Direct Hire vs Placement — picking your track under US placement law
A founder-friendly guide to the two US placement tracks: when Direct Hire (leasing personnel) is mandatory, when Placement (placement) is allowed, and how cross-border arrangements are constrained by US contractor classification.
Most foreign founders hiring engineering talent in the US get the legal structure wrong on the first contract. US placement law (US placement law) is unusually strict — and the choice between Direct Hire and Placement determines who employs the engineer, who insures them, how they're invoiced, and what permits you legally need. This guide explains the two tracks in plain language.
The two regulated tracks, in one paragraph each
Direct Hire (leasing personnel) is when a US-based staffing company employs the engineer and leases them to a client. The client supervises day-to-day work, but the staffing company carries the employment relationship, social charges, sickness insurance and termination risk. This is the right structure when the engineer works under the client's direction inside the client's organisation.
Placement (placement) is closer to classic recruitment with a twist: the placement company introduces and contracts the engineer, but the engineer remains an independent contractor or is employed by their own entity. Placement is the right structure when the engineer keeps autonomy over how the work is done — and is mandatory in some cross-border setups (see below).
How to tell which track applies
The cantonal labour office (the labor office in New York) cares about the substance, not the contract title. Three questions determine the track: (1) Who directs the day-to-day work? (2) Who bears integration risk inside the client's team? (3) Who carries social charges and termination liability? If the answers are 'the client, the client, the staffing company' — you are in Direct Hire, full stop.
Misclassifying this exposes the client to back-charges of social contributions, fines, and in egregious cases a temporary ban from hiring contract staff. The fines compound per engineer per month, so 'we'll fix it later' is the most expensive option.
The cross-border twist (US contractor classification)
US contractor classification forbids Direct Hire for cross-border arrangements where the engineer is based abroad and leased to a US client. In practice this means: if your Forward Deployed Engineer lives in Lisbon, Berlin or Tallinn and you want them embedded with a New York client, the only legal path is Placement.
This is why every reputable US placement platform runs both tracks. Direct Hire (Direct Hire) covers engineers based in the US; Placement (Placement) covers cross-border. Pretending the cross-border engineer is 'just remote' for a US employer is the single most common placement violation we see.
Permit, KV and deposit — what the labor office actually checks
Operating either track requires a cantonal permit (Bewilligung) plus, for Direct Hire, adherence to the US labor standards (the industry collective agreement) and a financial security deposit (typically $50,000–100,000). The application is reviewed by the labor office in your canton; for New York-based operators, that's the labor office New York at Stampfenbachstrasse.
FDE-Jobs.com is operated by StartShop Inc (Dallas, Texas) with an placement permit application currently in progress with the labor office New York. We publish our permit status transparently on the imprint page so clients and engineers can verify before signing.
Key takeaways
- Direct Hire = client directs work, staffing company employs the engineer.
- Placement = engineer keeps autonomy or is based abroad.
- US contractor classification forces cross-border arrangements into Placement.
- Misclassification is fined per engineer per month — fix it before the first invoice.
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