Payments to Foreign Contractors for Services: When and How Often?
May 6, 2021
If you’re hiring independent contractors in other countries, you need a plan for how and when to pay them, just like you would domestic contractors and normal employees. To make payments to foreign contractors for services as easy as possible, set up a payment schedule and system to streamline the process.
To create a payment plan, you need to consider the frequency of payment and the costs associated with monetary transfer. While there are a variety of traditional options to pay foreign contractors, digital payment platforms can offer you the most flexibility so that you can make payments when it’s best for you and your workers.
How often should you pay foreign contractors?
To streamline your payment process for independent contractors, make a plan for consistent frequency of payment. Consider whether you should pay your contractors weekly, bi-weekly, monthly, or quarterly. There are pros and cons for each payment schedule and you should consider them all before making a decision.
- Weekly: If you want to pay your contractors weekly, be careful of payment processes that charge large flat fees for transfers. This could increase the cost of payment drastically if you’re paying these fees four times a month.
- Bi-weekly: A bi-weekly payment schedule might be the easiest if that’s the schedule your domestic employees are on. Paying independent contractors at the same time as other employees can streamline the process. Again, if you’re paying large flat fees, bi-weekly might still be too expensive of a payment schedule.
- Monthly: A monthly payment schedule could be the best of both worlds for paying independent contractors. Not only does it reduce some of the costs associated with more frequent payment, lump sum releases are easier for the accounting department to track.
- Quarterly: Quarterly payments usually follow project-based payment schedules. For example, you might pay a consultant quarterly or pay per project as they wrap at the quarter. The sums associated with quarterly payment tend to be greater.
Factor international payments into payroll
To ensure you have the funds when it’s time to pay foreign contractors, factor international payments into payroll. Your payroll administrator will need to maintain clear records of international payments, as well as domestic payments, for tax purposes. Delineate these payments as part of an international dispersal and make sure they’re accounted for accordingly.
The maintenance of these records ensures necessary tax withholding and reporting—things that don’t go away when you hire an international contractor. No matter the method of payment and how often, keep records of payments to foreign contractors. In the advent of an audit, you don’t want to be caught without them!
Have a system for tracking payments
While traditional transfer systems don’t offer a lot of insight into money movements, digital payments offer much-needed transparency to track them. This will ensure not only that your independent contractors actually receive payment, it makes it easier to keep track of relevant payment documents. Both issuer and recipient can see where the money is, when it’s expected to land, and the dates associated with these transactions. This makes payments much more predictable for businesses and contractors alike, who can see where payment is whenever there’s a question.
Be mindful of associated costs
Depending on your payment method, the cost of sending money to contractors overseas can vary and will influence how often you want to pay them. Transaction fees can be flat, a percentage, or a combination of the two. Banks might also charge an exchange fee, or give you a lower exchange rate, which will effectively be an exchange fee. These fees can make the cost of paying an international contractor a lot more than expected. Be mindful of these costs when deciding how often you’re going to pay foreign contractors.
Use a system that makes paying foreign contractors simple
The workforce is becoming more and more a globalized one by the day. With all the complicated matters to consider when paying independent contractors in other countries, you might worry that it’s more trouble than it’s worth. But what if there was a payment platform that made it easy to send payments to foreign contractors for services?
Veem can do it all. Expect lower transaction costs than traditional international payment methods and easy invoicing tools, so you can keep track of your payments effortlessly. Veem makes including international payments in your payroll process easier than ever. Digital payment platforms’ affordability, flexibility and accessibility make them the best option for paying independent contractors no matter where they are.