Managing Your International Payroll For Contractors

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Hiring international contractors for your organization means that you can explore the many benefits of a global freelance workforce. But before you begin hiring, it’s essential that you have payroll systems and processes in place to manage invoicing and payments for your international freelancers. 

It can be tricky to keep compliant with both local and overseas labor laws when you work with contractors in other countries, and you’ll need to decide which is the best payment method to ensure these contractors get paid quickly and securely.

In this article, we’re taking a look at how to manage your payroll for contractors in other countries, plus some of the global payment methods that are available to make this process as seamless and stress-free as possible for everyone involved.

What defines an international contractor?

An international contractor is someone who doesn’t live or work in the country where your company is based. 

For example, if your company is in the USA – an international contractor is classified as a person who does not reside or work in the USA, and is not a citizen of the USA.

It’s important to ensure you understand what is classified as an international contractor, and also that you don’t make the mistake of confusing contractors with employees. Even if it’s an honest mistake, there can be steep penalties for this misclassification.

An international contractor must be a self-employed person who provides a specific service to your company, typically consisting of a defined scope of work or a set time period. This person can also work for other companies at the same time, and is not considered to be a staff member.

While this seems relatively straightforward, the lines can blur when you’re dealing with overseas freelancers – as the definition of “independent contractor” can vary from country to country. Some local labor laws can cause your contractor to suddenly become an employee purely based on how long you’ve been working with them.

When you’re considering global payroll solutions, you’ll need to ensure your company remains compliant with the labor and tax laws of both your own country, and every other country that your international contractors live in.

It can become a time-consuming and frustrating process keeping track of regulation changes around the world. It can also get expensive if you need to hire legal, payroll, and tax compliance services in multiple countries – which is why you need a solid foundation for managing your overseas contractors.

What currency should you pay your international contractors in?

As your global freelance workforce grows, you’ll need to navigate the issue of sending payments in various currencies and tracking the ever-changing foreign exchange rates – as these can make a big difference to your monthly operating expenses and cash flow.

When you’re making your first international contractor hires, you need to decide whether to:

Pay each international freelancer in their local currency. This obviously works well for your freelancers, but you’ll need to establish a payment system that can manage the payments and currency conversions for you. 

  • Pay all your overseas contractors in your local currency. For example, if you’re a US company, you’d pay everyone in US dollars, irrespective of where they live. If your contractors have a USD bank account set up (e.g. with Wise), this will be a smooth process. If not, they will need to pay their local bank’s fees to receive US dollars into their bank account.

A third option is to use a freelancer management platform or a global payment processing tool to easily manage payouts to your international contractors.

Do international contractors have to pay taxes? 

Your international contractors are responsible for paying their own taxes, in their own country. 

However, it’s your responsibility to ensure that your organization complies with the local tax laws in every country where your overseas contractors are located. Penalties for non-compliance can be harsh, so you’ll need to ensure that you’re always up to date with foreign government rules and regulations around labor laws.

How can you pay international contractors and freelancers?

Today’s technology means there are plenty of different options for paying contractors in other countries. We’ve listed the most popular payment methods so you can decide which ones will work best for your company.

Paper checks

These used to be the gold standard for paying people overseas, but are seldom used these days. 

While they might be convenient for your company to generate and send, paper checks are not a popular option for your international contractors.

Overseas freelancers don’t tend to appreciate paper checks because:

  • They can take several weeks to arrive in the post – especially if international mail services are experiencing disruption
  • They can get lost or stolen in transit
  • Very susceptible to fraud
  • Your contractors may be charged high fees at their local bank when they process the check
  • The amount your contractors receive will depend on their local bank’s exchange rate
  • Your contractors will have to wait for the bank to release their funds from escrow. Depending on a bank’s specific policies for clearing international checks, your contractors could be waiting anywhere from 4 to 6 weeks for their funds to become available
  • Many banks no longer accept international paper checks

If you’re considering using paper checks to pay your global contractors, it’s best to consider things from their point of view. 

Between waiting for a check to arrive, and waiting for the funds to get cleared by the bank into their personal account, your contractors may need to wait several months to finally get paid for work they’ve completed.

As your freelancers rely on a steady, predictable cash flow to support themselves and their families, lengthy delays between project completion and payment can cause them undue anxiety and stress. This can eventually result in your contractors leaving you to find other companies that have faster payment methods.


Not many! If you are intending to pay with paper checks, make sure you tell your prospective international contractors what this will entail for them. Many younger contractors have never seen paper checks, and may not understand how they work, or that there will be a delay and extra expenses when they take a check to their bank.


Excessive time frames between your contractor invoicing for completed projects, and receiving the cleared funds into their account – plus high transaction and currency exchange fees.

International money orders and wire transfers

Companies like Western Union used to be a popular option for sending money overseas. But like paper checks, this method of payment is now pretty outdated. 

Money orders and wire transfers also have the drawback of incurring steep transfer fees for your organization and your overseas freelancers.


Contractors in countries where digital payments aren’t available can receive funds via these methods.


Your contractor needs to visit the wire transfer office in person with identification in order to get their funds processed.

Bank transfers

Many companies choose to pay their international contractors via bank transfer, which seems like a safe, reliable option. In reality, this can turn out to be an expensive way to pay your overseas freelancers.

This is primarily because:

  • You’ll pay service charges for each transfer
  • There are hidden bank fees and exchange fees for your overseas contractors
  • You won’t get competitive exchange rates
  • The amount your contractor receives may be much less than they expected once the transfer and currency exchange fees are subtracted by the bank

Depending how the money is routed between your company’s bank as a sender, and your contractor’s bank as the receiver, multiple fees can be charged many times for one single transfer. 

During the bank transfer process, your contractor might lose anything from $0 to $40 once a single transfer is completed – making it difficult for your contractors to work out what they will actually receive each time you transfer payments to them.


Banks typically allocate a personal account manager for your company to ensure your bank transfers run smoothly.


Extra fees for you, and for your contractors. You’ll pay more than you need to for every transaction, and your contractors will often receive much less than they invoiced you for.

This could give you a reputation as a company that short-changes its contractors.


PayPal is one of the most widely used payment processing platforms, with over 426 million users. Companies around the world use this platform to pay their employees and contractors. 

For companies, it’s a useful way to pay international contractors – as long as the contractor has their own PayPal account to receive payment. 

As PayPal is used so frequently to purchase goods and services online, there’s a good chance many of your international contractors will already have a PayPal account, and will be comfortable getting paid via this platform.

The primary benefits of using PayPal for your global payroll include:

  • Reduced payment friction for your international contractors – it’s free for them to receive payments
  • The ability to send payments to contractors in 156 countries, in 24 currencies
  • Payments arrive in a couple of days for your contractors
  • Simple API integration for bulk payouts
  • Built-in security and fraud protection on the encrypted PayPal platform

Fees to send money to your international contractors can be up to 4%, which can add up when you’re sending a lot of payments – but compared to other methods of international money transfer, this could end up being a cost saving in the long run.

Perhaps the greatest benefit for sending payments to your overseas contractors using PayPal is that you can send up to 15,000 payments at once with the PayPal Payouts API, or use the batch upload function and pay up to 10,000 contractors with a single click – saving your accounting team hours of admin time every week.


It’s a well established and trusted platform that operates in over 200 countries, and supports multiple currencies This makes it simple to send payments to most international contractors.


PayPal doesn’t operate in some countries, which means your international contractors in those countries may not be able to withdraw any funds to their local bank account.


Formerly known as Transferwise, Wise has rapidly become one of the most popular ways to send and receive international payments.

Over 12 million users trust Wise to move a hefty $6 billion all around the world, every single month.

The benefits of using Wise to send and receive money are:

  • Bank-level security
  • You can set up multiple foreign currency accounts
  • Batch payments let you send up to 1,000 payments with one click
  • You send money using the real exchange rate – not your bank’s exchange rate
  • Independently regulated by the FCA
  • Your contractors can often receive their payments in minutes, instead of waiting hours or days

Compared to Paypal, Wise makes it about 19 times cheaper for your company to send payments to international contractors. 

Wise is also radically transparent about their fees and exchange rates, which gives you peace of mind as you grow your business and hire more contractors overseas.


Cheap and fast payments with no hidden fees and a transparent pricing structure.


Wise doesn’t yet support contractors opening USD accounts or receiving USD funds in many countries.

Worksuite Pay

One of the easiest ways for you to manage your international payroll for contractors is to use an automated payroll system like Worksuite Pay. This technology lets you streamline your invoice processing and payments, and ensures you stay compliant with local and overseas laws.

Leading brands such as Netflix, Microsoft, and Fandom trust Worksuite Pay to manage their global payroll services and get the flexibility they need to manage invoices, get approvals, and track their budget.

In addition, using a global payroll solution like this ensures you always keep compliant and avoid any potentially sticky situations with the IRS or international labor laws.

Benefits of using a payroll solution like Worksuite Pay

Global payment solutions

Powerful, integrated solutions let you approve, schedule, and pay contractors in over 150 countries, and in over 120 currencies – and every step of the invoice process can be managed and tracked from the centralized dashboard.

If you’re hiring multiple international contractors, Worksuite’s flexible global payment solutions and integrations enable you to set up bulk payment options to eliminate manual processes and save your team from tedious admin work.

Automated tax forms

Worksuite Pay automates the generation of your W9 and 1099 forms with a few clicks, and also takes care of your IRS e-filing.

Onboarding and compliance

Create customizable onboarding workflows to suit your needs and streamline your processes for new hires. 

Worksuite uses locally compliant contracts and ensures that contractors provide all necessary compliance documents as per their country’s labor laws.

Worksuite ensures you always get the necessary tax information and bank details from your international contractors.


Unlike other payment options, global payroll solutions such as Worksuite Pay give you detailed information into your payments and budget spend across individual freelancers, projects, and countries.

You can generate payment summaries and statements and send these to your contractors with a few clicks – giving your international contractors complete transparency around their payments for work done.

Worksuite Pay is also enterprise-ready, with an API that allows you to configure payments and reporting to fit your organization’s specific needs. 

Ongoing support

If you need advice or support at any time – Worksuite’s workforce compliance and global payroll experts can help you handle everything from independent contractor classification, to onboarding and payments, to ongoing compliance – giving you total peace of mind as you grow your international workforce.

To find out how Worksuite Pay can help your company streamline invoicing, global payments, and tax filing for international contractors – contact our team for a personalized demo.

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