How to pay contractors abroad?

Businesses often find themselves collaborating with contractors and freelancers from around the globe. Whether you're outsourcing development work, hiring remote talent, or engaging consultants for specialised projects, paying contractors abroad can present unique challenges. 

Factors such as slow processing times, high conversion fees, subpar user experience, and lack of transparency are important considerations for smooth and secure transactions, so we'll explore essential tips and best practices for effectively paying foreign contractors. 

Things to consider before paying an overseas contractor 

Exchange Rates and transaction fees 

Before initiating any payments, it's crucial to familiarise yourself with currency exchange rates. Fluctuations in exchange rates can significantly impact the amount you pay or receive. 

Read more: How to calculate an exchange rate? 

Even if the foreign exchange fee was free, which it isn’t, many banks generate additional fees by adding a fixed “sender fee” to each international payment. This has nothing to do with the exchange rate, it is just a fee to initiate a payment and it can be very expensive. 

And if you consider paying by card, be prepared to add an extra 2 or 3% to the total amount! 

Legal and regulatory requirements 

International payments are subject to various legal and regulatory requirements, including anti-money laundering (AML) and Know Your Customer (KYC) regulations. Familiarise yourself with the laws governing cross-border transactions in both your country and the contractor's country to avoid any compliance issues. No worries. Some payment providers like Crezco can remove this burden from your shoulders. 

Payment terms and contractor information 

Ensure you have accurate and up-to-date information for your foreign contractors, including their bank account details, or other payment identifiers. Any discrepancies or errors in the payment information could result in delays or failed transactions. 

You should also establish clear payment terms with your offshore contractors before commencing work. Discuss payment frequency, currency preferences, and any additional fees or charges associated with international transactions. Having a written agreement in place can help prevent misunderstandings or disputes later on. 

How to pay international contractors? 

Now that you're aware of these considerations, you need to find a suitable payment method. Several options are worth exploring, but one stands out, especially for SMEs. 

Bank transfer 

How can we start without mentioning bank transfers? If you paid attention to the previous part of the article, you know banks might not be the best choice. While bank transfers are secure, they can be expensive because of their not-so-great exchange rates and their hidden fees. They are also slow to settle and often lack visibility. When you want to pay an overseas contractor, you want to know where your money is, right? 

Credit card 

Sometimes, you can also use a credit card. This is one of the more popular options because of its ease of use. However, you will not have a good exchange rate, will still have hidden fees and will pay the card fees on top of it, which can be up to 3%!  

Payment platforms like PayPal 

While PayPal and other payment platforms can help and are more convenient than banks, they tend to charge higher fees for currency conversion.

Read more: Switch from PayPal to Crezco 

The best way to pay international contractors 

Now you might think you’re condemned to pay high fees to send your payments across the globe. Well, Crezco is here to save the day, and up to 85% on your international payment fees! 

Crezco is an account-to-account payments solution that allows you to easily and securely make payments in 37 currencies to 180 countries. With Crezco, you can easily import your invoices from your favourite accounting software, select all the invoices to pay, and see exactly how much you will be charged in your local currency and how much your payees will receive. 

No more manual errors or hidden fees; you can simplify your payment process by bulk paying your contractors with one click. Even better, you’re not left in the dark anymore. You can easily monitor your payments in real-time and automatically send remittance advice to your contractors. 

Frequently Asked Questions 

• How long do you have to pay a contractor? The duration for payment typically depends on the terms agreed upon in the contract. Ensure clear payment terms are established before commencing work. 

• How much to pay a contractor abroad up front? The upfront payment amount can vary depending on the project and agreement with the contractor. It's advisable to negotiate payment terms that are mutually beneficial. 

• How to pay a contractor with a credit card? Some contractors may accept payment via credit card, but it's important to consider potential fees and exchange rates. 

• How to pay a sub-contractor? Payment methods for subcontractors are similar to those for contractors, typically involving bank transfers, checks, or online payment platforms. 

• How to pay an independent contractor? Payment methods for independent contractors are similar to other contractors and may include bank transfers, checks, or online payment platforms. 

Paying contractors abroad involves navigating through various challenges, including exchange rates, transaction fees, legal requirements, and choosing the right payment method. By carefully considering these factors and exploring suitable payment solutions like Crezco, businesses can streamline their international payment processes while ensuring efficiency, transparency, and cost-effectiveness.