In recent years, many are turning to international contractors, and the global market for outsourcing work is ever-expanding. More and more people are hiring remote employees for various job roles, such as Virtual Assistant, Copywriter, Data Entry Clerk, and many more.
But as advantageous as hiring remote contractors may be, paying international or remote contractors can be a daunting task since there are a lot of risk factors to consider when making these payments.
Some of the challenges you may face when making remote worker payments are
fluctuating currency exchange, additional fees and taxes, complying with foreign laws and regulations, finding an appropriate mode of payment, etc.
In today’s blog, we will look into how you can make the safest payments and stay stress-free!
Table of Contents
Problems You May Face When Paying International Contractors
Ways To Minimize Risks Before Making Payment
Verify Your Contractor - Running a thorough background check on the chosen contractor to assess their reputation and reliability is crucial.
Run A KYC Check - Run a KYC (Know Your Customer) should be done to verify contractor identity to prevent fraud, money laundering and other illegal financial activities.
Make A Formal Contractual Agreement - A legally binding contract that clearly outlines the terms and conditions of the work and payment system is important in reducing risks.
Decide on the Payment Method - Choose a payment method that is convenient and accessible for both you and the contractor, we have mentioned some of the popular payment methods below.
Consider Currency Exchange Rates - Making international payments will involve currency conversion which is subject to constant change, not being careful with currency exchange might cause you to pay more than you need to.
Ensure Legal Compliance - US-based companies are required to collect Form W-8BEN or W-8BEN-E from their international freelancers. These are used to certify the foreign status of the remote worker and include an ITIN or International Tax Identification Number. You can only pay the contractors once you submit this form to the IRS.
Get Legal Assistance - Consult with an attorney who specializes in international business transactions to review the contracts and agreements and assess if you are compliant with the regulations.
Problems You May Face When Paying International Contractors
Fluctuating Currency Exchange and Fees
You will need to make the payment at a favorable time since currency exchange
rates are constantly fluctuating.
Misclassifying The Contractor or Employee
The classification of the remote worker is crucial since it will impact the
contractual agreements and tax requirements. Failing to accurately classify your
remote freelancer may even result in fines or penalties.
Additional Banking Fees and Transaction costs
Cross-border payments might be subject to international payment taxes like
Value Added Tax (VAT). Transaction fees may also apply depending on the
payment method or service provider. You will need to look out for intermediary
bank charges, currency conversion fees, and wire transfer fees.
Methods of International Payment
Making cross-border payments is easier than ever with all the new methods of payment nowadays. Discuss the payment method thoroughly with your remote contractor and figure out which method is the most suitable.
Here Are Some of The Popular Payment Platforms for International Contractors:
Wire Transfers - An international wire transfer, also known as a SWIFT transfer is the most well-known method of sending money overseas but it can be quite time-consuming and expensive.
PayPal - PayPal has relatively low transfer fees and is a quick way of sending money to your contractor abroad, you can also use PayPal to pay multiple contractors at once.
Payoneer - Payoneer will allow you to automate payments to a monthly payment system and pay many contractors at the same time.
Wise (formerly TransferWise) - Wise has multi-currency benefits and allows you to store money in many currencies. Wise also offers batch payments to pay multiple contractors at the same time.
Western Union - Western Union uses international money orders to send money effectively and safely although it has payment limits and can be expensive.
MoneyGram - MoneyGram uses international money orders as well. Money is sent directly to the contractor's account.
Xoom - Xoom also uses international money orders which can be a slow and tedious process.
Conclusion
Paying international contractors is easier than ever now and the world of international outsourcing and freelancing is expanding every day. However, understanding how to go about it and staying compliant with regulations is important.
Here at ASL BPO, we try our best to meet all your business process outsourcing needs. If you’re looking to hire a virtual assistant to help you expand your business, feel free to contact us.