If you’re struggling to find affordable and reliable payment methods to pay freelancers or to pay international contractors. We’ve all been there. Companies nowadays struggle with this due to many complications surrounding international payments to independent contractors in a foreign country and the excessive transaction fees (hidden charges) that this process entails. In the end, you’re expected to pay more than expected. Some companies won't even work with overseas contractors because of the stress involved in payments, payroll taxes, and abiding by local laws.
You might be working with a virtual team that is not part of your company, or you’re working with foreign independent contractors - the payment process doesn’t have to be so difficult, expensive, and time-consuming. Companies fail to provide a framework that makes payments easier for people who aren’t on the company’s payroll. Since virtual team members, freelancers, and foreign contractors are paid not monthly, but on a project-by-project basis, the payments must be made frequently.
This blog will discuss the different methods you have for freelancer and international contractor payments. Let’s get started.
Why is it hard to find reliable ways to pay contractors?
With the help of globalization, the border limitation has been lifted when it comes to working or selling services. Surprisingly, companies are still stuck on one of the most basic aspects of the business - making international payments. Especially with international contractors and freelancers, the barriers to easy transactions are in abundance. Ultimately, it makes the whole process much more complicated than it should be.
Below are a few reasons why paying contractors is a difficult task to do.
Complex taxation and regulations
Gig workers are governed differently in different countries. Managing a global business requires companies to become familiar with local regulatory nuances. Here are some things businesses should keep in mind:
- Contractor vs. employee status
Contractors and employees are classified differently and receive different benefits (one more than the other). Being an employee benefits the worker however, international contractors often work independently since they cannot be tied to just one organization. You must define if you're working with international employees rather than independent contractors.
- Tax requirements
Due to this uncertainty, companies juggling payments across multiple jurisdictions may become unsure of their tax responsibilities. It creates a dangerous situation because they might break the law by inadvertently withholding benefits. For example, if you have a contractor in the United States, you must be familiar with tax regulations in that country to avoid issues with withholding taxes. This is why it's a good idea to always go through the independent contractor agreement.
- International payments
International payments can be affected by unfamiliar regulations. It increases the chances of mistakes being made with transfers, resulting in workers becoming frustrated and having their payments delayed or dropped.
Differences in culture and worker preference
Workers everywhere want payments to be fast, consistent, and free from extra charges. But workers in different geographies have different expectations about payment methods that gig employers must understand and address. Businesses must consider:
- Swift payments
It is crucial to avoid creating unnecessary stress for gig workers due to cash flow issues and irregular payments. If faster payments were assured, more gig economy workers would be interested in working as freelancers or contractors.
- Banking the unbanked
It is much more difficult to transfer money quickly in emerging economies due to the high number of unbanked employees who rely upon cash payments. A growing number of Chinese and African people are using electronic wallets and virtual cards. Payments can also be made in multiple currencies through these, making international transfers as seamless as local ones.
- Gig workers' payment preferences
Without the right payment infrastructure, direct-to-bank payments are still slow and expensive, even though they have emerged as the preferred method in Europe and the USA. Worker preferences may differ elsewhere, such as wallets or virtual cards. The payment options offered by gig businesses must be tailored to meet the needs of freelancers and contractors.
Why do payroll services cost so much?
Another important part to consider is the reason behind expensive payroll services. Even with traditional bank transfers, there are intermediary banks involved that direct the international payment for that specific country. Intermediaries charge their fees to the services provider for every transaction, therefore, adding more cost to the already expensive process. Similarly, payroll services provide the ability to transfer money across borders but they also have to deal with the intermediaries of local banks of the recipient’s country.
Let’s see some important reasons behind the high cost of payroll services.
Foreign exchange rates
One of the first things you’ll consider when paying international contractors and freelancers is the fluctuations and uncertainty that revolve around foreign exchange rates. FX rates are volatile and they have a huge impact on your total cost of sending the payments. Banks charge different rates of currencies in order to make some profit out of it. In an ideal world, you’ll only be paying the interbank rate which would be a little less than what profit-driven banks charge.
So, in reality, you’re paying a currency conversion charge in addition to the interbank rate, making your total payment expensive to send. This fee is charged either as a flat fee or as a percentage of the amount you send/receive. Further, the current FX rate determines the amount you’ll need to pay and the amount recipients get.
Hidden costs
A lot of times customers are not aware of what exactly they are paying for. Payments that are often included in additional charges are hidden from customers' knowledge. These costs might include processing fees and bank overheads which are usually added to the total payment for the customer.
SWIFT fees
International money transfers require a network that can facilitate senders and receivers. SWIFT is involved in virtually every transaction you make whether it is from traditional banks or payroll service providers. Whether you’re the sender or receiver, you’ll be paying a SWIFT fee as well as a tracing fee if you’re looking to track your transactions.
Transaction time and urgency
Time plays a significant role in the transfer process. Depending on the time when the sender initiates the transfer, foreign exchange rates may change. A beneficiary's urgency for the money may also impact international bank transfer fees. When a party uses a same-day option, extra fees will be charged if they need to expedite the process. International payments typically take between three and five days.
Currencies and countries involved
A different currency pair will affect the rates, so it's imperative to keep that in mind. Furthermore, some countries lack modern banking infrastructure and financial technology and are more expensive to send money to. Fees may also be increased based on the amount of payment sent - the higher the transfer, the better the rate.
The payment provider
It is ultimately the bank or payment provider that determines the cost of international transfers. The price of services will differ from one financial institution to the next due to the different capabilities it possesses. Banks may be forced to rely on legacy systems due to technological limitations, which may be costly. Banks that are highly advanced and use the latest technology to send/receive payments will likely be cheaper than outdated banks with little technological resources and modern banking systems. On the other hand, cross-border payment service providers are equipped with better technology and resources to offer faster and cheaper payment transfers as compared to any modern bank.
How can you pay remote workers and international contractors?
There are many payment methods available for businesses to use and send payments to freelancers. However, not all methods perform well when it comes to providing the most effective and affordable payment gateway. For remote workers and international contractors, it is important to note the different factors that can affect their total amount. Country, the urgency of the transaction, time, and currency are a few important factors that affect all kinds of payment methods. It is always recommended to check with your chosen international payment provider about the time and cost it would take to make a certain transaction.
Here are the two most used methods to pay international contractors and remote workers:
- Bank transfers: As mentioned above, bank transfers are slow and require a lot of work before you can make a successful transfer or receive a payment successfully.
- Global payroll provider: Contrary to traditional banks, their efficiency and cost are few benefits (out of many) that payment gateways provide. You receive payments faster and send payments faster as well due to optimal routing systems.
Next, we’ll discuss multiple payment options along with some alternatives to bank accounts.
Remote worker payment options
Global payroll service has tough competition and that provides remote workers with many options to choose from. Let’s discuss the payment options available to freelancers.
Bank transfers
Bank transfer using SWIFT is probably the last resort for anyone looking to transfer payments overseas. The fees associated with transfers are extremely high, there are too many hidden charges that you’ll be unaware of and it is a pretty slow method compared to other options available. The exchange rates you receive are not the best, as discussed earlier, they have added service charges to include extra profits that can drive costs really high. Every transfer will cost a hefty service charge - a cost that will quickly add up.
Wire transfers
Wire transfers used to be a quick and safe payment method but now it has been outdated. Latest technologies have rendered wire transfers completely ineffective. One of the biggest flaws in wire transfers is that you need to physically visit the wire transfer company such as Western Union, and then you’ll be able to send the payment. Just like money orders, wire transfers can only be useful in countries where digital payments are not accepted, however, you’ll hardly find such countries. Also, wire transfers require a large deposit fee.
PayPal
PayPal needs no introduction - since it was the company that introduced digital payments to the world. Paypal operates in more than 200 countries and has a strong hold on the digital payment market. Paypal’s biggest flaw is that it only supports 25 currencies whereas other competitors offer currency support more than PayPal. On the other hand, PayPal’s mass payments system is pretty good as it can send payments to 5000 vendors in a single time. You also pay through credit card as well however, the transaction cost is on the higher side at 4% of the transaction cost. Compared to other competitors, it is pretty high.
IntaSend
IntaSend can provide the best service for Africans since it was developed for Africa. Other international payment methods fail to understand the intricacies of the African freelancers' market and its needs.
The payout to bank accounts and mobile money is instant. It is currently available in 132 countries.
Using IntaSend to pay remote workers in Africa
IntaSend is an African payment gateway for freelancers and contractors in Africa. Using IntaSend, you’ll get affordable payment rates (calculated in real-time), secure payments, and effective service. You can follow these simple steps below to get paid in Africa.
- Create an account
Using IntaSend, signup and create your account to start accepting online payments.
- Choose payment options
From your IntaSend dashboard, you can create invoices and send them to employers directly. IntaSend will take care of the payment request and navigate the employer to the payment check-out page to finish the payment. You’ll be able to share the link we generate and share on social media and messaging apps as well as on email. Further, if you have a website, you can integrate the IntaSend payment API to receive payments without any hassle.
- Get paid
Receive payments quickly and securely using IntaSend and withdraw using a payout account (bank accounts and mobile wallets such as M-Pesa are supported).
In Africa, the number of freelancers is rapidly increasing, however, due to the lack of payment options for Africans, receiving payments has always been a trouble. Now, you can pay international contractors and freelancers using IntaSend, and recipients in Africa can easily receive payments.
IntaSend advantages:
To pay international contractors in Africa, IntaSend is the best choice due to the level of transparency it provides. Let’s take a look at some of the benefits of using IntaSend for your international payments.
- Multiple ways to get paid
In addition to having reliable and robust technology, IntaSend has worked with banks and other leaders in the industry such as Visa and Mastercard to offer you a variety of simple ways to get paid. Offering multiple ways of payment gives you a higher chance to successfully receive them and not experience any loss. For freelancers in Africa, getting paid on time and with the preferred mode of payment is important. Keeping this in mind, we’ve provided traditional online payment options along with unique options such as Pay with Bitcoin which can help freelancers or international contractors to receive payments in the form of crypto-currency.
M-Pesa and STK push payments are the perfect local payment methods along with traditional card payments. Further, if you’re working with an American client, being in Africa, you have the option to use ACH bank transfer which is specifically used for clients in the US. IntaSend provides a payout of 2-3 days and usual transaction charges as with card payments.
- Real-time exchange rates
Compared with PayPal, IntaSend is better for African business owners, international contractors, bloggers, and freelancers because it provides useful features to simplify the payment process for sender and receiver, both. With effortless payments, you’ll join thousands of satisfied users of IntaSend who trust us to handle their international payments, including freelancers and international contractors. IntaSend provides real-time exchange rates for senders and recipients to fulfill their transactions at the most accurate FX rates - making IntaSend the favorite payment gateway in Africa.
- Global Reach
IntaSend can make payments to 132 countries making it a global payment gateway. African freelancers and international contractors can easily get paid from 132 different countries which opens a lot of opportunities. Further, IntaSend has introduced a mass payout system that employers can use to send all African freelancers their payments without any hassle. These 11 countries include Pakistan, India, and 9 African countries.
Wrapping Up
To make these international payments, you need to collect relevant payment information, agree on payment terms and find the best payment option that will do the job most effectively and affordably. Also, you need to consider the extra costs of international payments. Costs such as transfer fees and forex rates. Both of these can make a huge difference in the end amount you have to pay international contractors and freelancers. You can decide which payment method suits you the most. At the end of the day, international payments should be highly secure, quick, and transparent - IntaSend guarantees this to every customer.
If you’re looking for a lightning-fast way to send and receive your international payments, IntaSend can help you achieve your goal at the most affordable rates. Provide your partners and customers with the best payment options through IntaSend and reach new markets faster.
Credit: Photo by Chris Montgomery on Unsplash
