How To Pay Offshore Contractors
May 14, 2021
There are a variety of reasons to look around the world for contractors. Some countries offer more available skills than others. Or, you might need someone with perspective—for example, an American company may hire contractors in Japan to work on a project specific to Japanese culture. There are also pay rates and currency to consider. All told, the advantages of a global workforce are many.
While it’s easy enough to find global talent, how to pay offshore contractors can be a struggle. What if your contractor in Sweden only accepts payment in Euros? What happens if you’re dealing with an unbanked contractor in Malaysia? These questions aren’t typically a problem when hiring domestic contractors, but they’re common when working around the globe.
Here’s a look at how to pay offshore contractors and what to consider as you prospect a global workforce to help you produce the best possible results for your company.
Establish payment rates and terms
It becomes immediately evident that rates differ greatly across countries and talent pools. While skill and experience play a role in determining a contractor’s rate, so does cost of living and average local wage. This is why the rates for contractors in developing countries is often lower than those in more established countries.
Before you start looking around the world, qualify the rate you’re willing to pay. This can immediately rule out some countries or guide you towards others. For example, the rate for a full-stack ecommerce developer in Norway might be $80/hr., while a comparable developer in India may charge $50/hr. If you look at cost of living and currency, it’s instantly apparent as to why this cost difference exists.
Once you’ve established how much you’re willing to pay a contract position, make sure you also set the terms of payment. Will you pay bi-weekly? Monthly? In intervals specific to the project? No matter when and in what amount, make these terms upfront and readily understood by your contractor.
Explore modes of payment
Once you’ve found a contractor and agreed on rates and terms, it’s time to investigate modes of payment. There are several options, each with different pros and cons for transferring money to offshore accounts:
- Bank transfer: Traditional bank and wire transfers are widely accepted in most developing countries, but come with fees and a lack of transparency. They’re great for occasional payments and one-off transfers, but not suitable for consistently paying contractors in other countries.
- Money order: Money orders are a great option for unbanked contractors, but that’s about it. They’re often met with skepticism because of a high potential for fraud, and the cost of sending a money order can be quite high—and that’s if you’re sending it to a country that accepts them.
- Paper check: Paper checks are still hugely popular for enterprise companies, but come with several big downfalls. First, you’re subject to snail mail. Payments can take weeks to land, and there’s an increased chance of checks being lost or stolen. While they leave a paper trail, they’re largely antiquated by digital payments.
- Digital payments: Digital payments offer the best of all worlds. They’re quick and traceable, with low fees. Companies like Veem also offer digital wallets, which satisfy the needs of unbanked contractors. And, with opportunities for currency exchange, it’s possible to handle every aspect of global transactions from a single service.
Deciding on payment comes down to what works best for the company and the contractor. If you’re releasing a one-time, large payment, wire transfers are an acceptable option. If you’re paying contractors consistently, digital payments offer a lot to get excited about.
Consider the needs of your contractor
Finally, consider the needs of the contractor you’re working with. Do they prefer payment in USD or a local currency? Are they banked or unbanked? Do they prefer a specific payment schedule? It’s important to understand their needs and preferences, even if you can only honor some of them. This is part of developing a relationship and rapport with someone working remotely for you.
Release funds and account accordingly
All that’s left is to get your people paid! To do this, make sure you’re clearing international payments with your finance department, and accounting for those funds accordingly. You’ll need transparency for tax purposes and to keep your books clean. These days, it’s not uncommon to issue payments around the world, but they still require careful accounting to show where, how much and what for.
For your own peace of mind, it’s also a smart idea to work with a digital payments company like Veem, which allows payment tracking in real-time. You’ll get the convenience of seeing where funds are in transit and be able to confirm landing. Moreover, you’ll have full insight into exchange rates and fees, affording your business a little extra cost control when it comes time to get offshore contractors paid—no matter where they reside in the world.