How To Pay International Contractors: EOR & AOR Expert Guide

An independent contractor is contracted to perform specific tasks or services for your business, without being classified as an employee. This distinction is important because it affects tax obligations, legal responsibilities, and the level of control you have over how the work is performed. Misclassifying employees as contractors can lead to severe legal, financial and reputational damage. The most obvious benefit to hiring foreign contractors is the ability to work with top talent, regardless of where that talent lives.

• By automating and centralizing the payment process, companies save time and reduce administrative overhead.
• Susan is an experienced, certified HR and compliance professional who provides HR and compliance strategies to companies with global and US-based teams.
• Different countries may have varying criteria for determining worker classification, so it’s essential to understand the legal requirements specific to each jurisdiction.
• Instead of manually managing payment details, Slash lets you schedule, automate, and customize recurring transfers.
• There is one solution that removes FX risk which we’ll cover in section six below.
• It processes over $145 billion annually in over 140 currencies, demonstrating its significant global reach and financial impact.

Access to global talent

By guiding foreign contractors to submit the correct W-8 tax forms through the portal, Tipalti helps you achieve tax compliance. The system tracks payments for year-end IRS Form 1099 or 1042-S tax reporting and calculates any required tax withholding. Tipalti’s mass payments automation software uses thousands of Coffee Shop Accounting rules to ensure global regulatory compliance. It screens every payment against OFAC and other international sanctions lists to prevent illicit transactions. The platform also helps you adhere to local and international tax laws, including any required VAT and payout taxes.

• Depending on the route the money has to take, numerous intermediary banks might also have to get involved with your transfer — and each of them deduct a fee for their trouble.
• MoneyGram allows you to send payments that can be delivered to a contractor’s bank account, mobile wallet, or, most notably, picked up as cash at one of its many agent locations.
• For example, a US-based client may prefer to pay in USD, while a UK-based contractor might want to receive payments in GBP.
• From choosing the best payment method to understanding tax forms like the W-8BEN and W-8BEN-E, every step matters and skipping over the details could lead to expensive consequences.
• The use of cryptocurrency for international payments is becoming increasingly popular.

How to pay foreign independent contractors

For businesses with recurring payment needs, PayPal’s Mass Payments feature allows you to send funds to multiple recipients simultaneously. Once the payment is sent, providing automated status notifications to your contractors can drastically reduce inquiries. Finally, for your finance team, the process isn’t over until the payment is reconciled in your Enterprise Resource Planning (ERP) system, allowing you to close your books quickly. A more modern and efficient alternative is to utilize local clearing systems, such as the Single Euro Payment Area (SEPA) in Europe or the Bankers’ Automated Clearing System (BACS) in the UK.

Remote Work by Industry and Region: 2025 Projections

Hiring international contractors does not always shield a ledger account company from local tax obligations. Suppose contractors are working under your direct supervision, signing agreements on your behalf, or operating as a de facto representative of your business in that market. Every country has different legal frameworks for determining whether workers should be treated as independent contractors or employees.

• In this article, we’ll show you the fastest, most cost-effective, and safest ways to navigate paying international contractors.
• You can reduce payroll taxes, skip employee benefit costs, and scale up or down faster than ever.
• Similar to multi-currency options, invoicing is a valuable enough service that providers typically have a page dedicated to its description.
• A robust multi-currency account allows business owners to pay international contractors quickly and easily across different currencies without having to manage multiple bank accounts.
• With Asanify, you can transfer money across the world to pay your contractors in minutes, not days.
• For instance, if you’re paying contractors in USD, conversion rates can impact how much they actually receive.

With built-in Wise technology, IRIS Contractor enables you to make payments instantly, in your choice of currency, with no hidden transaction fees. Now, you can hire and pay contractors for contingent work with greater confidence to go further in your global growth journey. With IRIS Contractor services, your company can hire and pay overseas contractors for contingent work in 180+ countries, quickly and compliantly, starting in just minutes. Some independent contractors may ask you to pay them upfront pay international contractors before they start working on your project. This can be risky because there are no guarantees that they will deliver on time. As a result, paying upfront is best for simple tasks that require little oversight and are not very costly for your business.

• With Slash, you get access to global banking through the SWIFT network, enabling direct account transfers to eligible banks in more than 160 countries.
• If not, it’s worth bringing in a local legal expert or compliance consultant to help navigate the landscape.
• Paying international contractors can be a tricky part of hiring abroad.
• Comparing different methods, such as wire transfers, PayPal, and specialized platforms, can help you find the best fit for your business needs.

Secure methods like SWIFT transfers and digital payment platforms with robust security measures can help protect against fraud and criminal activity. However, the process of paying these contractors presents unique challenges, including navigating different tax jurisdictions, understanding international labor laws, and managing currency exchanges. Hiring international contractors offers businesses unparalleled access to a diverse talent pool, enabling them to leverage specialized skills from around the world. 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. Wise is explicitly designed for international money transfers, offering low-cost solutions using actual exchange rates.