Paying foreign contractors can quickly become a hassle. It can take longer, cost more, and may require extra steps from financial institutions, to ensure those funds get to the right place—and to avoid fraud. Unfortunately, these barriers often dissuade companies from casting a global net in their contractor search. They don’t want to deal with the hassle of international payments.
Thankfully, there are several ways to pay international contractors and it’s becoming easier to transfer money to workers around the world. Here’s a look at how to pay overseas contractors on-time and in-full, so they continue to be productive, contributing members of your global team.
Wire transfers have always been the standard for paying international contractors. They’re simple, low-risk, and easy to set up for most business bank accounts. Their security also makes them ideal for larger payments—there’s peace of mind in knowing the bank is handling larger transactions.
But wire transfers are far from perfect and, in many cases, are actually prohibitive! There are usually significant fees to pay freelance contractors overseas, and it can take a long time for payments to go through (5-7 days). Wire transfers are also bank-to-bank transactions, which makes them inapplicable if you’re working with an unbanked contractor or someone who prefers deposits to a non-traditional account.
Wire transfers are best for paying well-banked contractors in larger lump sums, since they’re handled (and insured) by the bank.
Although checks and money orders are becoming antiquated as forms of domestic payment, they’re still used to pay international contractors. The reason being, they’re inexpensive and there’s flexibility for the contractor in how, where, and when they cash the check. Unfortunately, this flexibility is the only real positive to checks and money orders these days.
The downfalls of these paper-based payment options are many. For one, they can take a long time to get to the recipient through conventional postal methods—and there’s always a chance they’ll get lost along the way! An even bigger issue is that they’re not universally accepted around the world—banking institutions in only 28 countries accept U.S. money orders and even fewer take USD checks outright.
It’s safe to say that the age of checks and money orders to pay international contractors is coming to an end.
Digital payment providers like Veem represent the quickest, simplest, most affordable solution for paying international contractors. Digital payment solutions offer transparency, such as a payment tracking from the moment a business sends money to the moment it’s received. Businesses also have the ability to control how they pay, such as the currency or where they send payment. These solutions are also flexible for contractors, who can choose where and how they deposit or withdraw funds.
Digital payments solutions are only getting better, but there are some small obstacles in using them. They’re typically better for smaller payments, since deposit insurance may not cover balances. In some countries, drawdowns from these services to traditional banking institutions isn’t yet supported.
Digital payments are the fastest-growing solution for businesses to pay international contractors, benefitting from the many advancements in FinTech.
Simultaneous payments live up to their name because they’re instant. Businesses send a payment to their bank, which accepts it and then pays the contractor’s bank in local currency. Businesses save the hassle of worrying about exchange rates (other than paying a fee). And, because everything is bank-to-bank, transactions are secure and insured, which makes paying large sums less of an anxiety-inducing experience.
Like wire transfers, the issue with simultaneous payments arises when working with unbanked contractors or those without access to reliable banking. Some countries or banking institutions may also restrict certain currencies. Setting up simultaneous payments can also take time upfront.
Simultaneous payments are akin to wire transfers in their security and reliability, but bank-to-bank transactions aren’t for every contractor.
How you pay overseas contractors comes down to your working relationship with them and, many times, their preference. You may prefer wire transfers when sending thousands of dollars at a time, whereas another contractor may prefer digital payments they can deposit into a non-traditional account. There are options for every situation.
No matter the methods by which you pay your contractors, understand the pros and cons of each, and the expectations of your international workforce. These individuals need to get paid on-time, in-full just like domestic contractors, and businesses should take the necessary steps to make paying them simple and straightforward.
When everyone gets paid, everyone stays happy, and work continues to get done. Making the effort to pay international contractors the right way leads to more fruitful partnerships and a better working relationship.
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