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 Djibouti can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Djibouti, 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 Djibouti.
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 Djibouti is not the same as paying workers in your own country. Employees have to be paid using Djibouti'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 Djibouti is 47 hours for a six-day week, 8 hours per day.
Employees in Djibouti overtime is paid as per convention or an agreement between both parties. Overtime should not exceed 4 hrs a day and cannot cross 60 hrs per week.
Any additional overtime beyond the defined hours requires authorization from the inspector of labor.
Employer
The typical payroll cycle in Djibouti is 12 months.
Employers in Djibouti are not required to provide bonuses. However, some employers may choose to offer performance-based benefits.
Employees are eligible for paid leave after completing 12 months of employment. It is calculated at 2.5 days per month amounting to 30 days of annual paid leave.
Annual leave can be split into 2- batches of 14 days each. Employees are also eligible for 12 days of unpaid leave that is not deducted from the annual leave.
There are 9 public holidays.
Employees receive 29 days of sick leave paid at 50% of the basic rate by social security. For any additional day exceed in 29 days, the employee receives 75% of the basic salary.
Employees receive maternity benefits, equally split between the employer and Social Advancement Organization. Female employees receive 14 weeks of paid maternity leave.
It is divided into two batches with 8-weeks before delivery and 6-weeks post-delivery. The leave period can be extended in case of complications with the pregnancy.
Male employees receive three days of paid paternity leave after the child’s birth.
There are no statutory provisions for parental leave.
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Employment in Djibouti can be terminated by either party by giving a minimum notice period.
An employment contract can also be terminated due to non-performance or inability to perform following the demands of the job. It can also include reasons related to health, lack of professional skills, and even misconduct.
For all such cases, a 48-hr notice is provided to the employee.
The minimum notice period in Djibouti:
Employees may be entitled to damages in the event of an unjust dismissal. Damages cannot exceed:
The probation period in Djibouti:
