6 Best Ways to Pay Independent Contractors While Staying Compliant

Hiring contractors from around the world is becoming common for businesses of all sizes. But figuring out how to pay these international workers is still not straightforward.

Some methods are fast but expensive, while others are cheap but complicated. Choosing the right payment method matters - it affects your business costs and how happy your contractors are. In this guide, we'll break down six popular ways to pay international contractors. Whether you're hiring your first overseas contractor or trying to improve your current payment system, this information will help you make smart choices for your business and your global team.

International Bank Transfer (Slow, Expensive)

International wire transfers are a traditional method of sending money electronically between banks across borders. You'll need the recipient's full banking details, including the SWIFT/BIC code.

Pros:

• Wire transfers are a reliable and well-established method, ensuring funds reach the intended recipient.
• Banks use secure networks to process wire transfers, minimizing the risk of fraud.
• This method is available in almost every country, making it a versatile option for global payments.

Cons:

• Wire transfers can be expensive due to high fees and unfavorable exchange rates.
• Transfers often pass through multiple intermediary banks, each potentially adding delays and fees.
• Setting up international wire transfers can be cumbersome, requiring detailed information about the recipient's bank.

Cost: Typically $25 to $50 in transfer fees, plus potential exchange rate markups of 1-3%. For a $1000 transfer, the contractor may receive approximately $915.

Wise (Fast, Transparent)

Wise is an online money transfer service that aims to make international payments cheaper and more transparent. It operates by using local bank accounts in different countries to transfer money, effectively making cross-border transactions feel like domestic ones. Wise is known for its mid-market exchange rates and clear fee structure.

Pros:

• Wise offers transparent fees and mid-market exchange rates, making costs predictable and fair.
• Transfers are typically fast, and often completed within 1-2 business days.
• The service supports multiple currencies and offers local bank details in various countries, enhancing convenience.

Cons:

• Wise is not as widely known as traditional banks or PayPal, which may cause hesitation for some users.
• The service may impose transfer limits for new users, potentially restricting large payments.
• Wise cannot be used to pay contractors in some countries like India, Ukraine, or Myanmar, limiting its global reach.

Cost: Approximately $7.50 to $15 in fees, depending on the destination country, with no hidden exchange rate markup.

PayPal (High fee, Widespread)

PayPal is a widely used online payment platform that allows users to send and receive money internationally. It acts as an electronic alternative to traditional paper methods like checks and money orders. PayPal can be linked to bank accounts or credit cards and supports transactions in multiple currencies.

Pros:

• PayPal offers a straightforward setup process and a user-friendly interface for easy management of payments.
• The platform provides buyer and seller protection for eligible transactions, adding a layer of security.
• PayPal supports payments in multiple currencies, facilitating international transactions.

Cons:

• PayPal is not accessible in all locations, which may exclude some contractors from using this method.
• The platform can charge high fees, especially for currency conversion, potentially reducing the amount received.
• Both the payer and the recipient need to have PayPal accounts, which can be a barrier for some users.

Cost: About 5% currency conversion fee. If funded by a credit or debit card, an additional fee of 2.9% plus a fixed fee based on the currency is applied.

Payoneer (Versatile, Platform-Friendly)

A financial services company that provides online money transfer and digital payment services.

Pros:

• Payoneer is integrated with many freelance platforms, making it convenient for contractors who use these services.
• The service offers local bank accounts in multiple countries, facilitating easier fund transfers.
• Payoneer provides a prepaid Mastercard, allowing contractors easy access to their funds.

Cons:

• The service can have high fees for certain types of transfers, potentially reducing the amount received by contractors.
• Some users report that customer support can be slow to respond, which may cause frustration when issues arise.
• There have been reports of account freeze or closures, which could disrupt payments and cause inconvenience.

Cost: Varies depending on the payment method, but typically ranges from $3 to $15 for bank transfers, plus potential currency conversion fees.

Cryptocurrency (Volatile, Borderless)

Cryptocurrency is a form of digital or virtual currency that uses cryptography for security. It operates on decentralized networks based on blockchain technology. For international payments, cryptocurrencies like Bitcoin or Ethereum can be sent directly from one party to another without the need for intermediary financial institutions.

Pros:

• Cryptocurrency transactions can be processed almost instantly, regardless of the recipient's location.
• Transaction fees are generally lower compared to traditional banking methods, potentially saving money on transfers.
• Cryptocurrencies are not bound by national borders, making them accessible worldwide for those who can use them.

Cons:

• Cryptocurrency values can fluctuate significantly, posing a risk for both payers and recipients.
• The regulatory environment for cryptocurrencies is still evolving, which can create legal uncertainties for users.
• Not all contractors may be familiar with or willing to accept cryptocurrency payments, limiting its usability.

Cost: Varies depending on the cryptocurrency and network congestion, but is generally lower than traditional methods.

Thera (Fastest, Affordable)

Thera is a global hiring, payroll management, and payroll management platform that simplifies the complexities of managing a global workforce. It provides tools for payroll, compliance, and contractor management across multiple countries. The platform is built to help companies navigate the challenges of international employment regulations, tax laws, and payment systems.

Pros:

• Thera offers a centralized system for managing global payroll and hiring processes, reducing administrative complexity.
• The platform ensures compliance with local labor laws and tax regulations in multiple jurisdictions, minimizing legal risks.
• It provides tools for efficient onboarding, time tracking, and payment processing for both employees and contractors worldwide.

Cons:

• Thera is optimized for startups and agencies, and may not be ideal for large enterprise-level organizations with complex, multi-layered payroll needs.
• The platform focuses on core payroll and contractor payment features, so it may not include extensive time tracking or other auxiliary tools that some all-in-one platforms offer.
• As a newer platform, some users may experience a learning curve while adapting to Thera's features and interface.

Cost: Pricing for Thera typically varies based on the number of employees or contractors and the specific services required. But you can take advantage of Thera starting from $10/user/month.

In a comparison test, Thera outperformed Gusto and Deel across five currencies. Contractors received 1.6% - 3% more through Thera than with competitors.

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While the percentage differences might seem small, they can result in substantial savings for contractors over time, especially for larger payouts or frequent payments. Companies using Thera for their global payroll needs can ensure their contractors receive more of their intended pay, potentially improving satisfaction and retention. Schedule a demo with Thera and get a personalized tour of the platform.

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