Unboxing Deel's International Contractor Management Business
Understanding Deel's international contractor management business, its key competitors, how it differentiates itself, and potential opportunities.
Hi readers,
After some reflection, I’ve decided to change the format of the newsletter from aggregating product management content to unboxing companies and their strategies.
I made this pivot because I want to provide value to the community but also enjoy the process of doing that. I saw that the newsletter was gaining little traction and found the process of finding content not very interesting, however, once I started to explore this idea of unboxing companies and doing the research— I found a spark.
So, here’s to something something new!
Special thanks to my friends, David Thor, for inspiring me to write about unboxing companies and, Ravi Patel, for editing the first draft of this post.
I’m happy to hear any feedback, or if you have any suggestions of companies I should explore.
Happy reading,
Mike
Deel's International Contractor Management Business
Words: 2,105 | Estimated Reading Time: 10 minutes
The Product
Deel’s Contractor Management lets you onboard, manage, and pay international contractors compliantly in over 150+ countries with flexible options, including 150 currencies, Crypto, Wise, and more.
TL;DR
We’re focusing only on Deel and its competitors’ global contractor management product lines; although, they have several other related product lines. These companies help customers onboard, manage, and pay international contractors compliantly in many different countries around the world.
Hiring international contractors is difficult because companies usually don’t have the internal resources to navigate local laws of other countries which is time-consuming and can open the company to additional risks. Also, it’s hard to manage international contractors with processes involving multiple tools.
Deel’s differentiators are its payment flexibility and always-on compliance positioning. It supports over 8 different payment options which include cryptocurrencies, Wise, and their own Deel Card. They also boast a strong claim that “Deel’s always-on compliance mitigates more risk than any other provider”1.
Emerging trends in the industry are leveraging AI and companies using their existing global employer-of-record product to make it effortless to transition international contractors into employees and manage misclassification risk.
In terms of growth strategy, two opportunities for Deel to explore are a new product line around helping customers find talent and bringing its Deel Premium protections in-line with Remote’s Contractor Management Plus.
Note: I leveraged company marketing and help websites and third-party websites such as G2 and Capterra to assemble this article. It may not fully reflect the full functionality of each company and should be used to provide directional insight.
Problem Space: Hiring Contractors Globally
Note: We’re only focusing on Deel and its competitors’ global contractor management product since covering all their other related products would be a lengthy process.
What’s the problem?
Local compliance: Hiring contractors from different countries can be difficult because companies typically don’t have the internal expertise to navigate the local laws and create compliant contracts. Also, it can be time-consuming to find lawyers in each country. Overall, the process can be overwhelming for teams and expose the company to unknown risks and penalties.
Managing payments: Keeping track of who to pay, when to pay, how much to pay, and tracking successful payments can easily become a time-consuming task when you need to leverage spreadsheets and other steps to submit payments.
Scattered processes: Companies can leverage several tools such as spreadsheets, document signing software, and email to help manage contractors. However, this can lead to many spreadsheets and things falling through the cracks— when lots of emails are exchanged, it’s easy to miss an email. It’s also hard to have a centralized view of what’s going on when stringing along several disparate tools.
When does this occur?
Finding the best talent: Increasingly, companies want to hire from around to world so they can find the best talent for their needs and don’t want to be limited by their borders.
Market expansion: Companies planning to expand into a new country may want to hire people there so they get access to people who understand the local language and cultures with minimal effort.
Acquisitions or mergers: After a company merger or acquisition, you may need to absorb new contractors across different countries quickly.
Customers
Deel has over 25,000 customers and serves both startups and enterprise businesses. Some customers include Supercoder, Sendspark, Mixtiles, Makerpad, and Cake.
Key Competitors
Oyster HR: A global employment platform designed to hire, pay, reward, and manage talent compliantly around the world.
Product lines: Employer of record (EOR), contractor management, global payroll, compensation management, talent network, and talent mobility.
Remote: A global HR platform that enables companies to manage employees, approve payroll, and consolidate HR data around the world.
Product lines: EOR, contractor management, global payroll, HRIS, and talent network.
The Strategy
Common strengths
Common features for Deel and its key competitors are helping customers from onboarding through paying and managing international contractors compliantly.
Compliant onboarding: Collecting contractor information such as personal information and payment details and conducting identification verification.
Localized contracts: Enabling companies to create, send, and sign locally compliant agreements in numerous companies with access to local legal partners.
Invoice management: Automatically generating invoices for contractor work, where 2 of the 3 companies reviewed also synced with popular accounting tools.
Global payments: Supporting contractor payments in over 150 countries in various currencies and tracking payment status.
Miscellaneous contractor management: They help manage miscellaneous items such as cost insights, time-off management, and tax paperwork.
Emerging trends
AI compliance technology: Deel and Oyster are beginning to leverage AI technology in their products. Deel has an AI-powered work assistant that lets companies quickly access global HR information from a legally vetted knowledge base2 and another AI-powered tool to classify workers with 90% accuracy3. Last year, Oyster created an AI-powered chatbox to answer questions about global hiring and remote work regulation.4
Big picture: Deel took a large leap into AI by creating a new research and policy department, Deel Lab for Global Employment, to develop AI-powered compliance technology and make policy recommendations.5
Contractor-to-employee transition: Deel and Oyster both help companies easily convert contractors into employees by leveraging their EOR service. Remote also has an EOR service but it’s unclear if they support easily converting contractors into employees based on their marketing website.
Natural extension: Companies that have good experiences with contractors may want to hire them as employees. This is beneficial for Deel and its competitors since they can likely charge a premium for employee services and who may have a longer lifetime value than contractors hired for a project.
Resolve misclassification: The solution also allows companies to easily convert contractors into employees to avoid employee misclassification risk which has financial, legal, and other penalties associated with it.
Differentiation
Deel tries to differentiate itself from the rest of the competition by zeroing in on compliance and payment flexibility.
Always-on compliance: Deel has compliant onboarding, misclassification alerts, and automatically flags changes in local labor laws, tax laws, and possible compliance issues with recommended action items.
The claim: Deel positions itself strongest on compliance with the statement “Deel’s always-on compliance mitigates more risk than any other provider”6.
The competition: Oyster and Remote don’t make as bold of a statement but say they work with country-specific experts to be up-to-date on legal and regulatory standards. Deel and Remote have a more expensive subscription that includes indemnity protection, but Remote’s limits are 4x higher.
Payment flexibility: Deel’s biggest differentiator is the number of different payment options including card transfers, bank transfers, Crypto, Wise, and Revolut. Remote also leverages Wise for multi-currency payouts, but overall, Deel offers more options than any of its competitors.
Why it’s valuable: Contractors living in countries that experience high levels of inflation such as Venezuela (200%), Argentina (93.7%), and Turkey (62.5%) where holding assets in local currencies could easily be halved in value through inflation, would likely prefer holding assets in more stable currencies.
Even better: Deel has its own financial product, the Deel debit card, which lets contractors spend funds directly from their Deel balance. This is a solution none of its competitors have yet.
Opportunities
Market penetration
Improve misclassification protection: Deel Premium subscription is comparable to Remote’s Contractor Management Plus but the latter provides better value through higher liability protection limits. They both provide their contractor services and additional liability protection for the same cost of $99 per contractor.
Higher limits: Remote’s plan offers better value and protection by offering 4x higher dollar limits on its liability protection than Deel. Deel could be more competitive depending on the needs of its customers but might be fine with its misclassification alerts and proactive flagging of changes in local laws.
Poor customer support occurrences: Several complaints on Capterra share poor customer support experiences; these seem like the exception since Deel’s ratings on G2 and Capterra are over 4.7 out of 5. There were instances of little customer support availability, slow response times, and incorrect information shared.
Fee reduction: Several comments on G2 and Capterra mention high fees which include withdrawal fees and exchange fees. This could be something outside Deel’s sphere of control and related to external financial institutions, but it should be examined to see if there are ways to reduce them.
Pricing: When comparing base subscriptions for contractor management services, Deel is priced at a $20 premium at $49 per month per contractor compared to competitors. They may be able to earn this premium through its differentiators of payment flexibility and always-on compliance but there is always room to test pricing.
Test subscription pricing: They could be turning away new customers who are price-conscious and skeptical of the superior compliance protection. I imagine Deel is continuously testing pricing but it’s worth a mention.
Introductory trial: An introductory trial like Oyster’s 30-day trial might be an interesting thing to test as a way to offset concerns about the higher pricing. I imagine customers in this industry are sticky because of the high effort to switch and wonder if it’s more beneficial to just get someone to sign up.
Product development
Finding talent: Deel could consider helping customers find talent. Oyster and Remote help customers find talent through job postings and one-on-one support. This would be beneficial to both Deel’s international contractor business and EOR business by reducing friction in finding contractors or employees.
Risk: The ability to attract quality candidates to support the product and lead to beneficial customer outcomes is a risk to take note of. This may be a reason Deel hasn’t pursued this problem area in the past.
New market development
Local market acquisitions: Deel could acquire new customers and strengthen its local footprint by acquiring companies that have a strong customer base in those markets. For example, Deel recently acquired PaySpace, an African-based payroll and HR software service company, to strengthen its footprint in Africa7.
Support additional currencies: There are several currencies that Deel doesn’t support but its’ competitors do, such as the Seychelles’ Rupee, the Croatian Kruna, and Angola’s Kwanza. However, the effort to support them might not be worth it depending on the size of those local markets.
Bilingual contract support: Of the competitors, only Remote supports bilingual contract support; however, this might be a nice-to-have feature. This is because most international contracts are written in English; however, some countries such as Indonesia and China require them in their national languages.89
Threats
Changing legal and compliance requirements: Keeping ahead of changes in legal and compliance requirements is a major risk to manage. With so many countries to keep track of, Deel and its competitors must be proactive and work continuously with their local legal teams to help manage this risk and enable customers to easily navigate any changes. Failure to do so could lead to expensive fines, legal cases, and/or damage to reputations.
Political and economic instability: With crises and war in different parts of the world such as Ukraine and the Middle East, the potential for more countries to be pulled in, could have major negative impacts on those countries and access to people in those countries.
Protectionist policies: Any domestic protectionist policies may make it harder and/or more expensive to hire contractors from abroad.
Intense competition: There’s very little that separates Deel and its competitors and I can only imagine they will continue to compete intensely to close new functional gaps and figuring ways to differentiate themselves from one another.
Appendix
Comparison
Disclaimer:
This is not an endorsement for Deel or any of its competitors. The information provided in this article is intended for general informational purposes only. It should not be considered professional advice or a substitute for seeking professional guidance. The information here has been collected from publicly available resources including marketing websites and third-party websites.
Deel is a great company, thanks for breaking it down. I love the Winning / Playing positions. I think more tail winds than head winds to Deel's business overall (I know you only covered their international contractor product line) because they are now EoR, they can manage a lot of additional offers that legacy companies like ADP used to manage.