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 Indonesia can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Indonesia, 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 Indonesia.
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.
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 working hours are arranged as follows:
Employees with 6 workdays a week work 7 hours a day and 40 hours a week.
Employees with 5 workdays a week work 8 hours per day and 40 hours a week.
These working hours rules do not apply to certain businesses and are usually regulated with a Ministerial decision.
An employee cannot be forced to work overtime against his or her will and must agree to work longer hours. Employees are not permitted to work more than 4 extra hours a day and 18 extra hours per week. If employees work overtime during weekdays, they receive 150% of their hourly wage for the first overtime hour. For every subsequent overtime hour, they receive wages paid at 200% of the hourly wage.
If employees work overtime on a weekly rest day or any public holiday falling on a weekly rest day while working a six-day workweek, their overtime pay is calculated as follows:
1-7 hours – 200% their hourly wage
8th hour – 300% their hourly wage
9-10 hours – 400% their hourly wage
If employees work overtime on a weekly rest day landing on a weekday when working a six-day workweek, their overtime pay is calculated as follows:
1-5 hours – 200% their hourly wage
6th hour – 300% their hourly wage
7-8 hours – 400% their hourly wage
If employees perform overtime work on a weekly rest day or a public holiday working a five-day workweek, their overtime pay is calculated in this way:
1-8 hours – 200% their hourly wage
9th hour – 300% their hourly wage
10-11 hours – 400% their hourly wage
Employees who hold high-level positions and whose working time cannot be restricted by hours are not eligible to receive overtime pay.
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Minimum wages vary among the 34 regions, ranging from IDR 1,798,979 in Central Java to IDR 4,416,186 in DKI Jakarta.
Wages may be paid weekly, bi-weekly, or monthly but should be made by the end of the month at least.
Employees receive 15 days of pay on 20th December as a Christmas bonus.
Known as Tunjangan Hari Raya (THR) payment, this is yearly payment employees receive before their longest religious holiday.
THR is a one-time salary for those who have continuously worked at the same company for 12 months. If it is less than 12 months, the THR payment is proportional to how long the employee has worked in the company. THR includes base salary and fixed monthly allowance but does not have to cover other payments such as bonuses.
16 public holidays.
When employees are sick or injured, they are entitled to paid sick leave, provided they show a medical confirmation of their ill-health. Employees can also have long-term sick leave lasting for longer than 1 year. A doctor should recommend such leave in writing.
Payment to employees on prolonged sick leave is as follows:
Pregnant employees are eligible to take 3 months of paid maternity leave. 1.5 months of this leave is taken in the prenatal period, the other 1.5 months are taken after childbirth. During their maternity leave, employees receive their full salary. Female employees who miscarry are entitled to a 1.5-month rest period if it is recommended by a doctor.
Employers also should provide conditions to breastfeeding mothers in their workplaces.
New fathers are entitled to 2 days’ leave for the birth of their child or a miscarriage.
Employees are entitled to paid child leave in the following circumstances:
2 days paid leave for the circumcision of the employee’s child.
2 days paid leave for the Baptism of the employee’s child.
2 days paid leave for the marriage of the employee’s child.
2 days paid leave for the death of the employee’s child.
2 days paid leave is given for the death of a worker’s spouse, child, child-in-law, parent, or parent-in-law.
Before an employee can be terminated, the employer must make a genuine effort to avoid the termination by negotiating with the employee and/or the employee’s labor union to find accommodation such as a change in working hours, improved working methods, or coaching.
If termination cannot be avoided, the employer must explain the reasons for termination clearly in writing to the employee and/or the employee’s labor union.
If the employee believes the termination is unjust, the decision can be challenged in the Labor Court, which will give the final ruling.
The reasons for which employees can be discharged from work are as follows:
The employee violates the employment agreement
The employee is imprisoned
The employee is ill for more than 12 months
The employee is absent from work for more than 5 days without a valid reason, provided he or she has been notified twice
The employee has reached retirement age.
Not all reasons for employees’ dismissal should be related to their misbehavior. The employer can discharge employees for several business-related reasons:
There can be a change of the company’s status, its merger with another business, or acquisition of its ownership.
The employer becomes insolvent
The employer has suffered continuous losses for two years consecutively as proven by financial reports
The employer is closing the business permanently.
There is no law that specifies notice periods for an employee’s dismissal from work. In practice, a 30-day notice is given to the employee to terminate his or her employment contract.
Employees who are discharged from their job are entitled to receive a payment of:
3-month probationary periods are permitted for employees on indefinite-term contracts if it has been agreed upon in writing between both parties. An employer cannot impose a probationary period on an employee on a fixed-term contract.