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 Madagascar can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Madagascar, 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 Madagascar.
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 Madagascar is not the same as paying workers in your own country. Employees have to be paid using Madagascar'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 working hours in Madagascar is 40 hours a week with eight hours a day.
Overtime is paid at 130% above the basic wage for the first eight hours and then 150% onwards. Evening work is paid at 130%, while weekend work is paid at 140% and then 150% if it is a public holiday.
The typical payroll cycle in Madagascar are generally paid on a monthly basis.
In Madagascar, bonuses are not required, but are common.
Employees are entitled to have 2.5 days leave per month.
All the employees working in Madagascar have the right to claim 30 days of paid leave per year if they have worked in any organization for more than a year.
There are 12 public holidays.
Employees in Madagascar are entitled to a paid five sick days a year.
Female employees receive 14 weeks of fully paid leave with 8 weeks to be taken after the birth.
This leave can be extended by three weeks due to a pregnancy illness or complications. Women are entitled to their wages which get paid partially by insurance and the employer.
There is no law stipulating paternity leave, but all workers receive 10 days leave a year for family events, and this could be utilised by new fathers.
Medical leave - Every employee working in Madagascar is entitled to at least five(5) days of paid sick leave, extendable in the case of chronic illnesses.
An employment contract can be terminated in Madagascar when the term of the contract comes to an end.
There must be some practical reasons for the termination of the employment contract. During the probation, the employment contract can be deemed void without any notification.
The notice period for termination is determined by the type of employment and length of service, and can range from eight days to six months.
Employees in Madagascar are not generally eligible for severance pay, except if they are terminated for economic reasons, in which case the employee is entitled to 10 days’ wages for each year of service, up to six months’ of wages.
The probation period according to Convention Number 158 of the ILO, a probation period of any employee can last for at least six (6) months.