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International Contractors

Best practices for hiring and paying international contractors

May 22, 2024

One way for companies to grow is by hiring international contractors. Global hiring can help your business expand while gaining access to a broad pool of talented freelance remote workers worldwide. However, paying self-employed contractors in different countries can be complex, involving various regulations, payment methods, and other potential issues.

To effectively pay international contractors, you must first understand the basics, including payment method options such as bank transfers, online payment platforms, and cryptocurrencies. Ensuring compliance with local tax laws and managing currency fluctuations is also essential to avoid fines and payment delays. An Employer of Record (EOR) can help support and simplify your global expansion efforts by taking on tasks like tax withholding and tax reporting on your company’s behalf. In addition to ensuring compliance with tax obligations, an EOR can make sure that you follow all local employment laws.

In this guide, we’ll cover what to consider before hiring international talent, best practices when choosing payment services, and how working with an EOR like Remofirst can help simplify the process and reduce risk when managing a global payroll.

Pros and Cons of Hiring International Contractors

Advantages

  • Companies can tap into a global workforce with diverse skills and expertise that may not be available locally.
  • It can be more cost-effective than hiring full-time employees, as businesses save on benefits, office space, and other overhead costs.
  • Businesses can scale up or down based on workload and project requirements without long-term commitments.
  • Working with contractors in different time zones can lead to round-the-clock productivity, with work continuing outside your company’s regular business hours.
  • Contractors often have specialized skills and experience in specific areas, providing high-quality work for specialized projects without extensive training.

Disadvantages

  • Navigating the legal and regulatory requirements for hiring international contractors can be complex, with risks including misclassification and non-compliance with local labor laws.
  • Language differences and time zone variations can lead to communication challenges, potentially causing misunderstandings and delays.
  • Cultural differences can impact work styles, expectations, and communication, requiring additional effort to effectively manage and integrate international teams.
  • Managing payments to international contractors involves dealing with currency exchange rates, transfer fees, and potential delays — which can complicate the payment process.
  • Contractors may not be as integrated into the company culture and processes as full-time employees, which can lead to potential misunderstandings

Best Practices for Hiring International Contractors

Here are the top three best practices for hiring and paying global contractors and how partnering with an Employer of Record (EOR) can help.

Create a Detailed Contract

Draft a comprehensive independent contractor agreement that outlines the scope of the work, deadlines, responsibilities, payment terms, currency, payment schedule, and payment method upfront. Well-written contracts reduce misunderstandings and set clear expectations for both parties.

EORs are experts in drafting and executing contracts with international contractors, making sure that all necessary language is included. This also includes ensuring that your company, not the contractor, retains the rights to any IP created for your business by the contractor. Remofirst allows customers to create, send, and digitally sign contracts in minutes.

Follow Local Tax and Compliance Rules

Before hiring contractors in another country, you must get up-to-speed on local employment and tax and payment regulations in every country where you’ll be hiring. Mistakes can be costly and could result in legal and financial penalties.

EORs are experts in global compliance with legal and tax requirements, such as income tax, and can handle these responsibilities on behalf of a company. Remofirst ensures your international contractors are working compliantly wherever they are located. We can also make sure you don’t accidentally misclassify international employees as contractors.

Perform Automated KYC Checks

Performing Know Your Customer (KYC) checks for your international contractors verifies their identity and ensures they are not engaged in fraud or criminal activities. KYC standards protect businesses and financial institutions against fraud, money laundering, corruption, and other threats. By implementing a robust KYC process for compliance, you can protect your organization against fraud while mitigating legal and financial threats.

Remofirst’s platform automates KYC checks in seconds to ensure compliance and mitigate risks for your business. We can also provide background checks on potential new contractor hires.

International Payment Methods for Independent Contractors

Once the contract is signed, your company needs to determine a convenient payment method for both you and your contractor. Here are some common payment options companies can use to pay foreign contractors.

Bank Transfers

Bank transfers, including international wire transfers using SWIFT, are a common method to pay international contractors. Wire transfers are fast and secure, allowing companies to pay international workers almost anywhere in the world. The funds will be directly transferred from your bank account to the contractor’s.

However, be mindful of the high wire transfer transaction charges, as some banks charge [as much as $50](https://www.bankrate.com/banking/wire-transfer-fees/#:~:text=person or entity.-,Average wire transfer fees,fees are usually %2435-50.) for an international money transfer. Other downsides to bank transfers include potential delays for international transfers and unfavorable exchange rates that could reduce the amount received by the contractor.

Online Payment Platforms

Digital platforms and digital wallets — such as PayPal, Payoneer, and Wise — are popular payment methods for international contractors. They are easy-to-use, offer lower fees than bank transfers, have faster processing times, and offer currency conversion at competitive rates.

One thing to keep in mind when making digital payments is that there are often costs associated with using those services. For example, PayPal [charges fees](https://www.paypal.com/us/cshelp/article/what-are-the-cross-border-fees-when-selling-internationally-help550#:~:text=If you send or receive,Fees page for more information.) to send money internationally based on the cross-border expenses associated with individual countries. Some providers also have transaction limits, and some digital services may only be available in certain countries.

Cryptocurrencies

Companies can use cryptocurrencies like Bitcoin and Ethereum to pay international contractors, especially in regions with limited banking infrastructure. They offer fast and secure transfers, have lower transaction fees than bank transfers, and bypass the issue of fluctuating currency exchange rates.

On the other hand, cryptocurrency values can become volatile, there are regulatory uncertainties in some countries, and both the employer and the contractor need to be comfortable with this payment method.

Partner with an EOR

Remofirst is an expert when it comes to hiring and paying international contractors. Our services include:

  • Performing background and KYC checks
  • Creating and managing contracts
  • Onboarding new contractors
  • Ensuring payroll taxes are compliant with local laws
  • Paying contractors on time and in their local currency

Our platform allows you to manage your global talent on our platform and pay them using just one invoice.

Book a demo to learn how we can help your business hire and pay international contractors.