Hiring independent contractors to make up for the skill gap or to scale up production on demand has already become a go-to method among business that want to stay ahead of the curve. Although finding freelancers and independent contractors raises no question thanks to popular platforms like Fiverr and the like, paying contractors is still very much uncharted. EasyStaff provides this concise straight to the point guide to fill you in on the matter.
How to pay an independent contractor. Your (easy) guide on overseas freelancer payment
11/18/2024
#ForBusiness
How to pay an independent contractor. Your (easy) guide on overseas freelancer payment
Freelancer vs Independent Contractor. Is there any difference?
Risks of Working with Independent Contractors
Payment Models & Terms
Upfront Payments
After Payment
Charging Per Hour
Fixed Projects
Monthly Service Agreement
Payment Methods to Independent Contractors
SWIFT International Bank Transfers
Online Payment Platforms
Cryptocurrency
EasyStaff is Your Secure International Contractor Payment Method
Conclusion
The difference is subtle, if any. A freelancer is a person that does gigs. They may or may not have a full time job. However, one source of their income is projects they engage in with multiple clients. In other words, freelancers are independent contractors that connect with a business or an individual client, do the job and leave.
When a client and a freelancer reside in the same country, paying them is at least doable. Paying tax for the individual a company hires and sending money is easier when both parties are within one jurisdiction. However, when you work with a foreign independent contractor, it becomes times more difficult.
Well, it may seem overwhelming but are these questions real reasons to give up on hiring globally all together? Not at all. But you need to be aware of risks.
When a client and a freelancer reside in the same country, paying them is at least doable. Paying tax for the individual a company hires and sending money is easier when both parties are within one jurisdiction. However, when you work with a foreign independent contractor, it becomes times more difficult.
- John hires Jane to draw a website for him. Jane is a freelancer, or an independent contractor, and she and John work under a service agreement. Whether John pays taxes for Mary or whether Mary pays the tax herself is defined by local regulations.
- Mary, from Australia, hires Marc, from South Africa, to run a market analysis for her company. Now, who pays what? Does Mary have to pay taxes for Marc at home? Or does Marc simply have to promise he will pay at home and Mary won’t be accountable?
Well, it may seem overwhelming but are these questions real reasons to give up on hiring globally all together? Not at all. But you need to be aware of risks.
Freelancer vs Independent Contractor. Is there any difference?
Every single benefit of having an expandable workforce that can be fine tuned to meet your budget and expectations has already been discussed. What businesses may forget is just how many risks and pitfalls there are behind hiring a remote foreigner.
Payment will not come through. Time and again, there is a similar exchange across multiple cases: ‘PayPal doesn’t work in my country' or ‘Will you be able to send money in crypto?' There you go: time was spent and work was done, yet you find yourself working out payment, and the freelancer is about to lose all faith. An unseen, yet persistent challenge is finding a payment method that works for all — the company and the freelancer.
Closing documents are not available. Suppose you find the freelancer, your one and only who seems to read your thoughts. They are abroad, and you are just about to start work, when you ask yourself: ‘How do I explain this to my bank?' And there is something to explain! You are hiring an individual from overseas, and there are questions asked in the bank as to why your company sends money not only abroad, but also to a physical person? It is important that you keep the matter in mind when selecting a payment method.
Cryptocurrency may not work. All of you tech geeks out there, we know you have already thought of cryptocurrency as a potential way around. Yes, crypto is convenient, fast and largely uncontrolled the way traditional banking operations are. Yet to freelancers, receiving payment on crypto may be problematic. The reason is, some countries either don’t have a lear law regulation yet or even prohibit getting paid in crypto all together. If your contractor makes their living with freelancing, they’d rather choose someone else who pays in fiat money.
Freelance platforms don’t work for repeat projects. If you absolutely loved your experience with a freelancer, chances are you will be reaching out again and again. However, with freelance platforms designed for one-off contact, offering your job to the same person and paying for every posted project may be troublesome and costly. If you are looking for an intermediary, consider their functionality for repeating connections with the same contractor.
Payment will not come through. Time and again, there is a similar exchange across multiple cases: ‘PayPal doesn’t work in my country' or ‘Will you be able to send money in crypto?' There you go: time was spent and work was done, yet you find yourself working out payment, and the freelancer is about to lose all faith. An unseen, yet persistent challenge is finding a payment method that works for all — the company and the freelancer.
Closing documents are not available. Suppose you find the freelancer, your one and only who seems to read your thoughts. They are abroad, and you are just about to start work, when you ask yourself: ‘How do I explain this to my bank?' And there is something to explain! You are hiring an individual from overseas, and there are questions asked in the bank as to why your company sends money not only abroad, but also to a physical person? It is important that you keep the matter in mind when selecting a payment method.
Cryptocurrency may not work. All of you tech geeks out there, we know you have already thought of cryptocurrency as a potential way around. Yes, crypto is convenient, fast and largely uncontrolled the way traditional banking operations are. Yet to freelancers, receiving payment on crypto may be problematic. The reason is, some countries either don’t have a lear law regulation yet or even prohibit getting paid in crypto all together. If your contractor makes their living with freelancing, they’d rather choose someone else who pays in fiat money.
Freelance platforms don’t work for repeat projects. If you absolutely loved your experience with a freelancer, chances are you will be reaching out again and again. However, with freelance platforms designed for one-off contact, offering your job to the same person and paying for every posted project may be troublesome and costly. If you are looking for an intermediary, consider their functionality for repeating connections with the same contractor.
Payment schedules in the gig economy are different from traditional 5/2 full-time employment. There are many factors at play that influence how a freelancer is likely to charge, and those include local laws, marketplace rules or common practice of an industry. Let’s consider several payment models you’re likely to encounter with a foreign independent contractor.
Upfront Payments
If you have ever tried freelancing, you know some people are set on getting your services for free. With more than 50% of freelancers having experienced a client like this, upfront payment is a widely accepted practice among freelancers. Many independent contractors require a portion of the contract fee upfront before committing to the project.
From the client’s perspective, upfront payments may seem risky, but customers are guaranteed the freelancer will begin work immediately and encourage both parties to take the project seriously. When a client has invested actual money in a project, they’re more likely to stay actively involved.
After Payment
This method is the total opposite of upfront payments. You pay your freelancer only after work is done. It is difficult to say that every contractor is happy to be paid in full only after the project is complete. It is either a short project that your freelancers will be fine with or a newbie freelancer who is excited for any work and would give in for post-payment.
Upfront Payments
If you have ever tried freelancing, you know some people are set on getting your services for free. With more than 50% of freelancers having experienced a client like this, upfront payment is a widely accepted practice among freelancers. Many independent contractors require a portion of the contract fee upfront before committing to the project.
From the client’s perspective, upfront payments may seem risky, but customers are guaranteed the freelancer will begin work immediately and encourage both parties to take the project seriously. When a client has invested actual money in a project, they’re more likely to stay actively involved.
After Payment
This method is the total opposite of upfront payments. You pay your freelancer only after work is done. It is difficult to say that every contractor is happy to be paid in full only after the project is complete. It is either a short project that your freelancers will be fine with or a newbie freelancer who is excited for any work and would give in for post-payment.
Payment Models & Terms
Risks of Working with Independent Contractors
SWIFT International Bank Transfers
A bank transfer is just moving money electronically from one person to another. Bank transfers have proven to be reliable over the years, making companies feel secure when sending money internationally. The best part? You always know where your money is. If something goes wrong, it gets returned.
However, these transfers can be pricey. You might pay up to $ 50 in fees for each transfer, plus extra charges for currency conversion and delays before the money reaches its destination. High commissions can be a headache too; either you send more money to cover the fees, or the freelancer charges you more to make up for it. Banks can even hit you with unexpected fees for extra checks they do on suspicious transactions.
Plus, if you’re sending money through a bank, expect to provide a ton of paperwork, especially if you’re paying a freelancer in another country. Both you and the freelancer might need to show where the money is coming from. With all these extra requirements, traditional banking is not an option at all if you have freelancers on a more or less regular payroll.
Online Payment Platforms
Another popular way to handle payments for freelancers is through online money transfer services like PayPal, Payoneer, and Wise. These platforms are alternatives to traditional bank transfers, but they can have high and unpredictable fees, not to mention long wait times. You usually enter your card info, and the money gets sent off. These services work best for smaller amounts and aren’t available everywhere. Plus, not all businesses can set up an account—especially those outside Europe, which face tough eligibility rules.
While online payment platforms seem great, they can be pretty rigid when it comes to adding funds or withdrawing money for the person receiving it. For instance, Wise has high fees, making traditional bank transfers sometimes cheaper.
Cryptocurrency
Cryptocurrency is still relatively new, but it’s gaining traction as more freelancers and companies try it out as a payment method. It has the potential to rival traditional money.
Crypto gives you a unique sense of ownership. Unlike fiat money, which is controlled by banks, cryptocurrency allows you to have true ownership of your digital cash, making it super flexible for online transactions. But with that freedom comes some drawbacks. Cryptocurrencies aren’t well-regulated by governments or banks, meaning once you send money, it’s gone for good—there's no way to get it back or pause the transaction.
Also, because crypto is still in a bit of a legal gray area, it can be tough to comply with regulations. It raises questions about how to document transactions or explain where the money came from, which can make using cryptocurrency feel complicated for managing contractors.
A bank transfer is just moving money electronically from one person to another. Bank transfers have proven to be reliable over the years, making companies feel secure when sending money internationally. The best part? You always know where your money is. If something goes wrong, it gets returned.
However, these transfers can be pricey. You might pay up to $ 50 in fees for each transfer, plus extra charges for currency conversion and delays before the money reaches its destination. High commissions can be a headache too; either you send more money to cover the fees, or the freelancer charges you more to make up for it. Banks can even hit you with unexpected fees for extra checks they do on suspicious transactions.
Plus, if you’re sending money through a bank, expect to provide a ton of paperwork, especially if you’re paying a freelancer in another country. Both you and the freelancer might need to show where the money is coming from. With all these extra requirements, traditional banking is not an option at all if you have freelancers on a more or less regular payroll.
Online Payment Platforms
Another popular way to handle payments for freelancers is through online money transfer services like PayPal, Payoneer, and Wise. These platforms are alternatives to traditional bank transfers, but they can have high and unpredictable fees, not to mention long wait times. You usually enter your card info, and the money gets sent off. These services work best for smaller amounts and aren’t available everywhere. Plus, not all businesses can set up an account—especially those outside Europe, which face tough eligibility rules.
While online payment platforms seem great, they can be pretty rigid when it comes to adding funds or withdrawing money for the person receiving it. For instance, Wise has high fees, making traditional bank transfers sometimes cheaper.
Cryptocurrency
Cryptocurrency is still relatively new, but it’s gaining traction as more freelancers and companies try it out as a payment method. It has the potential to rival traditional money.
Crypto gives you a unique sense of ownership. Unlike fiat money, which is controlled by banks, cryptocurrency allows you to have true ownership of your digital cash, making it super flexible for online transactions. But with that freedom comes some drawbacks. Cryptocurrencies aren’t well-regulated by governments or banks, meaning once you send money, it’s gone for good—there's no way to get it back or pause the transaction.
Also, because crypto is still in a bit of a legal gray area, it can be tough to comply with regulations. It raises questions about how to document transactions or explain where the money came from, which can make using cryptocurrency feel complicated for managing contractors.
Payment Methods to Independent Contractors
Charging Per Hour
Many freelance marketplaces — think Flexjobs or PeoplePerHour — enable freelancers to charge for their projects based on hourly rates. In this model, independent contracts are paid for the time spent working, rather than a fixed price for specific deliverables. The strategy makes a lot of sense when it comes to projects prone to revisions or delays. Freelancers will be open to continued work and especially meticulous.
Fixed Projects
Instead of hourly rates, which often represent a trade-off between time and value, independent contractors can set a fixed rate for each project. This fixed rate can be paid upfront or upon project completion. This approach allows freelancers to accurately quote their worth and provides clients with a clear value for their investment.
Monthly Service Agreement
Seasoned freelancers understand the reality of the "feast or famine" scenario — an abundance of projects one day, followed by a shortage the next. That’s why both new and experienced freelancers embrace retainer agreements. This type of contract outlines a consistent service agreement between a company (or individual) and a service provider. Retainer agreements allow freelancers to plan their work, even out income fluctuations, and take on additional clients. A significant portion of freelance writers earn a considerable income through monthly retainer contracts, allowing clients to review freelancers' expertise and measure their progress. This ensures value for money and fosters a sustainable working relationship.
Many freelance marketplaces — think Flexjobs or PeoplePerHour — enable freelancers to charge for their projects based on hourly rates. In this model, independent contracts are paid for the time spent working, rather than a fixed price for specific deliverables. The strategy makes a lot of sense when it comes to projects prone to revisions or delays. Freelancers will be open to continued work and especially meticulous.
Fixed Projects
Instead of hourly rates, which often represent a trade-off between time and value, independent contractors can set a fixed rate for each project. This fixed rate can be paid upfront or upon project completion. This approach allows freelancers to accurately quote their worth and provides clients with a clear value for their investment.
Monthly Service Agreement
Seasoned freelancers understand the reality of the "feast or famine" scenario — an abundance of projects one day, followed by a shortage the next. That’s why both new and experienced freelancers embrace retainer agreements. This type of contract outlines a consistent service agreement between a company (or individual) and a service provider. Retainer agreements allow freelancers to plan their work, even out income fluctuations, and take on additional clients. A significant portion of freelance writers earn a considerable income through monthly retainer contracts, allowing clients to review freelancers' expertise and measure their progress. This ensures value for money and fosters a sustainable working relationship.
- International independent contractors help you scale and grow on demand. Freelance workforce can be highly customizable to correspond with your budget and expectations.
- However, despite the seeming ease of paying abroad, traditional payment solutions may not be enough document or coverage-wise.
- You also need to be aware of the risks that come with paying individuals internationally for their services.
- One way to navigate international contractor management is EasyStaff. The platform offers a secure way to pay contractors abroad through its user-friendly single-window solution to meet any payment demand — $, € or ₿.
Conclusion
EasyStaff is Your Secure International Contractor Payment Method
EasyStaff is the contractor management platform that helps you bypass risks, challenges, and problems of administering payroll for independent workers internationally. With its 100% compliance in every payment, the service provides secure payment in multiple currencies, including crypto, followed up by closing documents.
How does EasyStaff do it? As a European company, it has access to international banking networks which enables the service to offer most favorable commission rates on transfers. Another important advantage of EasyStaff is that it works with its corporate clients under a B2B contract. Therefore, businesses work with EasyStaff as a partner and are provided documents to underpin the partnership. The risks of working with a foreign individual are eliminated.
For freelancers, EasyStaff offers multiple withdrawal methods and closing documents as well, so contractors can report their income and pay taxes hussle-free.
EasyStaff is the contractor management platform that helps you bypass risks, challenges, and problems of administering payroll for independent workers internationally. With its 100% compliance in every payment, the service provides secure payment in multiple currencies, including crypto, followed up by closing documents.
How does EasyStaff do it? As a European company, it has access to international banking networks which enables the service to offer most favorable commission rates on transfers. Another important advantage of EasyStaff is that it works with its corporate clients under a B2B contract. Therefore, businesses work with EasyStaff as a partner and are provided documents to underpin the partnership. The risks of working with a foreign individual are eliminated.
For freelancers, EasyStaff offers multiple withdrawal methods and closing documents as well, so contractors can report their income and pay taxes hussle-free.
Customer Support working hours: 8:00 – 17:00 UTC+2
EasyStaff UAB
Code 305643163
Vilnius, Labdarių g. 6A-18, LT-01120, Lithuania
Vilnius, Labdarių g. 6A-18, LT-01120, Lithuania
