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 Ecuador can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Ecuador, 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 Ecuador.
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 Ecuador is not the same as paying workers in your own country. Employees have to be paid using Ecuador’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.
Employees work 5 days per week. Normal working hours are 8 hours per day and 40 hours per week.
Regular overtime hours are paid at the rate of 150% of the regular pay. Work performed on Saturday, Sunday, or holidays are paid at a rate of 200% of the regular pay.
The minimum monthly wage is 400 USD.
The 13th salary is paid on December 22nd, and the 14th (which is equal to a monthly minimum wage) is paid between March and August.
Employees receive 15 days of paid leave annually. After five years of continuous service, an additional day is given per year.
There are 12 public holidays.
Employees who have 180 days of continuous contribution to the Ecuadorean Social Security Institute (IESS) within 6 months prior to the onset of illness, or 189 days of continuous contribution within 8 months prior to the onset of illness.
Employees who are covered are paid by the employer for the first three days and covered by IESS for the remainder.
New mothers are entitled to maternity leave of 12 weeks; 2 weeks before birth and 10 weeks after birth. Payment is shared by the social security and the employer. Social security pays 75%, the employer pays 25%. 10 days are added for additional births.
New fathers are entitled to 10 days of paternity leave, 15 days for cesarean or multiple births, or 18 days for babies who are premature or require special care. 25 additional days are added for severe disability or illness.
No statutory regulations.
Hospitalization Leave: each parent is entitled to 25 days’ leave if their child is hospitalized.
1 day of paid leave for the death of a 1st or 2nd-degree relative.
Contracts can be terminated with just cause without severance (with approval from labor authority) for Lack of discipline, dishonesty, serious offense against the employer, serious incompetence, or Non-compliance with regulations. Otherwise, 30 days notice is required.
There is no statutory notice period, it is usually something that is agreed upon in the employment contract.
If employees are not given notice, they are entitled to receive one paycheck for every year employed by the company, with a maximum of 25 months of payments. Additionally, a sudden dismissal bonus is offered at 25% of monthly wages for each year employed. For over 20 years of employment, the employee is entitled to a retirement pension.