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 Japan can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Japan, 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 Japan.
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 Japan is not the same as paying workers in your own country. Employees have to be paid using Japan'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 work week in São Tomé & Príncipe is 8 hours a day, or 40 hours a week.
Japanese labor laws generally limit overtime to 45 hours a month. However, if a company goes through extraordinary circumstances and its employees agree to work more overtime, they can be granted an extra dispensation to work up to 80 hours of overtime per month.
If an employee is expected to work overtime regularly, a written agreement must be filed with the Labour Inspection Office. When an employee is requested to work overtime or work on holidays, the maximums are 5 hours per day, 45 hours per month, and 365 hours per year.
Overtime payment is calculated as an additional payment to the hourly base salary as follows:
Japan employees receive their salary in monthly basis and payments are to be made on the 25th of each month.
In Japan, it is customary to pay a “13th month,” or even “14th-month” salary as a summer bonus paid in June and as a winter bonus paid in December.
Paid leave in Japan is set in the employment contract as dependent upon the years of employment. This paid leave is in addition to any public holidays.
There are 16 public holidays. While there are no legal requirements to pay for public holidays, it is common to grant those days as paid days off.
Sick leave is not mandatory; some companies may introduce their own sick leave policies, and employees often use their holiday to cover sick leave or claim social insurance.
All female employees are eligible for maternity benefits, consisting of 14 weeks paid leave, six weeks before the due date, and eight weeks after.
The maternity payment is made by the Social Insurance based on the National Health Insurance rates, which are currently 420,000 JPY per child.
However, suppose the employee is enrolled in the employees’ Health Insurance. In that case, they may receive a Maternity Allowance of 2/3rds of the regular salary rate from 42 days before birth until 56 days after delivery.
The father is entitled to paid paternity leave for up to one year after the birth as childcare leave. Paternity leave is referred to as ‘childcare leave’ in Japan, and new fathers employees are entitled to this benefit.
However, the employee does not receive a salary while on leave unless stated in the employment contract. They are entitled to a partial allowance from social security.
Childcare leave can be taken by the mother or the father and starts from the day after the maternity leave ends. Labor insurance covers childcare leave, and an employee can take childcare leave until the child is one year old.
If both parents take childcare leave, the leave is then extended to when the child is one year and two months old.
Family Care Leave - unpaid leave to care for a spouse, child, parent, or grandparent for up to 3 months.
In Japan, an employee is entitled to bereavement leave. For the death of a father, mother, spouse, or child, an employee is entitled to 5 days of leave and three days for the death of a grandparent, grandchild, sibling, child’s spouse, or spouse’s parent.
The termination process varies according to the employment agreement and collective agreement in place. It is based on the type of contract, the job role, the region, and the reason for termination.
The notice period in Japan is usually 30 days, and if notice isn’t given, the employer can provide payment in lieu.
In Japan, there is no statutory severance pay regulation.
Probation period for permanent employees is generally between 3 and 6 months.