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 Mexico can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Mexico, 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 Mexico.
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.
Paying employees in Mexico is not the same as paying workers in your own country. Employees have to be paid using Mexico’s employment and payroll standards.
Full time employment is considered 8 hours daily, 40 hours weekly.
Employees who earn minimum wage can work up to 9 hours exempt per week. The following 9 hours will be paid at a rate of 200% salary, with any hour beyond that paid at a rate of 300%.
Employees that earn more than the minimum wage are exempt for only 50% of the overtime worked per week up to 5 minimum wages per week. The first 9 hours will be paid at a rate of 200% and the following hours will be paid at a rate of 300%.
The payroll cycle is bi-weekly. Payments are made every 15th day & last day of the month.
Employees receive 15 days of pay on 20th December as a Christmas bonus.
Paying 13th and 14th salaries is also a common practice.
8 public holidays.
Pay is by social security based on the social security cap called “salario de cotizacion (SBC)”.
holidays for maternity leave (42 days before and42 days after birth of baby). Pay is by social security based on the social security cap called “salario decotizacion (SBC).
Male employee may take up to two weeks of paid time off following the birth of your baby.
Parental leave is not mandatory.
You may take up to 20 calendar days (4 weeks) of full paid time (base salary) following the death of an immediate family member.
No mandatory process is required, however formalization of the termination before the conciliation and arbitration court is suggested.
There are no statutory notice periods for employment contracts in Mexico.
The employer is required to notify the employee in writing of the date and cause of dismissal, or must notify the relevant Conciliation and Arbitration Board no later than five days after the date of termination.
Voluntary resignation: the employer must pay the employee all benefits that are due. If the employee has 15 years or more of seniority, the employee is entitled to 12 days’ salary for each year employed.
Termination with Cause: The employer must pay the employee all benefits that are due. In addition, 12 days of salary for each year employed.
Termination without Cause:3 month’s salary, 20 days for each year in the company, and a seniority bonus of 12 days per year of service. The employee will also receive back salary from the date of dismissal to the day that the employer complies with the Labor Board’s decision.
Optional, but the common practice is 3 months.