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 Panama can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Panama, 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 Panama.
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 Panama is not the same as paying workers in your own country. Employees have to be paid using Panama’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 workday is 8 hours, and a full time work week is up to 48 hours.
125% of the regular pay when overtime hours are between 6 am and 6 pm.
150% of the regular pay when overtime hours are between 6 pm and 6 am or work over a holiday or day of rest.
175% of the regular pay when the overtime hours carry over from working during night hours.
It is important to note that an employee cannot work more than 3 hours of overtime per day or a total of 9 hours per week. If work is deemed dangerous or a hazard to one’s health, overtime is not permitted.
The payroll cycle can be monthly, every 2 weeks, weekly, daily, or even hourly.
The 13th salary is paid out in 3 installments in April, August, and December.
PTO is calculated by the:
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:
Women are entitled to 14 weeks of paid maternity leave and paid at 100% of the regular pay.
Maternity leave can start 6 weeks before the expected due date and 8 weeks after. However, if the actual due date is delayed, then the prenatal portion of the leave is extended so that the mother can enjoy 8 weeks of post-natal leave.
Maternity leave is calculated by the greater of the last salary or average of the last 180 workdays.
Fathers are entitled to 3 days of paid leave.
There are no statutory laws regarding parental leave in Panama.
In Panama, the dismissal of an employee must have just cause as outlined in the labor code. Termination in writing must be provided outlining the cause and the date that the termination was given.
A dismissal that does not follow the laws outlined in the labor code is considered unjustified and the employee may be able to make a claim with a labor court. If the labor court does not resolve the claim within 60 days, the employer may continue with the dismissal.
However, there are certain classifications of employees that may be dismissed without just cause (domestic workers, fishing or agricultural workers, retail workers).
The notice period in Panama is:
Notice is not mandatory except for employees dismissed for just cause.
For employees who are dismissed without just cause, they are entitled to 30 days’ notice.
There are no statutory laws regarding severance pay unless the reason for dismissal is redundancy. In this case, payment is determined based on the length of employment and is as follows:
The maximum length of probation is 3 months.