Hiring international contractors is gaining traction as a go-to strategy for many companies. Why?
Well, for one, international independent contractors bring specialized expertise and fresh perspectives that may be difficult to find locally and are often a more budget-friendly solution for companies expanding globally.
We expect demand for international contractors to increase in 2025, but one challenge for many businesses is determining the best payment method.
Key Takeaways
- Companies have multiple options to pay international contractors, each with pros and cons.
- Choosing a contractor payment method involves weighing factors such as transaction fees and compliance with local tax regulations.
- An Employer of Record like RemoFirst can simplify the process by managing payments and tax documentation.
How Do I Pay International Contractors?
When it comes to paying independent contractors, you've got plenty of options to choose from. But before settling on a payment strategy, it's essential to weigh the advantages and disadvantages of each one.
PayPal
PayPal is a leading online payment platform that allows users to send and receive money globally. It supports transactions in over 130 currencies, simplifies payment management, and offers enhanced transaction security.
However, PayPal can have high transaction fees, particularly for currency conversions, and funds may be held for verification — which can delay contractor payments.
Xoom
Xoom is a service from PayPal dedicated to fast international money transfers in over 170 countries.
The user-friendly app makes sending money simple and convenient, but it has limited international payment coverage in some regions and high fees for smaller transactions.
Bank Transfers, Wire Transfers, & SWIFT Payments
These three payment methods provide a secure method of moving money directly from one bank account to another. Transactions are generally secure, with banks using encryption and stringent authentication protocols.
Bank transfers typically have lower fees but can only be utilized for domestic transactions, so you won't be able to pay your international workforce using this method.
International wire transfers and SWIFT payments are accepted worldwide, making them a reliable choice for international transactions. However, these payment options often have steep fees, including transfer fees, intermediary bank charges, and currency conversion fees.
Wise
Wise is explicitly designed for international money transfers, offering low-cost solutions using actual exchange rates. It has a transparent fee structure with no hidden costs, and transactions are often completed within a day.
One drawback is that larger transfers may require verification, which can delay payments, and not all countries are supported.
Payoneer
Payoneer is a versatile payment platform available in over 200 countries. It specifically caters to businesses working with international contractors by providing multiple payment options.
Contractors may be wary of this method, as they could get hit with fees when receiving payments on smaller transactions, and new accounts may experience delays during the verification process.
Credit Card
Credit cards offer a convenient way to pay contractors quickly through near-instant electronic transaction processing. They also provide added security features such as fraud protection and dispute resolution services.
However, high merchant fees charged by credit card companies for payment processing can significantly impact overall payment costs.
MoneyGram
MoneyGram enables businesses to send money internationally through a network of agents or online services. Recipients can pick up their payments at local offices worldwide, making it a good choice for contractors who prefer cash transactions over electronic payments.
While MoneyGram offers the ability to transfer money quickly, exchange rates can impact payments and the fees charged can be significant.
Cryptocurrency
Cryptocurrency offers a modern alternative for paying contractors without relying on traditional banking systems by using digital currencies like Bitcoin or Ethereum.
Cryptocurrency transactions typically incur lower transaction fees than traditional banking methods due to reduced fees on blockchain networks. However, volatility risks can dramatically affect payment amounts, alongside regulatory uncertainty that varies by country.
International Money Order
International money orders provide a secure way to send money across borders by requiring prepayment before issuing the money order. This ensures that funds are guaranteed before being sent to the recipient.
While money orders guarantee that funds cannot bounce due to insufficient balance and are accessible at various locations, they may not be widely accepted or accessible in all countries, particularly in remote or underbanked regions. Contractors might also face difficulty finding a bank or agency to cash the money order in their area.
Check
Although less common, checks may still be preferred by some who value physical documentation of transactions as they provide a clear paper trail for record-keeping and are easy to issue for one-off or small-scale payments.
On the downside, payment by check is time-consuming. First, checks must be physically mailed to the contractor, which can take days or weeks to arrive, depending on the contractor's location. Even after receipt, the check may take several days or weeks to clear, especially if processed through multiple banks.
Cash
Paying international contractors in cash can be advantageous in regions with limited banking infrastructure. It also eliminates transaction fees and delays associated with electronic payments or currency conversion.
While it might be convenient in some instances, paying international contractors in cash poses significant security risks, including theft or loss during transit. Additionally, handling and distributing large amounts of money can be logistically challenging and may violate local or international regulations on cash transactions.
Employer of Record
An Employer of Record (EOR) helps companies hire, manage, and pay international contractors and freelancers in multiple currencies while ensuring compliance with local labor laws and payroll processes.
Using an EOR can also potentially be costly if there are multiple fees beyond the base price for payroll processing. It's also essential to ensure the EORs offer their services in the countries where your contractors are based, as some are limited in country coverage.
Other Considerations When Paying International Contractors
When determining how to pay international contractors, be sure to weigh all the factors that can impact your compliance, costs, and efficiency.
Taxes
Contractors operate independently. That means companies employing international contractors don't need to worry about tax withholding — that's on the contractor. However, businesses still have tax obligations, including providing self-employed contractors with tax documentation at the end of the year.
For example, companies that employ U.S.-based contractors must file IRS Form 1099-NEC, which reports any income above $600 earned by someone who's not an employee.
U.S.-based companies hiring international contractors may be required to issue form W-8 BEN. The form ensures the contractor is correctly classified as a non-U.S. taxpayer and is subject to different tax rules.
Bank Fees
Considering bank fees when paying international contractors is crucial, as these costs can significantly impact businesses and contractors.
For instance, banks can charge hefty fees for wire and SWIFT transfers. Fees of $50 for an international transfer are not uncommon, so it's something to keep in mind.
Currency Exchange Rates
Due to market volatility, exchange rates can change daily — or even hourly. As a result, businesses may struggle to accurately predict contractor costs, especially if rates shift significantly between the time of invoicing and payment.
Fluctuating exchange rates also mean that a contractor's payment can take a hit, meaning less money for their work.
Payment Delays
You'll want to consider the time it takes to process payments internationally, as some methods may have longer lead times, especially when paying by paper check.
Currency conversions can also slow down the process, as can bank holidays, etc.
Employ and Pay Contractors with RemoFirst
With RemoFirst, you can efficiently manage and pay international contractors in over 150 countries on one platform (and one invoice).
Our global payroll services ensure that all of your international contractors are paid on time, even in regions where your business lacks an entity, by handling compliance, payments, and documentation — including filing the 1099-NEC form for U.S. contractors hired through our platform.
There are no setup fees or minimum deposits, and we support payments in major currencies such as U.S. Dollars (USD), Euros (EUR), British Pounds (GBP), and more. Contractors receive payments in their local currencies, ensuring smooth transactions.
Additionally, our pricing covers both our service and platform access and dedicated customer support, allowing you to start hiring and paying international contractors today with confidence.
