ballooning in size, too.

Here are some examples of Eastern European startups that have recently secured funding:

• Ukrainian startup airSlate (workplace automation solution) secured a $40M deal in 2021
• Ukrainian startup Creatio (CRM, low-code, and process automation) grabbed $68M in funding in 2021
• Restream, a Ukrainian-born multi-streaming service, secured $50M in Series A in 2020
• Romanian startup FintechOS raised $60M in Series B funding to fuel global expansion.
• Polish-founded Booksy raised a $70M war chest to acquire salon appointment apps, expand internationally.
• Brainly raised $80M as its platform for crowdsourced homework help balloons to 350M users.
• Czech BNPL Twitso nabbed €16 million in Series C funding
• Polish Startup Picup launched Europe’s first 100% biodegradable, plantable coffee & teacups
• Czech on-demand grocery delivery startup Rohlik bagged $230M to expand across Europe

Evolving Domain Expertise

With domain expertise, Eastern Europe has everything under the sun: AI, Blockchain, Fintech, EdTech, etc. We have to give it up to niche outsourcing studios, who in recent years have moved from being jack-of-all-trades and take-on-any-project-oriented to focusing on a single industry. This is a major advantage for both the outsourcing studios and software engineers — focusing on a single market = excellent domain knowledge expertise.

#5 How Much is it Going to Cost to Hire in Eastern Europe?

Based on our research and experience, you get what you pay for. If you’re expecting to reduce costs by 90% and release your product on time, well, there’s little to no chance of that. That might sound harsh, but the reality is that talented teams cost more. A more realistic number to aim for would be in the 40-50% cost reduction range.

Plus, for full transparency, you should also remember that if you intend to hire legally (which we recommend), you’ll have to factor in the costs of benefits, perks, taxes, among other things. Also, some countries require you to set up a business entity in that country before being allowed to hire legally, so there are some hidden costs involved that most companies don’t tell you about upfront.

You can go the outsourcing route and bypass all the legal formalities associated with opening a business in a foreign country. However, it can get risky — you’re partnering with a company that most likely isn’t transparent with you. They could add or remove team members without your knowledge — endangering the stability of your company and any plans you may have.

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And at the end of the day, if you think it’s too good to be true, it probably is.

Here’s a breakdown of the annual salaries of five of the hottest remote hiring destinations in Eastern Europe.

Figures taken from our Budget Calculator and SalaryExpert.com

Takeaways — Hiring Remote Engineers in Eastern Europe

Eastern Europe isn’t synonymous with the Soviet bloc anymore. The region has seen boom after boom with each passing year. Following the 2020 trend of expansion and tech innovation, Eastern Europe attracted more foreign investment than any year to date.

That said — if you don’t have millions of seed investment money to throw at more back-office staff to handle compliance and other problem areas, an employer of record is a good middle ground.

We cover compliance, recruiting, and accounting (if you need them), and we know the ins and outs of hiring software engineers in Eastern Europe, giving you the freedom of handling your core business.