How To Pay Foreign International Contractors & Workers ?

June 2, 2021

Foreign contract workers are the workers that work in a country of which they are not a citizen. The payment, taxes, and deadlines are defined by foreign independent contractors' agreements. Employing or hiring independent contractors is a crucial task for a company's success. There is no requirement to provide payments to foreign contractors for services in the US. However, the company must have its contractor file. There are many ways to pay an outsourced employee, international contractors, or overseas contractors. However, the best way to pay independent contractors is still PayPal. 

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Requirements for independent contractors salary transfer:

After hiring independent contractors, an independent contractor payment schedule is defined for the workers by considering the independent contractor payment rights. Some companies pay independent contractors in cash to avoid any taxes.  Paying employees cash legally is done by calculating and withholding payroll taxes. Sometimes, contractor pays are made on an hourly basis. The independent contractor payroll is made through form F-9. The average independent contractor salary in California is $50,450 per annum. 

Difference between freelancers and foreign contract workers:

Freelancers are professionals that are self-employed with no long-term contract with businesses and employers and have no other employees working with them. However, foreign contract workers or agencies work through contracts with various companies. 

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Paying independent contractors hourly:

Small business organizations prefer hiring independent contractors rather than hiring employees. This is because the employees may get the flexibility of work and the employers have to pay for specific projects. However, paying independent contractors hourly has become common in the past few years for remote workers, foreign contract workers, and different computer programmers

Paying W-2 contractors:

The W-2 contractors are paid by assigning them to the client of the base agency. The base company manages the payments to foreign contractors for services tax, independent contractor salary and also deducts a particular amount at an hourly rate. Paying 1099 employees or freelancers overseas is somehow different from W-2 contractors. For this purpose, you have to fill the W-9 form which has all the particulars of the freelancer. Afterward, independent contractor payment terms are considered for which there are no prescribed rules. The contractor upfront should be paid for a maximum of 33% of the total cost upfront. However, some freelancers also charge 50% upfront.

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Paying 1099 workers:

Freelancers or 1099 workers can also be paid after the job is completed. However, some projects may demand 50% of the payment before starting the job to buy necessary supplies. Payments for large projects may be given divided into various portions at different times. Also, I can get paid by international clients through PayPal, Electronic Funds Transfer, Payoneer, via checks, via credit cards, and via accounting software. However, the best way to pay overseas suppliers are through:

  • Bank wires which may delay the process
  • PayPal which is used for small payments with facilities of dispute resolution and protection from fraud
  • Peer-to-peer transfers offer fast payment transfers and more savings than banks

Paying internationally without fee:

There are several options to get paid internationally without a fee. For example, Google Pay provides an opportunity of transferring the amount from the client’s bank account to your account. The amount is directly transferred to your bank account by this method. On the other hand, payments via checks are also free but may take a longer duration for processing.

Independent contractor payment terms and rights:

Paying freelancers and contractors overseas can be a difficult task. For this purpose, an employer has to classify his contractors, freelancers, and employees. Independent contractor payment terms and independent contractor payment rights are considered a priority. 6 main rights are given to 1099 contractor including:

  • Rights to control the tasks
  • Rights to contract
  • Rights to work when and where you want
  • Rights to work with other contractors
  • Rights to market the services
  • Rights to manage own business

Afterward, the payment method is defined. Lastly, documentation of IRS is assured.

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Paying offshore employees:

The offshore employees such as software developers are paid through independent contractor payrolls. Local or third party company is asked to place their payrolls. Paying independent contractors hourly is done for most of the outsourcing teams and software developers. For example, the hourly rate of a software developer in Eastern Europe (Poland, Romania, Ukraine, Slovakia, Austria, etc.) is $25-$50. Independent contractors and software developers make a higher amount in Latin America (Mexico, Brazil, Chile, Colombia) i.e. $30-$50.

Hiring independent contractors:

Hiring independent contractors are not confined to your state however, you can hire someone in another country. For this purpose, you have to make sure that a foreign independent contractor is not legally defined as an employee under foreign laws to avoid litigations. Foreign independent contractors from W-8 BEN should also be completed.

The international employees are hired after applying for certification from the United States Department of Labor. International employees are then interviewed. Employees can work remotely from another country because it is 100% legal and many companies allow workers to travel for work activities.

Paying employee cash legally:

The employee cash is paid legally by calculating and withholding independent contractor payroll taxes. For this purpose, a payroll bank account should be opened and the foreign contract workers are paid on a scheduled basis. Record maintenance is also important.

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Employers can pay an international freelance invoice by various methods. Following are some methods of paying independent contractors:

World Remit:

A foreign independent contractor agreement is made by considering the contractor pay, exchange rates, and the company’s fee. Afterward, independent contractors are paid online. Companies charge a particular amount for paying independent contractors online. World Remit charges the lowest contractor pay transfer fee. The exchange rate is better than its competitor Xoom. It helps in paying independent contractors hourly and is one of the best methods to pay overseas suppliers. World Remit users can send money to foreign contractor workers in over 145 countries. Africa, USA, Kuwait, Malaysia, Qatar, Saudi Arabia, Japan, Jordan, Singapore, New Zealand, Australia, Germany, France, Greece, Belgium, Italy, Spain, and the UK are the countries where salaries can be sent through World Remit. The company provides services of Cash pickup, bank transfer, mobile money, and airtime top-up for sending money through phones instantly.

An account is signed up for free and the payment options are Credit, Debit, bank account, Poli, and Google pay. The fee depends on the location at which contract pay has to be sent. For example, World Remit charges $3.99 when the independent contractor's salary is $50. World Remit provides instant payments with a transaction limit of $5,000 from the U.S via credit or debit card.

International Bank Transfer (SWIFT):

It is the oldest and most widely used method to send contractor pays to foreign contract workers. It helps employers and companies to pay the contractors via bank transfers internationally. However, the payment method has been declining because of problems with employment laws. Also, the banks charge a huge amount for the transfers. G-10 central banks of Canada, France, Japan, Netherlands, Italy, and Switzerland support SWIFT.

A government-issued form of identification, proof of address, and social security number are some requirements by law for International Bank Transfer. Rules for transferring over 10,000 USD are also notable. For example, a declaration of travel with $10,000 is made. Also, service providers should report activities over $10,000 so that suspicious activities are checked.

Payoneer:

Payoneer is another online payment platform for paying independent contractor salaries and freelancers overseas. It is also the best way to pay overseas suppliers. The method is relatively easier and faster than bank transfers. However, Payoneer is not available in every country. It is available in the U.S and also supports countries such as Australia, Algeria, Argentina, Bahrain, Canada, Columbia, France, Greece, Germany, Mexico, Mongolia, Pakistan, Netherlands, Romania, Turkey, and U.K. Payoneer supports many currencies of the world, for example, Euro, United States Dollars, Pound sterling, Australian dollars, Turkish lira, Singaporean dollars, Saudi Riyal, Omani riyal, Qatari riyal, Japanese yen, Indian and Pakistani rupee.

It works for freelancers, foreign contract workers, and service providers of Fiverr, Upwork, Adobe, Shutterstock, etc. Payoneer payment service works by registering Payoneer and $3 will be charged for each transaction via bank. Canceled transactions are charged $1 through Payoneer. Payoneer provides services of online selling, digital marketing, vacation rental hosts, receiving and requesting payments, managing currencies, paying VAT, and paying contractors. Costs of services and converting currencies vary significantly due to which profit margins differ in various countries. Due to this reason, contractors and freelancers are paid depending on how and where it all takes place.

Remitly:

International contractors, overseas suppliers, and overseas freelancers can also be paid through Remitly. It is a budget-friendly independent contractor direct deposit method because it sends payments to overseas bank accounts in the destination country’s currency. The company also provides an express service through which international contractors and overseas freelancers are paid within minutes with a fee of $3.99.

Similar to Payoneer, Remitly's account can be signed up for free with various payment options such as debit card, credit card, and bank accounts. The transfer fee depends on the amount and the location where you have to send money as the contractor pay or foreign independent contractor’s salary. Sometimes, the transfer rates are almost free if the recipient currency has to be the same. For example, if 1099 employees of the Philippines are paid in USD. Also, Remitly charges 3% if overseas suppliers, international contractors, and overseas freelancers are paid through debit or credit card.

The transaction limits of Remitly have three tiers. $2,999 is the limit for the lowest tier and $10,000 for the highest tier. Remitly service is available in most countries such as Belgium, Sweden, Spain, UK, Ireland, Norway, the US, and Canada. Bank deposit, cash pickup, and mobile money are the prime functions of Remitly. Remitly has a Remitly User Agreement that defines all the terms and conditions including eligibility, charges, receiving remittance, and service restrictions. The user has to sign it before making transactions.

PayPal:

PayPal has beaten most of the famous Peer-to-peer money transfer applications such as Zelle. This is because the company is easily accessible and the independent contractor salaries, payments to overseas contractors, and outsourced employees can be sent instantly to their PayPal accounts. 75% of the employers hiring independent contractors are using the PayPal facility because they can use PayPal balance to send the contractor pays.

Higher amounts are charged for international transfers therefore it is mostly used to send money within the US with no fee. However, if the payments are made through credit or debit card 2.9% deductions are made. Also, the verified accounts have no specific limit of transfers but are limited to up to $60,000 in a single transaction. UAE, South Africa, South Korea, Thailand, Norway, Oman, Morocco, Mexico, Sri Lanka, Japan, Saudi Arabia, and Qatar are some important states where PayPal provides its services. Credit card reading, debit card payments, online shopping, setting online stores, making donations, and credit card payments are some services offered by PayPal.

A User agreement is signed by the user of PayPal for using PayPal services and account. The user must be a resident of listed countries, 18 years old, and must agree to legal policies and payment method terms.

Credit card/Debit card:

The contractor pays, overseas supplier payments, and freelancers can also be paid through credit cards this can be done through various payment systems such as Western Union, and PayPal. Credit cards and mobile applications help in processing payments. Similarly, transactions can be made through debit cards because of improved banking services. The contractor pays are delivered through bank accounts, Money gram, PayPal, Western Union. Both Money Gram and Western Union help in international transactions by allowing wire money from nearby sites. 8 to 12 percent transaction fees are applicable for sending contractor pays which can be calculated before transfers. Credit cards and debit cards are widely used for this purpose.

Electronic Funds Transfer:

It is another widely used method with or without a fee. The salaries are transferred directly into the bank accounts. Fewer chances of fraud are present along with faster deliveries. 1-2 days are required to deliver payments within the United States and 3-4 days are required to make international payments of foreign contract workers, and freelancers. The service is available in most countries of the world and the money can be received in the current currency.

Australia, Belgium, Canada, Austria, Denmark, Germany, Israel, Italy, France, Mexico, Sweden, Turkey, Spain, Switzerland, Japan, and Norway are some famous countries that support electronic funds transfer.

Paying independent contractors in cash:

It is legal to pay independent contractors, foreign contract workers, and overseas freelancers in cash. Some companies prefer this method to avoid payroll taxes, income taxes, and payments to foreign contractors' services tax

Direct deposit:

Paying independent contractors through direct deposit is another frequently used method. After choosing the bank checks are required to process Pay to the Order of drop-down arrow. After selecting the option for independent contractors transfer date is entered. The amount is entered and the Pay Online method is verified. This method is also called Quickbooks Online Payroll. This method helps in paying unpaid bills or contractor salaries by writing checks.

Wise International Payment:

Wise International Payment is the least expensive method to send money to India because it supports 45+ state currencies. Fast transfers in up to 2 days of contractor pays can be done through the channel along with low remittance cost i.e. $13.01 (0.65% conversion fee). The service provides a high level of security and accepts credit and debit cards. The tool called Wise Batch Payment helps foreign countries to pay multiple salaries in India in one go. Bulgaria, Hungary, Denmark, Poland, Sweden, Bahrain, Kuwait, Turkey, Brazil, India, Pakistan, Russia, Australia, Greece, and Norway are some countries supported by Wise International Payment.

The company’s application has made International payments more convenient. However, the recipient can not track the transaction statuses. It converts and holds 56 currencies. Money transfers, overseas online shopping, and receiving money are some services offered by Wise International Payments. Governmental issued ID, reason of the transfer, proof of address, proof of bank account, and your SSN are requirements for the transfer. Also, IRS has to report for transfers valued at $10,000 or more to check for illegal activities.