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 Ethiopia can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Ethiopia, 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 Ethiopia.
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 Ethiopia is not the same as paying workers in your own country. Employees have to be paid using Ethiopia’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 Ethiopia are 8 hours per day and 48 hours maximum per week.
Overtime is only permissible for a maximum of:
Employers compensate the employees for overtime as follows:
In Ethiopia, employees expect to be paid monthly.
Bonuses are common in Ethiopia. Employers are not required to pay employees bonuses but may elect to do so as part of their compensation package
In Ethiopia, employees receive one additional day per year for every two years of service.
Employees receive 16 days of paid annual leave after one year of service.
There are 13 public holidays.
Employees receive 100% of their pay for the first month while on leave and 50% for the following two months. Employees receive six months of sick leave.
Female employees in Ethiopia receive 120 days of paid maternity leave of which up to 30 days of leave can be availed before the due date and the remaining can be availed post-partum.
Male employees in Ethiopia are entitled to up to three days of paternity leave.
There are no statutory provisions for parental leave.
Employees are entitled to 3 days paid leave for marriage.
Employees are entitled to 5 days unpaid leave for exceptional circumstances.
Termination of the employment contract is possible only by the provisions of the Labor Proclamation. The following are the grounds of termination of the contract by either party:
Notice period in Ethiopia of termination depends on length of service, as follows:
In Ethiopia, severance is typically required, unless in case of redundancy. Severance pay is 30 times the average daily wage at the last week of service.
Probation period is 6 months.