This is part three of The Logic’s in-depth series exploring how Canada is faring in the global competition for tech talent, as economies reopen and companies and governments jockey for advantage in a remote-work world. Read the rest of the series here.

Waterloo, Ont.-headquartered Uvaro doesn’t technically employ anyone in Cameroon. And yet a member of its development team clocks in at the tech-sales training company every day from Buea, a city nearly 10,000 kilometres away.

For a startup like Uvaro, making such a long-distance hire might come with a high cost, both in money and in the time it takes to comply with another country’s legal and labour requirements. That’s why, as Canadian startups and scale-ups look further afield for technical talent, business is booming for companies that manage paperwork and payroll are seeing major demand.

Some Canadian innovation-economy companies that sent staff to work from home when COVID-19 first struck have embraced distributed teams, and are now actively recruiting for engineers, developers and other hard-to-fill roles outside their home cities or country.

“Our networks are strongest locally,” said Uvaro CEO Joseph Fung. But the pandemic made already-employed workers cautious to switch jobs, and the firm was getting plenty of applications from outside the country. “As we narrowed it down and selected the best candidate, they weren’t always local.” That’s why 30-person Uvaro now has a developer in Cameroon, as well as staff in Malaysia and India.

But recruiting internationally brings practical challenges. “Logistics and costs are a factor, but the really big one is agility,” said Fung. Hiring an employee in another jurisdiction typically requires setting up a local legal entity and registering with tax authorities, a process that can take months.

Uvaro’s employees outside North America are technically employed by Kitchener, Ont.-based tech hub Communitech via its Outposts service, or by one of its partners. Client firms recruit the workers and assign their work; the program acts as an “employer of record” (EOR) and handles payroll, deductions and benefits. The Outposts network, along with its partners, extends to over 160 countries.

“We’re allowing our Canadian founders to play offense anywhere on the globe [that] they need to go get talent,” said Communitech CEO Chris Albinson.

Originally announced in September 2019 with a focus on sales staff, Outposts “really hit the accelerator” over the past spring and summer, Albinson said.

Offloading the compliance work allows smaller firms to hire internationally earlier. A Toronto-based fintech firm looking to build out a U.S. sales team recently used Outposts to hire in Florida, Georgia and New York, according to Albinson. The U.S. is a popular recruiting destination for Canadian startups and scale-ups, but for labour purposes, each of its 50 states is a unique territory. The company “could not have done three jurisdictions” on its own, said Albinson. “They would have been forced to grab one.”

Outposts now has 52 people from 42 companies working in 13 countries, including Australia, Germany, Hungary, Israel, Mexico, Nicaragua and Sweden. The majority are in the U.S.—the service has brought on 37 people for 24 companies across the border since April.

San Francisco-headquartered Terminal has also seen high demand for its services. “When you go remote-first, it doesn’t matter if you’re 30 miles from HQ, or 3,000 miles,” said CEO Clay Kellogg. The company embeds local recruiting teams in its markets to find candidates for client firms, and also offers back-office software for payroll and benefits.

In Canada, Terminal has an office in Kitchener—a few hundred metres from Communitech—as well as locations in Montreal, Toronto and Vancouver. It also has fully virtual operations in Mexico, Colombia and Chile. “We had a thesis in the early days that there was fantastic talent that was underappreciated [and] underutilized,” Kellogg said. Most of its client base is headquartered in Silicon Valley or New York, where tech talent is in short supply and competition is fierce.

Pre-pandemic, clients often came to Terminal with an interest in a particular location, but now the only criteria that most cite is time-zone alignment. The firm started out working with five companies that had also spun out of San Francisco startup studio Atomic, but now has about 50 clients. It’s placed more than 700 workers to date, and is currently the EOR for about 300.

Not everyone welcomed Terminal into Canada. Local startup executives met its arrival in Kitchener-Waterloo in mid-2017 with concern; engineers and developers are hard to find here, too. “These Terminal companies have no interest in building a company in Canada or contributing to the local economy,” Axonify CEO Carol Leaman told The Logic the following year. Several founders contrasted it to Silicon Valley tech giant Google’s more community-friendly approach.

Professional employment organizations aren’t new, Fung noted this summer. “The greater umbrage and frustration with the remote team model that caused so much concern a few years back wasn’t so much about foreign companies hiring local talent [but rather] whether they’re actively trying to be conscious of the ecosystem,” he said, also contrasting Terminal and Google.

Kellogg insisted the initial reaction to Terminal was “very positive,” but acknowledged that “there was some pickup of more mixed reaction,” which he attributed to “a competitive spirit and the belief that [there may be] a limit to how much talent are in these markets.” That hasn’t borne out, he said. The firm has since worked with Canadian clients looking to build teams in Latin America. Terminal recently advertised an engineering role in that region for Toronto-based fintech firm Clearco.

The pandemic has broken down companies’ preconceptions about where the best talent is located, according to Kellogg. “If you’re a good software engineer, anywhere in the world, you’re being bombarded by emails right now, with opportunities.”

That means more clients for services like Outposts and Terminal, which smooth the way for those professionals and their would-be employers. And there’s a side benefit: in this global competition for talent, outcrops of workers employed remotely by Canadian firms “become our best ambassadors,” said Albinson. “We now have [a] density of employees in Atlanta, in Charlotte, in the Bay Area [and] in Austin that are talking about these amazing companies.”