Defining “international contractor”

Regardless of where your organization is located, an international contractor is a person who lives or works abroad and is not a citizen of your organization’s home country. 

Although this definition focuses on both citizenship and residence, it’s imperative to understand that the definition places less importance on what passport an individual holds and more on the location in which they work.

Bearing this in mind, even citizens of your organization’s home country can be considered international contractors under certain circumstances. Frequently, local governments will uphold income reporting and withholding requirements even for non-citizens that earn wages within their borders. Plainly, anytime an organization contracts an individual not located in their home country it is crucial to consider the location and regulations of the individual’s workplace.

‍

Payment structures for global contractors

Developing internal policies for contractor payments can be challenging - especially for young, fast-moving startups that don’t have extensive internal compliance or HR teams. Borderless can help you pay contractors through a few different structures:

Activity based:

Activity based pay is best used for projects that have a clear and defined output. Through activity based payments, organizations can pay contractors for the completion of specific tasks. Of course, it’s imperative when you use activity based payments that you set out clear guidelines ahead of time and develop concrete milestones, progress reporting requirements, and the expectations you have for the quality of their work.

Hourly (plus costs):

Time-based payments can be the most accurate representation of the effort required from contractors when your organization has granular insight into how their tasks are performed. If your organization can confidently track the time it takes to complete a project, these structured payments may be best. However, bear in mind that contractors that are paid hourly have no incentive to work quickly and may take longer to complete a project.

Recurring payments:

A recurring payment, often processed on a biweekly or monthly basis, can be a great solution for organizations that expect to have multiple similar projects that do not want to renegotiate or find a new contractor for each additional task. This payment structure, however, requires sufficient advanced planning. How long will you have consistent project needs? What will you do if you have no new projects for a contractor that is still under a retainer? These are questions to consider before initiating recurring payments.

‍

How to transmit money across borders

Since the time of Mansa Musa, transmitting money across borders has been a challenging and arduous process. However, times are changing and your organization now has multiple options for paying international contractors:

Borderless

Borderless’ contractor-focused platform is purpose built. With Borderless, not only can you pay your contractors, but also manage their onboarding, send them fully compliant contracts, provide multiple payment methods, and support them with our best-in-class contractor success team. 

Pros:
  • Contractor focused design
  • Fast and easy hiring
  • Secure and compliant contracts
  • In-depth country expertise
  • Quick and accurate payments
  • Happier distributed teams
  • No hidden fees
Cons:
  • Given that Borderless is a younger company, you may not have heard of us before!
Digital Payments Companies (PayPal, Wise):

One way to get away from potentially manual processes is to leverage a digital payments company such as PayPal or Wise. Many organizations find this beneficial when paying one or two contractors intermittently. One thing to keep in mind is that these organizations charge payment fees that can become significant at scale.

Pros: 
  • Mature platforms
  • No need to open specific bank accounts
  • Quick and efficient payments
Cons: 
  • Payment fees for recipients
  • No contractor management platform
  • Requires significant management at scale
Wire Transfers:

Using companies like Western Union to send international wire transfers was long the preferred method of making individual, global payments. However, there are many drawbacks to this approach. First, wire transfers can result in significant fees for the recipient. Second, wire transfers require in-person withdrawals which are not only inconvenient, but also force recipients to absorb the risk of holding significant cash before they are able to deposit their funds.

Pros: 
  • Accessible almost anywhere, wire transfers are a good fallback option in locations without a digital option
Cons:
  • High fees
  • Recipient required to receive funds in person
Paper checks:

Mailing paper checks is a highly inefficient solution to processing international contractor payments. Like with all paper check payments, banks may hold funds until a check clears. Further, many banks will charge onerous currency fees. These traditional banking issues, however, won’t even be a problem if the check never arrives in the mail.

Pros:
  • There are minimal benefits to paying international contractors with paper checks
Cons:
  • Dependent on international mail services
  • Long payment wait-times
  • High fees
Bank transfers:

Most banks can arrange an international transfer. However, this is generally not the most cost efficient way to pay contractors located overseas. Your bank will most often require you to pay a service fee for each transfer as well as currency exchange fees. The receiving bank will generally charge fees as well and, depending on the route your payment takes, multiple intermediaries may charge fees as well.

Pros:
  • If you are a big enough customer, banks will assign an account manager dedicated to providing you with effective customer service
Cons:
  • Poor exchange rates and high service fees
  • Hidden fees for your contractors
  • No contractor management platform

‍

Why use a platform to manage your contractors?

Building a global workforce of highly skilled individuals is challenging. Scaling your labor pool up or down to fit your evolving needs is even more complex. Figuring out how to pay the talented contractors you hire shouldn’t be your biggest headache. Using a platform with contractor management functionality will not only simplify your payroll processes, but also enable straightforward onboarding and effective contract management, letting you focus on what matters most - identifying the right talent for your team.

‍

About Borderless

Borderless is a global company of passionate people brought together by the conviction that hiring local talent anywhere in the world can be the greatest form of opportunity equalization.

Organizations that choose to look beyond their brick-and-mortar offices will not only have access to a wider talent pool of highly qualified individuals, but will also be supporting emerging local economies, improving their workforce diversity, and contributing to emission reduction by removing the daily commute. All while increasing their bottom line and reducing their legal liability.

Borderless enables you to become a distributed organization whose members will be empowered to lead the lifestyle they desire without sacrificing their career opportunities or feeling like 2nd class citizens.

‍

Disclaimer

Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.