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 Luxembourg can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Luxembourg, 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 Luxembourg.
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 Luxembourg is not the same as paying workers in your own country. Employees have to be paid using Luxembourg’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.
A full time workweek is 40 hours or 8 hours per day.
There are strict rules on overtime as it is considered something that is considered abuse if the employer requests overtime work in excess and the employee can refuse.
An employee can work 2 hours of overtime per day and cannot exceed 8 hours per week. In addition to this, a pregnant woman cannot be forced to work overtime, and overtime for adolescents is forbidden.
Overtime can be compensated either through payment at the rate of 150% of the regular pay or time off.
Salaries are paid weekly or monthly depending on the company.
The 13th salary is the equivalent of one months’ salary and is paid out at the end of the year.
It is common for employers to give their employees an additional half months’ salary as well.
PTO is calculated by the:
Employees receive 26 working days of paid leave per year. In addition, certain employees automatically receive additional leave:
There are 11 public holidays.
The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:
Maternity leave in Luxembourg is 20 weeks and can begin 8 weeks before the expected due date.
To be eligible, the woman must have been covered by the mandatory health insurance for at least 6 months within the last 12 months before maternity leave.
In addition, the woman must notify their employer at least 12 weeks before the expected due date.
Social insurance pays for maternity leave and cannot be lower than the minimum wage and is capped at 5 times the minimum wage.
Paternity leave is 10 days. The father must notify their employer at least 2 months in advance of when the leave is intended to be taken, otherwise, this leave can be reduced to 2 days.
In addition, this leave does not have to be taken consecutively and can be taken within 2 months of the birth of the child.
There are 2 types of parental leave and each leave can be taken once per child:
Both leaves can be taken either in full, partially, or split with the other parent and are based on the number of hours in the employee’s contract:
Split or partial leave is at the discretion of the employer.
To be eligible:
Instead of wages, an allowance is given by the Children’s Future Fund.
Termination in Luxembourg must be done in writing, however, no reason is required by either side unless the cause is immediate dismissal. However, this information must be provided upon request.
For employers with more than 150 employees, a hearing must be conducted before the employee is dismissed. For employees with at least 15 employees, the employer must notify the Economic committee of the dismissal.
The notice period depends on the length of employment:
It is also possible to pay in lieu of notice.
Severance pay is determined by the length of employment:
The minimum probation period is 2 weeks and generally is determined by the employee’s salary and qualifications: