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Paying Foreign Contractors: The Ultimate Guide

Damian Tornatore
Damian Tornatore

Table of Contents

Growing your business to a global scale greatly depends on your workforce. Independent contractors can be an extremely valuable asset to growing a global business. These specialized individuals offer companies expertise, on a flexible, on-demand basis.

Ensuring compliance and reporting everything needed in your home country and every country where your remote workforce lives is a big part of global payroll, it is not just financial transactions. There also are currency exchange rates, currency conversion, and bank fees to account for before even considering onboarding new talent to your workforce.

Compliance with international labor laws can be expensive, time-consuming, and frustrating, even more so if your team is spread across various countries. You have to get in touch, understand, and learn every aspect of professional tax and payroll services for each country your workers reside.

Businesses with a global workforce must understand how to pay overseas contractors, how to be compliant, how to scale, and how to make the process stress-free and cost-effective.

Let's start by first understanding what is an international contractor.

🌍What Is An International Contractor?

An international contractor in plainsman's terms, is an individual who doesn't reside in the same country where they work. If we talk about US-based companies, an international contractor does not reside or work in the US, and they are not citizens of the US. In most other countries, the classification is the same. international contractors work in a different country and are not citizens of that country.

If the international contractor(also known as a 1099 worker) works outside of the US, even if they are a US citizen, the local government always imposes a cut. You cannot just pay US contractors who work internationally without considering where they work.

It is of vital importance that you are well aware and compliant with local regulations when thinking about working with international contractors since in some countries if you work long enough with an individual they will be considered an employee and no longer a contractor. This could come back to bite you with legal actions, fines, and fees, even if you were unaware.

Crossroads for different locations

Can I pay an international contractor?

Absolutely. There are a ton of ways to do so as well. Either the traditional method like a bank transfer from a US-based business account. You can go for digital wallets or payment platforms like Wise or Paypal. There are global payment partners like Remote and cryptocurrency options like Bitwage.

Let's break these down a bit.

💼How Do I Pay International Contractors?

There are various ways to conduct global payroll. Below you will find some of the most used methods.

Bank Transfers

This payment method is the most well-known and used method around the globe. Yet, this is by far, the most expensive way to pay international contractors. Banks are loaded with fees, intermediaries, unfavorable exchange rates, and hidden fees that you may not be aware of. Banks also tend to take days to process an international transfer. These fees and delays essentially leave your worker with no option but to wait for various days for an invoice to be paid, and it might come a bit short when it finally reaches the individual due to the extensive fees. Which ultimately makes them think you are not giving them the full compensation for their work and it could cause upsets and frustrations.

International Money Orders

Payment methods of this sort are almost as outdated as checks. Well-known companies like Western Union are at the tip of the food chain for this market. This payment method requires the contractor to physically deposit the payment at one of their stores which is a hassle on its own. The fees are also on the extreme side of things. This option is only viable if there are no other digital options to get your international worker their salary. This method is not recommended.


Another well-known payment method is checks! Yes, checks can be used to pay your overseas workers, yet checks are the least popular of all the options on this list. Checks require a fee to be deposited, have an exchange rate that only the bank controls and funds have to be escrowed for some time until the check clears. This ultimately leads to, long wait times for payments to be processed, high fees for both parties, and the exchange rate could destroy the amount of actual money received after the check has cleared.


Wise is one of the leading platforms for sending international payments. They don't have any hidden fees and enable multiple foreign currency accounts. This makes the process easier and cheaper since you can top up multiple currencies. The security of Wise is as high as a bank, and just like banks, Wise is custodial. Meaning they hold your funds. So in a hypothetical scenario where wise were to disappear you are at their mercy, just like banks. Wise also offers batch transactions with a single click.


This is perhaps the most well-known and used payment method to make payments online. Everyone at some point has heard of or used PayPal. Paypal can also be used to make international payments to contractors in different currencies. PayPal offers credit card options to top up your account and allows you to send to thousands of individuals at the same time. However one of the biggest downfalls of PayPal is that you can only send from a PayPal account to another PayPal account. Paypal fees are also on the higher side of the spectrum.


Payoneer was a top-used payment gateway to get funds to international contractors. Payoneer however only allows you to execute each international payment transaction manually and usually the funds take days to reach the target account. You also have to maintain and update banking information and details for each payee. Payoneer has received some recent backlash due to the constant security issues and hacks the company has suffered. As a custodial platform, where user funds should be the primary concern, this leaves room to doubt using their service.


Bitwage is a revolutionary approach to international contractor payments. Bitwage leverages the speed, reliability, and country-agnostic vision behind Bitcoin and cryptocurrencies. Bitwage is completely non-custodial, which means that no user funds are held on the platform. With 10 years in the industry, Bitwage has become a staple in payroll.

🏦International Payment Structures: Why Are Companies Considering Them?

Creating an international pool of remote talent is one of the things most organizations seek for. It can become a considerable challenge to work out how to pay these talented individuals consistently and fairly. International Pay Structures (IPS) are becoming very popular.

Why use International Payment Structures?

An international payment structure brings value to organizations by defining compensation packages that best meet the needs of both parties, the employer and the employee, while also not being constrained by where the employee is located. It is thoughtful and sensible for companies to draw their talent from various countries, even if they don't have a business entity in that specific country. In the case that the company does not have a business entity in a specific country, it can be challenging for companies to determine remuneration for employees. It is important to anchor individuals in terms of pay.

How is international pay determined?

Calculating a fair competitive international pay line is crucial. There are several options to consider, like home and local plus market-based compensation and local packages. It is also important for employers to analyze thoroughly all the different venues available to find the best solution.

  • Inspect trends in the places where you have the most executives, or where you want to attract them, closely and thoroughly and create a pay line that will work in these locations. (Some countries have been affected largely by expat workers and have led to local payment structures to adjust to these)
  • Choose the right currency for the payment structure. The usual safe options are the US dollar, Euros, and stablecoins such as USDT and USDC even if they slightly fluctuate. Find the best fit for your workers.
  • Set up a project fee or a fixed-price fee for the specific scope of work outlined in the contract.
  • Define things like milestones, progress reporting, and sanctions for missing deadlines.
  • Make sure that intellectual property is arranged within the contract agreement.
  • Set up retainer arrangements for monthly payments that could be renegotiated at the beginning of every year or month in some cases.
  • Define what happens if you have not provided enough work for the contractor for the hours billed.
  • Make sure your contractor submits a timesheet and expense report if applicable, this way you can accurately measure the time and money it takes to get the desired outcome.

📝Classify Your Workers When Hiring Overseas

Each country has its way of determining the employment status of a worker.
It is of dire importance to do your research and understand, for example, that in different countries, long-time contractors may be considered full-time employees and you are required to hire them as full-time employees to avoid fees.

1099 workers can be w2 workers depending on their location and how long they have been contracted. Avoid hefty penalties and read more about 1099 vs w2 workers.

💰Determine Which Currency You Are Going To Pay Your Contractors

This is a very important part of working with overseas contractors.
Before hiring, knowing what their payment amount or salary will be and taking foreign exchange rates into account, choose the best currency for your contractors.
Most individuals go for payments in US dollars since it seems to be a staple around the world. Yet many don't realize that there are countries that have hefty limitations on foreign currency entering their country.

Let's take a look at some of the available options so you can choose what best suits your situation.

Paying in US dollars

This is the most commonly used method and honestly, it works quite well. Make sure that the international contractor has a USD account and can receive US dollars into their account without having to pay a fee.

Local currency

This can be a bit tricky for the employer, but extremely beneficial to the employee since they do not have to go through the hurdles of getting a USD bank account if there are limitations in place in their country of origin/work. For the employer, you would need to set up multiple foreign accounts or use a 3rd party to handle currency conversion for you.

Use a digital payment method

There are plenty of options, like the ones mentioned above (Wise, Paypal, etc) that will make paying your overseas contractors much easier. Yet take into account that these services often come with hefty fees, or limitations, like Paypal, where you can only send money to another Paypal account.

Leverage cryptocurrency

This is by far the newest method of paying your workers. It relieves lots of the stress that comes with navigating international waters to make sure you are compliant. Cryptocurrency transactions are fast, cheap, border-agnostic, and are not controlled or regulated by a central authority, so funds cannot be held, frozen, or stuck. Employers all around the globe are leveraging this method and we highly recommend it.

⚖️Pros And Cons Of International Payment Options

Let's take a look at some of the positives and negatives of the payment options discussed above.

Bank transfers

Pros: Most contractors will accept bank transfers without hesitation. Bank transfers are the most commonly used method of payment around the globe currently. You also receive security and customized attention from the bank branch.

Cons: Fees, fees, and fees. Banks have very bad currency exchange rates and high fees for their service. Hidden fees may appear as well, causing the contractor to receive even less than expected.

Money orders

Pros: In some underdeveloped countries or countries that have tight regulations on digital payment methods, this can be the only way to pay your international contractor.

Cons: High fees, require you to go into a Western Union or similar service provider in person to pay, and the receiver must also go to a local branch to receive the payment.


Pros: Very few upsides to using a check, this payment method is outdated and only the most "traditional" workers may ask you to pay for their work in checks.

Cons: High fees and long payment times are just some of the cons to paper check payments. These payments depend on international mailing services, which may be expensive, while also, the checks can be fraudulent or fake as we have seen with Leonardo Di Caprio in the movie classic "Catch Me If You Can".


Pros: Wise provides a transparent price structure without hidden fees, and international bank accounts in various local currencies. You also don't have to go through the hassle of setting everything up with a banking entity.

Cons: Wise is custodial, meaning they hold your funds, in the extreme case that Wise were to disappear, so would your funds. This is highly unlikely, but we have recently seen something similar happen to customers of Silicon Valley Bank.


Pros: One of the oldest payment platforms available with many users already using the service. Giving employers and employees security when using the service.

Cons: PayPal averages a 4% transaction fee on the amount sent and has been known for freezing funds for extended periods. Similar to Wise custodial services are susceptible to the service going down or completely disappearing with customers' funds.


Pros: Payments are usually low cost (roughly 1% of the bank transfer amount). You can make payments to other Payoneer accounts for free. Account setup is also free and they have the option for international payments

Cons: They do not have a payment gateway or POS system which can limit how payments can be received. It is also best suited for small businesses and freelancers since it lacks some of the advanced payment features you can find with other providers.


Pros: Non-custodial approach to keep users' funds safe. Bitwage does not hold or retain user funds within the platform, unlike other services that have this inherent risk. Cryptocurrency payments are what makes Bitwage stand out since you can send freelancers and international contractors cryptocurrency or Bitcoin to bypass most of the issues related to traditional payment methods.

Cons: Bitwage is a fairly new service, with only 10 years in the market, making some individuals and companies go for other well-known providers instead.

🤝International Contractor Benefits

Offering benefit packages is a great way to attract and retain top talent globally. International workers, believe it or not, may often take much more into account the benefits provided instead of the pay. Benefits, just like pay can vary between countries.

When providing benefit packages like healthcare, it's important to take into account that the norm is different in each country. In the UK and Australia for example, socialized healthcare is a thing, so the health insurance package you might be able to provide could be limited. In South America, employers usually provide childcare and food allowance benefits, which in the US is not usually seen. Do your research on the country your contractor is working from and consider offering benefits like religious festivals, public holidays, specific cultural moments, and vacations.

While these benefits are a huge tool for retention, once again I mention, doing your research, because providing these benefits in some countries could lead to your contractor being misclassified and you could have some hefty fees and penalties coming your way.

💸Do International Contractors Pay Taxes?

Yes, taxes are everywhere. Each country has its way of taxing, and your contractors must pay taxes where they like and work. Usually, contractors are well aware of tax obligations where they live and as so, you should also know your tax obligations. Make sure your business is compliant with foreign law and that you are paying the required taxes for your contractors, as 1099 workers and W2 employer tax obligations vary.

Do you have to give your international contractors a 1099 form?

Don't get it twisted, a 1099 is for US-based contract workers, not in general. If the work is done by non-US-based contractors that do work outside of the US, the IRS does not require businesses to withhold or even submit reports.

Employers are required to submit a 1099 form for overseas contractors who are US citizens who live outside the US but work for a US-based company. Outside the US, each country has its own set of rules and they constantly change. To avoid hefty fees or restrictions, make sure you keep up to date on the subject.

🧠Why Hire Foreign Contractors?

We talked a lot about how to pay foreign contractors, now let's look into why hire foreign talent.

Cost Effective

It's quicker, easier, and cheaper than hiring an employee. International contractors make for a quick hire, saving you money on HR costs, and time on paperwork and you know you are dealing with top talent.

Measure Future Relationships

Starting with a contract-based relationship is also an insanely efficient way of measuring if they are worth the time and effort to build a long-term relationship while also tapping into international waters to get an exclusive field on how your business could also be offered overseas.

Variety of Skills and Knowledge

Foreign contractors often come with an exclusive set of skills as well, making it easier for recruiters to find the exact fit for the task your business needs to tackle. International contractors are also considered more creative and have a higher problem-solving capability due to the nature of how they work in comparison to employer-employee relationships.

🚀Experience Bitwage Today

If you arrived at this post looking for the best ways to pay overseas contractors, you found what you are looking for. With that in mind, take into account how Bitwage compares to competitors and you will see that Bitwage provides an innovative solution to international payroll. Providing a non-custodial platform with unparalleled personalized customer support, while offering the best service when it comes to paying overseas contractors. Now, experience Bitwage and sign up for a Bitwage Business account completely for free!


Damian Tornatore

Involved in the crypto space since 2014, Damian has managed communities, created blockchain-based spaces, and submerged himself in crypto and blockchain technology.