What are the best ways to pay contractors in a foreign country?
The gig economy is making the plunge toward a more sustainable economic model. Dividing the fabric of time in 2 starkly different spheres, COVID has proved to be the catalyst for such economic growth. Like many other phenomena, a new sapling seems to emerge among the crisis caused by coronavirus across the globe. In such times, hiring a contract workforce seems to be a viable idea to organizations and businesses alike. From providing a flexible hiring structure to access to a wider pool of talent, contract-based talent is a perfect fit in this entire ecosystem.
As much as the ‘new normal’ is exciting and rewarding on both the front, organizations are facing numerous challenges. These challenges are dynamic in nature and are as widespread as shuffling economies to change in the way the workforce is paid.
There are different tried & tested methods of sending money abroad but new ways are evolving every day and staying updated is the key.
Now, assuming the fact that you are a small-medium sized business owner and do not have a registered entity to run payroll through a foreign country, you will be considering paying your contractors remotely. Technology has proved to be the backbone of such a transformation and is facilitating the way we look at the world. Especially in the payroll system, technology is leaving its mark with numerous ways to pay your team across the globe.
Here are the best ways to pay contractors in a foreign country:
SWIFT Transfer - The Swifty payments system
Speaking of convenience in sending money across borders and paying your contractors, SWIFT is a great option. A typical form of wire transfer, SWIFT is an instant messaging system designed to carry secure transaction messages based on specific SWIFT codes. A simple walk to your nearest bank with the SWIFT code of the receiver is enough to send the money across. Once initiated, the amount is instantly credited directly in the receiver account. The SWIFT transfer system is quick, reliable and keeps the transaction secure at all times. Most international wire transfers across the world are done via SWIFT except in Europe where it’s done using IBAN. A good point to note here could be that your contractor will also have to take care of tax compliances in his or her own country when paid via SWIFT wire transfer.
Moneygram - The money Telegram
Moneygram offers payment transfer but restricts one-time transactions to a limit. You can only transfer upto $899 in a single transaction that too only if the receiver has a bank account based in the US. The transaction limit drops to $500 if you are using a credit card to make the payments. If you are looking for a payment option for small transfers, Moneygram is a good option but lacks a good network. On the other hand, Westernunion is much more common in many countries. Although sending payments via westernunion is slower, it still can be a good option due to its widespread network. If withdrawing cash locally in your contractor’s country is important, it can be a great option too.
PayPal - The first mover platform
One of the oldest and most sought after payment methods, PayPal is one of the easiest ways to send payments to your contractors. Based on the wallet to wallet transactions, PayPal charges a flat fee of about 4 per cent on each transaction. The fee charged is dependent on the payment amount and can quickly add up if you’re sending tens of thousands of dollars on a regular basis. If you have a PayPal merchant’s account, you may be liable for a rebate in the transaction fee. Where PayPal lacks is its customer service and trained representatives. Many remote professionals have reported unruly behaviour on PayPal’s front. Minus the convenience, Paypal may not be the best choice for sending money to your contractors on a long-term basis.
Transferwise - A wise payments app
If you are looking for a payment platform that charges a nominal standard fee against all transactions, Tranferwise can be a good option. Founded in the year 2011, the idea behind Transferwise was to cut down the humongous commission costs charged by payment platforms. A nominal fee calculated by understanding the currency and destination country is charged. Generally, transferwise charges 1 per cent for payments in USD and 0.5 per cent in other currencies. You can not only pay your contractors overseas via Transferwise but can also set an automated bulk payment system to automate your payment process. A transaction time of about 2-4 days should be expected if you are making bulk payments because many intermediary banks may be involved in a single transaction. Due to this, Transferwise ends up being just another ‘wire transfer’ option.
Payoneer - The ‘No-fee’ payments method
Based on its mantra to support easier and hassle free transactions across borders, Payoneer was founded back in 2005. Doubling up as a bank account, you can get a Payoneer debit card and use it to make payments. No fee is charged against transactions and the payment transfer is swift and easy. Although Payoneer charges currency transfer rates depending on the currency you are paying in. You should consider the fact that Payoneer cards are not available in all countries, for e.g., India. Also, you can only send or pay upto $1000 USD in a single transaction via Payoneer. Low FOREX rates can also pose a problem while withdrawing money through the debit card.
Cryptocurrency - The new age money
The rapid pace at which cryptocurrencies are gaining traction is uncanny. The use of cryptos as a way of paying the contractors is following the suite and might become one of the most favourite payment methods in the near future. Some of the popular cryptocurrencies include Bitcoin and facebook powered Libra Coin. As of now, Crypto payments have their own pros and cons. The volatile nature of cryptocurrencies makes it challenging for people to trust the method. Although, its instant capabilities and ease of access could be counted as some of the pros. Breaking all norms, cryptocurrency can virtually pass through any barrier. Due to this, you can pay your contractors anywhere in the world in just a few clicks. Although, just like platform based payment solutions, crypto can only be shared in ‘crypto wallets’. Typically managed by ‘crypto exchanges’ in various countries, these wallets can hold n-number of cryptos valuing any amount of money.
We at Starkflow are payment service facilitators assisting you in handling your taxes and payments on a monthly basis. We offer a complete solution of payments & administration for your organization helping you manage payroll, taxes, and all legal work. We also offer affordable escrow service to businesses acting as a facilitator between you and your contractors and help process payments, hasslefree. Not just this, we can also offer payslips to your contractors against the payroll and make the process easier.
You can reach out to our experts here and we will be happy to assist you in bringing more flexibility and ease in your contractor management process.