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 Hong Kong can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Hong Kong, 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 Hong Kong.
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 Hong Kong is not the same as paying workers in your own country. Employees have to be paid using Hungary’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.
There are generally no restrictions on working hours, except in relation to young persons (under 18 years of age) for whom the maximum working period is usually eight hours per day or 48 hours per week.
Rest Day: An employee employed under a continuous contract is entitled to no less than one rest day in every period of seven days. Whether rest day is paid or not is to be agreed by employers and employees. In general, the rest day is paid in Hong Kong.
There are no special restrictions applicable to the working hours or rest breaks for shift workers.
All employees covered by the Employment Ordinance, irrespective of their hours of work, are entitled to basic protections under the Ordinance. Employees who are employed under a continuous contract by the same employer for four weeks or more, with at least 18 hours worked in each week are further entitled to additional benefits.
Optional (as long as minimum wages are respected overall).
Employees are paid on monthly basis. The wages must be no later than 7 days after they are due. The due date is decided between the employer and the employee.
End of year payment (including double pay, 13th-month payment, bonus) of a contractual nature. It applies to an employee employed under a continuous contract in accordance with a term of his contract (including agreement made orally or in writing, in express or implied term). It does not include any payment which is of a gratuitous nature or which is payable at the discretion of the employer.
An employee is entitled to annual leave with pay after having been employed under a continuous contract for every 12 months. Annual leave entitlement increases progressively from 7 days to a maximum of 14 days according to years of service:
All employees are entitled to statutory holidays. Most employers however extend entitlement to all general holidays. There are 12 statutory holidays and 5 general holidays.
14 weeks and can begin at any time between two and four weeks before the expected date of birth of the child.
Payment by employer
The employee is eligible for maternity leave pay if she has been employed under a continuous contract for not less than 40 weeks immediately before the commencement of scheduled maternity leave.
The daily rate of maternity leave pay is a sum equivalent to 4/5 (80%) of the average daily wages earned by an employee in the 12-month period preceding the first day of maternity leave.
Male employees are entitled to 5 days’ paternity leave.
Payment by employer
The employee is eligible for paternity leave pay if he has been employed under a continuous contract for not less than 40 weeks immediately before the day of paternity leave.
Payment by employer
The daily rate of paternity leave pay is a sum equivalent to 4/5 (80%) of the average daily wages earned by an employee in the 12-month period preceding the day of paternity leave.
No statutory laws or regulations.
A contract of employment may be terminated by the employer or employee by giving the other party due notice or payment in lieu of notice.
Statutory restrictions on termination
An employer shall not dismiss an employee under the following circumstances:
An employee may claim for remedies against an employer under the following situations:
During Probation Period
1. Within first month: not required
2. After the first month where a contract makes provision for the required length of notice: as per the agreement
3. After the first month where the contract doesn’t make provision: not less than 7 days notice
For continuous contract / After probation period
1.Where contract makes provision: as per the agreement, no less than 7 days.
2.Where the contract doesn’t make provision: not less than 1 month.
An employee is eligible for severance payment or long service payment subject to the following conditions:
not less than 24 months under a continuous payment
a.) employee is dismissed by reason of redundancy
b) contract expires without being renewed by reason of redundancy
c) The employee is laid off
Long Service Payment
not less than 5 years under a continuous contract
a) employee is dismissed but not due to serious misconduct
b) dismissal is not due to the reason of redundancy
c) employment contract expired without being renewed
d) employee dies
e) employee reigns on ill-health
f) employee resigns on grounds of old age
An employee will not be simultaneously entitled to both long service payment and severance payment.
Amount of payment
(last month wages* x 2/3)# x reckonable years of services
* An employee may also elect to use his average wages in the 12 months immediately preceding the termination of the employment contract
# The sum should not exceed 2/3 of HK$ 22,500 (i.e. HK$ 15,000)
The maximum amount of severance payment or long service payment is HK$ 390,000.