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.
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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 Spain can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Spain, 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 Spain.
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 Spain is not the same as paying workers in your own country. Employees have to be paid using Spain'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.
Full -time employment is considered 40 hours weekly, and 8 hours daily.
Overtime policy is usually covered by Collective Agreements. The guidelines set out by law are that overtime hours should not exceed 80 hours per year.
Overtime can be compensated by paying a higher amount than the employee salary or by replacing the hours with an equivalent paid rest period.
Employer
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Employees are paid monthly by the last day of the month.
The 13th and 14th salaries are mandatory in Spain and are usually pro-rated over 12 payments, however, it varies depending on the company’s collective agreement.
Many collective agreements do include 13th and 14th salaries.
Paid time off is at least 30 calendar days.
Employees are entitled to an uninterrupted rest period of at least one and a half days per week.
As a general rule, this must include Sunday.
Each province in Spain has a different number of public holidays, but do not exceed 14 in total.
Out of these 14, there are 9 national holidays.
Sick leave is as follows:
Mothers are entitled to 16 weeks’ maternity leave. The leave can begin up to 4 weeks before the expected due date and at least 6 weeks must be taken immediately after the birth of the child.
During maternity leave, the employee is not paid their salary, but rather, a maternity benefit. The maternity benefit is calculated based on the previous month’s contribution (including monthly salary and the proportional part of the extra pay) and is paid by social security.
The maternity benefit is capped at 4,070 EUR per month. If the employee’s salary is generally higher than this amount, the employer can decide to pay the difference, however, this is not mandatory.
Fathers are entitled to 16 weeks of paid paternity leave.
The first 6 weeks must be taken immediately after the birth of the child. leave can be extended by two weeks in the case of multiple births.
All 16 weeks are 100% paid by the state.
Employees have the right of leave up to three years to attend to the care of each child, whether natural, adopted or being fostered permanently or as pre-adoptive measures.
Females workers have the right to one hour of absence from work each day to breastfeed an infant of less than nine months. This can be divided into two half-hour periods.
January 1, 2020, leave will be extended to 16 weeks, the first 6 without interruption.
Neither of the parents may will be able to transfer this right to the other.
Adoption Leave: 6 weeks compulsory and uninterrupted leave for both partners. 16 unpaid weeks in total can be shared between both parents. A maximum of 10 weeks can be taken by one with the remaining 6 weeks being taken by the partner.
Serious illness or injury of family member: 2 days (4 days if travel is required).
Moving: 1 day for moving to a new house.
Marriage: 15 calendar days
Bereavement: 2 days (4 days if travel is required) for the death of a family member.
The end of a temporary contract – the worker is given notice as established in the collective agreement/employment contract. The employee is entitled to the proportional part of extra pay and holidays as well as the compensation of 12 days’ salary per year worked.
Voluntary termination by the employee – the employee must give notice to the company with the notice established in the collective agreement. On their last day the company will pay the amounts corresponding to the payroll and termination.
Dismissal:
a) Disciplinary–there is no notice and the final payroll is paid on the day of dismissal, without compensation, delivering the letter with the reasons for which the dismissal is made.
b) For objective reasons–the amount corresponding to 20 days of salary for each year worked is paid to the worker 15 days before the end date including a letter with the reasons for the dismissal.
Employers should provide 15 days of notice, and if notice isn’t given, payment in lieu shall be given.
Employers should pay 20 days of salary pay per year of service up to 12 months.
If the dismissal is declared unfair (a dismissal without cause) by a judge, the employer may reinstate the employee or pay a statutory severance payment.
Employees affected by a redundancy will be entitled to receive a legal severance payment and an advance notice in writing of the termination of the contract.
A worker who is dismissed for disciplinary reasons is not entitled to severance pay.
It varies depending on the Collective Agreement in place at the company.
The common practice is two months, graduate technicians are usually for a 6 month period.
