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 The UK can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in The UK, 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 The UK.
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 The UK is not the same as paying workers in your own country. Employees have to be paid using The UK'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.
Full-time employment is 8 daily hours and 48 weekly hours, maximum.
Employers can ask for workers consent, in writing, to opt out of the 48 hours weekly limit.
For an employee to work overtime it must be stated and agreed upon in the employment contract.
Employers do not have to pay any overtime unless it is outlined in the contract.
National Insurance contributions (NIC) are based on a category letter
Salary should be paid monthly between the 25th – 30th of the month.
There is no 13th salary.
PTO is calculated by :
Employers must give a minimum of 28 days paid leave per year. The Public holidays can be incorporated as part of the 28-day leave entitlement; however, it is common practice for employers to give more than 28 days.
If employees were unable to take all of their entitled holiday leave for reasons related to Covid-19, they are allowed to carry it over to the next two years.
There are 8 public holidays in England, Wales and Scotland, and 10 in Northern Ireland.
Sick leave pay varies based on the :
Workers currently employed can receive £95.85 per week Statutory Sick Pay (SSP) for up to 28 weeks if they are too ill to work. For an employee to qualify they must be sick for four or more days in a row.
Employees must receive the statutory minimum but may be entitled to more depending on the company’s sick pay scheme.
Employees must give their employer a doctor’s note if they have taken sick leave for more than 7 days in a row. This includes non-working days, such as weekends and bank holidays.
Statutory maternity leave is 52 weeks and is comprised of:
Ordinary Maternity Leave – first 26 weeks
Additional Maternity Leave – last 26 weeks
Mothers are required to take off at least 2 weeks’ leave after the baby is born (or 4 weeks for factory workers) out of the entitled 52 weeks.
Unless the child is born early, the earliest that leave can be taken is 11 weeks before the expected week of childbirth.
Statutory Maternity Pay (SMP) is paid by the employer for up to 39 weeks with the employee receiving:
90% of their average weekly earnings (before tax) for the first 6 weeks £148.68 or 90% of their average weekly earnings (whichever is lower) for the next 33 weeks
Employees can choose to take either 1 week or 2 consecutive weeks’ leave. The allotted time off is the same regardless of the number of children (for example twins). Leave can’t start before the birth.
The statutory weekly rate of Paternity Pay is £148.68, or 90% of the average weekly earnings (whichever is lower).
Any money paid is done so in the same way as wages are paid, for example monthly or weekly. Tax and National Insurance will be deducted.
Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP) is given to eligible employees who are having a baby or adopting.
Leave must be used in the first year the child is born
Up to 50 weeks of leave is shareable with up to 37 weeks of pay between the couple.
Leave can be taken in blocks, all at once, together as a couple, or separate
Jury Service Leave: Employers to provide their full-time regularly employed employees, job-protected, unpaid leave for their duty as jurors or as a witness in a case, or acting as a plaintiff or defendant in the courts.
Public Duties Leave: Employees are entitled to a reasonable unpaid amount of time off to perform public duties, for example, if they are:
The law does not provide employees with a statutory right to time off because they are moving house, getting married or going on honeymoon.
In the UK in the event of the death of an immediate family member, an employee is entitled to bereavement leave of up to three days.
Dismissal can be deemed fair or unfair depending on reasoning and conduct.
The termination process varies according to the employment agreement and collective agreement in place and is based on the type of contract and reason for termination.
Notice must given based on what is stated in the employment contract or the statutory minimum, whichever is longer.
The statutory redundancy notice periods are:
Dismissal without notice can be utilized in cases of gross misconduct.
Employees on Fixed-term contracts which are ended ahead of the expiry date need to be given the statutory notice period.
Employers can pay in lieu of notice.
Severance is only required in cases of Redundancy. Payment is statutory if an employee has been under contract for at least 2 years:
Half a week’s pay for each full year for employees under the age of 22
One week’s pay for each full year for employees between the ages of 22 to 41 years of age
One and half weeks’ pay for each full year for employees over the age of 41
Length of service is capped at 20 years
Weekly pay is capped at £525
There is no mandatory requirement but it is common to utilize a trial period of 3 to 6 months.