Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Guatemala can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Guatemala, you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Guatemala.
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in Guatemala is not the same as paying workers in your own country. Employees have to be paid using Hungary’s employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
The standard workday is 8 hours but cannot exceed 12 hours per day. However, working hours do not apply to high-level executives or domestic workers. In addition, there are some other classifications of workers that working hours don’t apply to such as caretakers, and doormen.
Anything over 44 hours in a workweek is considered overtime and is paid at a rate of 150% of the regular pay.
Salaries are paid on a monthly, bi-monthly, weekly, daily, or hourly basis, depending on the type of work and what is agreed upon in the employment contract.
Salaried employees should receive 2 bonuses a year, equivalent to 1 months’ salary each and are paid out in July and December.
Employees are entitled to 15 days of vacation after their first year of service.
There are 12 public holidays.
Sick pay is either paid by the employer or social security, depending on the reason for the sickness, and is paid at 50% of the regular pay rate.
The length of sick pay depends on the length of employment:
Mothers are entitled to 84 days of maternity leave starting from 30 days before the expected due date.
In the event of a miscarriage or stillbirth, the mother is entitled to 42 days of paid leave.
There are no provisions in the law regarding paternity leave.
There are no provisions in the law regarding parental leave.
Labor union leader– up to 6 days of paid leave for a member of a union’s executive committee in order to carry out union duties. Such a person may also be entitled to additional unpaid leave.
Judicial summons– half a day of paid leave.
5 days paid leave for the wedding of the employee.
3 days paid leave in the event of the death of a spouse or child.
In Guatemala, there is no specific termination procedure other than providing written notice and for just cause. There are, however, some instances in which the employer must get permission to dismiss an employee:
The notice period varies based on the length of employment:
Severance payment is only granted when a court finds that an employer was dismissed without just cause. In this case, the employee is entitled to either be reinstated and back paid from the date of termination or are entitled to severance pay equal to one months’ salary for every year employed.
In addition to the above, if the employee has received any non-cash benefits such as the use of an employee car, mobile phone, food, etc., they are entitled to an additional 30% of their salary for each year of employment.