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 Nicaragua can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Nicaragua, 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 Nicaragua.
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 Nicaragua is not the same as paying workers in your own country. Employees have to be paid using Nicaragua’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 working hours depends on the hours of the day:
Day work between the hours of 6 am and 8 pm- A typical workday is 8 hours or a maximum of 48 hours per week
Night work between the hours of 8 pm and 6 am- A typical workday is 7.5 hours or a maximum of 45 hours a week.
Overtime pay is paid at a rate of 200%.
For work over a weekend or holiday, the employee is entitled to a 24–hour rest period in lieu.
Payroll cycles depend on the type of employment. Manual workers are paid weekly and employees are paid every 15th day.
Employees receive a 13th salary within the first 10 days of December.
PTO is calculated by the:
There are 9 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 is 12 weeks and is paid at the rate of 100% of the regular wages in which 60% of this is paid by the employer and 40% is paid by social security. Maternity leave can begin 4 weeks from the expected due date.
For multiple births, maternity leave is extended to 14 weeks.
Fathers are entitled to 5 business days of paid leave.
There is no statutory law on parental leave in Nicaragua.
To terminate employees, employers must request for termination from the labor inspection department.
At the time of dismissal, the employee is entitled to remaining vacation pay and their annual bonus. Notice of termination is also required.
The notice period in Nicaragua is:
Employees must provide 15 days notice.
The employer must pay severance when the employee is terminated for an unjust cause.
The severance pay is calculated at one month’s salary for the first 3 years of employment and 20 extra days of wages for every year after.
Severance is capped at 5 months in payments.
The probation period is 30 days, during which either party can terminate the employment agreement for any reason.