In previous articles, we’ve talked about creating a job profile, getting it seen by the right people, selecting CV’s, and doing interviews. Our final installment talks about making actual offers to candidates, and the responsibilities, cost, and risks as an employer.
Step 1 – Know your real cost
The real cost of employing someone is more than just a salary. There’s the office space and computer. There’s the secondary benefits. But most importantly, you need to understand the tax burden of the country where you hire. France, obviously, is at a huge disadvantage here. France’s payroll taxes are infamous for a good reason – they are sky high. More than that, there are many hidden gotchas that are additional drains. If you pay a French employee a salary of €40,000 a year, figure that your total cost is about double that, when all is said and done. So that’s an employment tax pressure of around 100%. Romania is much more reasonable in that regard – we pay around 40%, depending on the tax breaks that go in and out of fashion.
The Silicon Valley’s Dirty Little Secret
So now you know how much it costs. But there’s more than that. You’re also taking on risk. But first, let’s compare two places that are both famous:
Us Europeans hover between envy and irritation when ‘Silicon Valley’ people blow into town and brag about their superior employment conditions. But wait, is that really true?Having spent eight years working there, I feel I have a basis for comparison. And the truth is, the mythical place called ‘Silicon Valley’ is really located in a very real place called California. And guess what? California LOVES regulation, red tape, and high payroll taxes. Tax pressure is around 60-70% – in addition to the federal and state government, the city government also takes a slice of your taxes, so each city has different taxes. Not bureaucratic enough for you yet? The labor regulations are also crazy, right up there with French rules about how high the ceiling above the employee must be, and other nonsense.
So next time Twitter is bragging about having negotiated with the city of San Francisco about their taxes, you need to remember it’s merely to bring it down from the insane to high-but-bearable. So ‘Silicon Valley’ (not a real place!) is right up there in terms of taxation and regulation with, say, Germany. Sorry to burst that bubble (no pun intended).
The only thing where they are truly at an advantage is when it comes to firing. This is the stuff of myths, so let me explain both the French and the California side quickly.
In California, ‘At Will’ employment is the norm, as in most of the United States. This means that both parties (employer and employee) can terminate the relationship at any moment. But wait? Doesn’t that mean that all Americans get fired every time they take a cigarette break? No! First of all, to make sure that firing isn’t because of discrimination, the laws around that are much more tightly enforced. So in practice, what does this mean? American employees are cautious about their behavior in the workplace, because they know that if they slack off, they will get fired eventually. But in reality, firing people is still a pain in the ass to do, so managers avoid it when they can. In my 8 year career in the US, I’ve seen maybe 10 people fired. And they all deserved it. So nothing crazy – no Donald Trump situations. And do people work harder because of this? Yeah, but not that much.
The French situation
Without exaggerating, in France, employment is very stable, in the sense that you need to really misbehave to get fired. To fire a French employee, you have to either document their misbehavior (warnings with registered letters, all that fun), or the economy must be in recession. Even then, there’s a formula that for every year of employment, they get 5-10% of their year salary as a parting gift (and yes, there’s an iPhone app to calculate this). This adds up quickly. So more than anything, firing in France is EXPENSIVE and people avoid doing it whenever they can. Because of the parting gift, it also encourages you to leave senior people and fire junior ones. This is bad in several ways. It means that senior employees know that they are untouchable, and so get less and less productive with each passing year. Whenever there is a recession, managers all over France sigh with relief and fire their senior staff at discount rates.
So what do we take away from this?
In France, hiring is something that you must do with extreme care. This cheerful motivated person may turn out to be the worst slacker in the world the moment the dreaded trial period – the first few months in which both parties can terminate with little notice, as negotiated in the contract – in the labor contract is over. You must do anything and everything to weed out the slackers-to-be before you make an offer. Also, you won’t always succeed. And you’ll have to pay the firing bonus to a person who least deserves it. Welcome to France.
The upside to this is that people tend to stay long at one company, often without turning lazy. So you can build a team that knows each other super well. That’s pretty awesome for productivity. Another thing is, your team size must be very stable. In the US, you can build up a team temporarily (say for 3-6 months) and then reduce the size. You can’t do that in France, you have to work with freelancers for the temporary capacity portion.
A straight-up comparison
So your conclusion should not be that you need to take a one-way flight to California right now. Let’s compare cost. A French developer will run you about €50,000 a year, go ahead and multiply that by two as your real cost (€100,000). What about a San Francisco developer? This mythical creature will run you about $100,000 a year at minimum, these days. If you add up the tax pressure on top of that salary, you end up around $140 – 160,000 a year. The only penalty you pay in France is difficult to fire, which in practice, with developers, is rarely an issue since they job-hop every 2-3 years on average. Office costs for San Francisco and Paris are roughly the same, and both places are cheaper if you move 10-20 kilometers away from the city center into the suburbs.
Step 2 – Composing your offer
So now you know what you’re getting into, cost wise. You’ve probably already committed to your secondary stuff (the lunch tickets, free fruit, etc). In France, you now have to worry about the type of contract you will offer – CDI or CDD. It’s not really my expertise but I’ll say at least that CDD can actually be more dangerous than CDI, as it’s even harder to fire someone halfway into their CDD. CDI with the maximum trial periods is probably your best bet. Don’t skimp on having a good lawyer/accountant/labor contract expert look at your paperwork. Your life may depend on it.
In the US, this part is easier. A one-page letter spelling out the conditions suffices.
In Romania, we have our lawyer do what looks like a cookie-cutter contract. I know it doesn’t take him a lot of time to crank out.
Now, what salary are you offering? There are several schools of thought. The first is, the cheaper, the better. Since you’re paying, less is more, right? Sure. Developers are fairly vulnerable in this department, as they can be very clueless or indifferent about their market value. So sure, low ball the developer. The upside is monthly savings in the bank. The downside is that when they find out later, they will resent it and probably leave in a huff.
In Romania, we made the choice to pay 10% above market. At the time, Romania was cheap anyway, so the idea was to ONLY have senior developers, since they are cheap. And to pay them above market so that they stay loyal. This worked – we put together a great team, but Romania got too expensive. So we still do above market, but we don’t have only seniors anymore.
In France, the situation is more nuanced. People don’t just look at salary (with some exceptions, of course!).
So when you make an offer, make sure it includes the following elements:
- An expiration date: This is to prevent people from shopping around for months for the best offer. I usually do one or two weeks.
- If references haven’t been checked yet, make the offer conditional based on passing the check.
- The financial part: Salary, bonus, commission, everything.
- Secondary compensation: Anything and everything that’s extra.
- What you get back in return: how many hours per week worked, the time of the day those hours must be worked.
- I always put in something nice about the great workstation the developer gets. Make sure you know what the person wants: developers are incredibly finicky about their workstations. Some want Linux, some want laptop, some want 2-3 screens. Make sure you ask beforehand. I only veto Apple equipment, just because I can.
Now, after you’ve made the offer, you can only sit back and wait. I used to make one offer at a time, but usually the yes/no ratio is about 50%, so only having one offer outstanding at a time can stretch the timeline even further. So these days I will put out several overlapping ones, and just deal with the mess when too many accept – a rare occurrence.
Speaking of timeline, be aware of notice periods. Again, different countries, different rules. In the US, under ‘At Will’ employment, you can walk off at any moment if you so desire (forget about getting a good reference!). So the notice period is a courtesy. Two weeks’ notice is what I saw consistently, in both directions, although I walked out on my last ever employment (in 1999) because the VP of Sales was incredibly rude to me.
In France, there’s a two month notice period(!!), which is part of the law. So from acceptance of offer to start of work, count on 2-3 months, assuming you’re hiring someone who is already employed elsewhere. This is incredibly painful, obviously, if you’re building a team in in a hurry, which is why you see so much freelance and outsourcing in France. Romania is one month as a courtesy, and we’ve pressured people into less than that a few times when we were desperate.
Making offers, and employment in general, is a complex subject. Make sure you cover all your bases, and know what you get into, and then make offers that are clearly defined. Don’t expect everyone to accept your offers, and make it enticing and clearly spell out what you expect.
This is the last in a four part series of articles about the recruitment process with developer positions. Feel free to follow up with the rest of the series: