U.S.-based companies paying international contractors should have contractors fill out an IRS Form W-8BEN, which certifies their foreign paying international contractors status in the eyes of the U.S. government. Though it sounds like a dream come true, online payment platforms are not as flexible when it comes to adding money to your account and withdrawal methods on your recipient’s end. For example, Wise charges quite a hefty fee which makes a bank transfer cheaper than funding your account. In many cases, foreign contractors are responsible for handling their own taxes. However, depending on where your company and your contractor are located, you may need to report those payments or provide documentation. Rivermate can help you stay compliant by ensuring all tax-related steps are handled properly.
Obligations and contractor’s rights
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. 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. But before diving into the nitty-gritty of payment methods and how to pay international contractors, let’s start by understanding what an international contractor is. Companies can also begin paying foreign contractors via an international money order or by paper checks, but there are multiple downsides and risks in doing so.
No pre-funded accounts
Misclassifying employees as contractors can lead to severe legal, financial and reputational damage. An international contractor is a person who works on a per-project basis for a company headquartered in a foreign country. Contractors have more autonomy over when, how, and for whom they work than an employee, and companies aren’t required to handle their payroll taxes or provide benefits. If you would like a quick and easy way to automate your contractor management, choosing a contract management platform like Remote is an excellent retained earnings place to start. You can begin sourcing, onboarding, and paying international contractors in just a few minutes. Luckily, contractor management doesn’t have to be difficult or expensive.
US Company Paying Foreign Contractor: Taxes, Payments, and More
- Also referred to as international money transfers, this payment method orders or instructs a bank-to-bank transfer of money for a specific amount that has been prepaid and certified.
- Xoom is a service from PayPal dedicated to fast international money transfers in over 170 countries.
- When target rates are met, Stampli will automatically execute your payments.
- Negotiating payment terms clearly and using formal contracts can protect both parties and ensure smooth transactions.
Yes, you’re correct that QuickBooks only allows you to enter US addresses and SSNs when adding contractors. With this, I’ll gladly share some suggestions on how you can pay international contractors in QuickBooks Online (QBO), so you’ll get to manage your expenses accordingly. The surest way to ensure timely payments is to automate payments using a payroll software like Asanify. But you have to first ensure that the contractor is comfortable with it as well. Once this is finalised, you can schedule the cross border payment securely with Asanify and it will be transferred to the contractor’s account in under 24 hours.
- If a contractor is on retainer, they’re paid a set amount regularly — similar to a salary (also known as fixed-rate).
- For regular payments, consider locking in rates to avoid budget fluctuations.
- Gain a comprehensive understanding of the complexities involved in international business growth.
- Independent contractors are exempt from social security contributions and other employment-related taxes in many countries.
- Our centralized platform for documentation ensured no contractor details were missed and helped the team stay organized.
- Hiring and paying foreign contractors can be complex and cumbersome, especially for companies that employ contractors in multiple countries with multiple currencies.
For employers, Deel simplifies the payment process by managing invoices and providing one centralized location from which to pay all international contractors. While PayPal is a convenient option, it’s important to consider the fees it charges for international payments and currency conversion. The best time to use a direct wire transfer is when you are making a substantial, non-recurring payment to a high-value partner where the high cost is justifiable for the perceived security. For the day-to-day work of paying a global team of contractors, it is an inefficient and costly method that creates significant manual work for your finance team. 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.
Asanify allows employers to make cross border payments to their contractors securely and saves money on forex too. Other than that, SWIFT, Paypal, Stripe, Payoneer & Transferwise are good options. Keep abreast of changes in international labor laws, tax regulations, and classification guidelines that Payroll Taxes may impact contractor payments and worker classification. Proactively adapt your processes and procedures to ensure compliance with evolving legal requirements. Make sure that the employment contracts comply with local laws and regulations. This is essential to ensure that the payroll for international contractors is being managed in a non-erroneous way.
