How to Pay International Contractors: 5 Factors to Consider

Discover five factors that will help you decide how to pay international contractors (includes international payment options and their pros and cons).

Corner of bank that pays international contractors against pink and blue sky

Plane Team

Published on December 7, 2022

How to pay international contractors 🏦

You’ve found the perfect independent contractor for your website redesign gig. Her name is Annika, and she has an out-of-this-world portfolio and skillset. Let’s get to work immediately!There’s just one little problem… Annika lives in South Africa and requires payment in South African Rand.For US contractors and freelancers, your US-based company can just collect their bank account information to pay them via direct deposit. But paying international contractors is a different matter entirely. From legal compliance concerns to hefty transaction fees, there’s no shortage of ways you can mess up international contractor payments. And there’s a wide range of payment options to choose from. (Money orders? PayPal? SWIFT transfers? Oh my!)Overwhelmed? Don’t be! Paying your foreign contractors doesn’t have to be expensive, risky, or stressful. Not to mention, there are many great reasons why you should hire international contractors like Annika. We’ll show you how you can pay international contractors quickly and cost-effectively by considering these five questions.

Amount: How much should I pay international contractors? 🤔

You shouldn’t necessarily pay contractors less than you'd pay employees; sometimes contractors are paid more per project! But just like employee compensation, paying contractors fairly is key to attracting and retaining great talent.The exact amount of how much you should pay your contractors depends on various factors, including:
  • Where they live, which can dictate local taxation rates, market rates, and their local cost of living. You may choose to adjust compensation based on location or set location-agnostic rates that are competitive in many different markets. 
  • What currency you’ll pay contractors — USD or their local currency? If the latter, currency exchange rates can affect how much you should offer
  • Your company’s budget for the job
  • Whether you’ll compensate for materials
Beyond the payment amount, you’ll also need to determine whether you’ll pay one flat sum for the entire project or pay an hourly rate.

Timing: When should I pay contractors? ⏲️

Exactly when and how often you pay your contractors is usually something you agree upon together. Once you’ve signed an independent contractor agreement, it’s up to you, though, to make sure your contractor gets paid on time for the work they’ve completed. One payment option is to pay international contractors upfront — before any work is completed.
  • Pros: Ensures that your contractors are paid on time and shows that you trust them. These factors can motivate them to do their best work, or perform above and beyond your expectations.
  • Cons: You’ll have to assume the risk in case a deliverable doesn’t get submitted, or isn’t up to your standards.
On the flip side, you can pay only after a project has been completed.
  • Pros: You can hold payment until the final project results meet your expectations.
  • Cons: The contractor will have to assume the risk that their pay could be delayed or withheld due to discrepancies in expectations.
If neither of these payment methods sounds ideal, how about somewhere in the middle? Here are a couple preferred payment options that offer a nice compromise, benefiting both you and your contractors equally.You can pay by milestone — meaning you break up the full project fee into multiple amounts to pay out as more work is done. If you commission a freelancer to write a 50-page ebook for $2500, you might pay them $500 for every ten pages they complete. Alternatively, regular international contractor payments — whether weekly, bi-weekly, monthly, or quarterly — are a great option for securing long-term projects and working relationships. Contractors get to rely on a steady stream of income and work, while you benefit from being able to budget more predictably and effectively.With international payment processing often running into delays, it’s important to send international payments early, so they arrive by the payment due date. You can set clear, exact pay dates for your international contractors with Pilot, so they’re never in payment limbo.

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Tax liabilities: What tax laws do I need to comply with? 🧾

Dealing with the IRS is enough of a hassle; imagine dealing with tax authorities in multiple countries! Well, the good news is that you don’t have to if you hire foreign workers as contractors.Generally, the IRS says you don’t need to withhold and pay taxes on international contractor payments as long as:
  • The contractor lives in and performs the work in a country outside of the US
  • The contractor doesn’t have a US visa or citizenship
  • Your company doesn’t have a legal presence in the contractor’s country, i.e., a foreign subsidiary
  • They’re properly classified as contractors, not employees (more on this later)
Another plus: unlike US-based independent contractors, you don’t need to issue a 1099 form to foreign independent contractors, as long as they work outside the US.But that doesn’t mean you’re off the hook entirely. Here are three things you need to do to make sure you’re covered when it comes to your tax obligations: 
  1. Advise contractors that you’re not responsible for withholding and paying taxes on their behalf. Self-employed individuals are liable for reporting and paying income taxes in their home country. 
  2. Request IRS Form W-8BEN or W-8BEN-E from each contractor located outside the US before they perform work for you. These forms ask your workers to certify that they are, in fact, foreign contractors and therefore, not liable for US taxes on any payments made. 
  3. Document these payment terms in writing to keep you and your contractors aligned on payment expectations. It also helps prevent or mitigate potential disputes. Hot tip: Put your payment terms in the independent contractor agreements you draft and sign when hiring contractors.
As with all things tax-related, we recommend you consult with your own accounting professionals or employment lawyers to determine the full extent of your liabilities. 

Classification: Am I classifying my workers correctly? 📋

In the eyes of the law — and we’re not just talking about US laws — there’s a clear distinction between international employees and contractors. And you could get in serious trouble for misclassification if you hire a contractor, but their local employment laws say they should be hired as a full-time employee instead.Some factors that can influence whether to classify a worker as a contractor or employee include:
  • How long you’ve been working together
  • How much control you have over the work they do, including how, when, and where they do it
  • Whether the worker is allowed to freelance for other companies in addition to yours
  • Whether or not the worker receives benefits like paid time off
  • Who is responsible for paying taxes to the government — the company or the worker?
Say you hire someone as a contractor, but their government mandates they should have been hired as a full-time employee based on their country’s laws. You could suddenly be on the hook for lots of expensive consequences — like hefty fines, civil lawsuits, back taxes and back pay, and the total value of all the employee benefits you should have provided. According to the Internal Revenue Code, you could even face jail time if the US government determines you intentionally misclassified contractors to avoid paying taxes — yikes!While the IRS has a set of guidelines on classifying contractors vs. employees, every country has its own rules and formulas for classification. Make sure to thoroughly investigate relevant local labor laws in each country where you hire foreign workers so that you comply with all regulations.

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Payment method: What’s the best way to pay international contractors? 💸

There are plenty of payment methods for paying foreign contractors, but not all methods are created equal. Each comes with its own pros and cons. The best way to pay international contractors will depend on your unique business needs! Here’s a shortlist of factors to consider, which you can use to prioritize and guide your decision-making:
  • Speed: How quickly your contractors receive payments after you send the funds
  • Costs and fees: How much you’ll owe in transaction fees for using international payment services
  • Ease of use: How easy it is for you to send payments and for contractors to receive them
  • Security: How well the payment method protects you and your contractors’ financial information and ensures that the money reaches its final destination safely
  • Scalability: How easily you can scale to pay many contractors in many different countries without investing too much extra time or money. Look for features like automation, mass payouts, etc. 
  • Compliance: Whether the payment method helps keep you compliant with various labor laws and tax codes
Here are some of the best ways to pay foreign contractors:


For many US companies who work with globally distributed remote teams, Pilot is the best way to pay international contractors. That’s because our platform is specifically designed to streamline hiring and paying international contractors and employees.Here’s how it works: Businesses pay a flat rate (per contractor per month) to use Pilot to hire and pay their contractors. They can then set up automated payments to pay each contractor the exact amount they’re owed by the specified dates, directly to their bank accounts and in their local currencies. That's it! Plus, our pricing is transparent, with no exchange rate markups or transaction fees. A little more money in everyone’s pockets — a win for you and your contractors.As a bonus, Pilot helps you draft and manage all your contracts to comply with local labor laws and protect your intellectual property rights.


  • Saves time: Let Pilot handle the complex logistics of making international payments. Schedule recurring payments with set-it-and-forget-it ease, and free up your HR and accounting teams to focus on more strategic financial initiatives.
  • Manage costs: Outsourcing is usually much more cost-effective than hiring internal staff to implement, maintain and manage payroll full-time. Our transparent pricing also makes it easier to budget for international payroll.
  • Stay compliant: Researching and understanding all the relevant tax and labor laws in every contractor’s country is a total pain. Not to mention time-consuming! Pilot helps you stay audit-proof by collecting all the right tax forms and minimizing the risk of payroll errors, tax penalties, and missed deadlines. 
  • Reduce payment delays: Oftentimes, paying international contractors yourself can lead to unpredictable delays as your transactions get left in limbo between banks. Pilot leverages its established connections to banks in foreign countries to pay your workers exactly on time — every time
  • Secure: It takes a lot of trust to let a third-party provider handle all the confidential information needed to pay someone — their full legal name, their address, tax ID number (like an SSN or ITIN), their bank account number, just to name a few things. Thankfully, Pilot is SOC 2 compliant and has state-of-the-art, multi-layered security processes to ensure your payments reach your contractors safely every time. Your funds never touch Pilot’s corporate accounts, remaining yours until your contractors receive them. We follow strict compliance standards and security protocols to protect you and your team’s sensitive data at all times. 


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International wire transfers 

International wire transfers are the tried-and-true, traditional method of paying someone overseas. Through the SWIFT network’s messaging system, banks instruct each other to transfer funds between accounts in different countries. As long as your employee’s international bank and your bank belong to the SWIFT network, you can ask your bank to wire money directly to their account. 


  • Secure: Wire transfers are incredibly safe because no money is actually held or transferred — only instructions to pay someone a certain amount. The only people who see these instructions are authorized bank personnel. Unlike checks, nobody can get their hands on money sent in a wire transfer.
  • Direct payments: Contractors (and anyone, really) prefer to get paid in as few steps as possible. Wire transfers are the easiest and most convenient way for contractors to get paid since the payments go straight into their bank account for access in their local currency. 
  • Large sums OK: The limits for wire transfers vary (check with your bank!) but are usually relatively high. 


  • Slow payment processing speeds: International wire transfers usually take a few days. Payment processing times for wire transfers vary depending on whether banks are connected to the SWIFT network and how many intermediary banks the payments need to go through. 
  • Expensive: Wire transfers go through multiple banks and clearinghouses, each charging its own transaction fees. You’ll never really know how much the banks will charge you for a wire transfer until it’s already completed. Plus, the fees can vary each time, even if you’re using the same banks to send the same amount. That’s not even mentioning currency exchange rates, which banks usually don't disclose. Definitely not a great option if you’re sending a large volume of payments and want to manage your costs.

International money orders

Also referred to as international money transfers, this payment method orders or instructs a bank-to-bank transfer of money for a specific amount that has been prepaid and certified.Here’s how it works: You purchase your money order via bank transfer, cash, or debit from a money transfer company like Wise, Western Union, MoneyGram, or Xoom. These companies have local bank accounts in countries worldwide, so they can transfer the funds directly to your contractor’s account or hold the money securely for them to pick up. 


  • Ease of use: Anyone can pay for and send an international money order. Many money order providers allow you to transfer funds internationally via website, app, phone, or in person. 
  • Faster delivery: Money transfers are usually quicker than wire transfers because the requests don’t get held up in intermediary banks. While processing times (and fees) can vary, some services offer same-day delivery (though sometimes at a cost). 
  • Transparency: No more guessing games; You’ll always know how much you’ll pay in fees because money order companies share their fee structures transparently, with no intermediary costs taken out.


  • Costs: Even though you’ll know how much you’re paying, that amount might still be more than you’re willing to pay — and might be even higher than you’d pay sending a bank transfer. Some money order providers charge a percentage of your transfer amount, which means the more you send, the more you’ll spend.
  • Payment caps: Money orders often have much lower per-transfer limits than bank transfers do. For example, with Western Union, you can only send up to $3,000 from the US without verifying your identity, and after that, up to $50,000. 

Legal Disclaimer:

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.

E-Wallet payments

E-wallets like PayPal and Payoneer are fast, convenient, and widely used by many established contractors. Instead of sending funds to a bank account by getting your contractor’s banking information, all you need is their email address. After linking your bank account or a credit card, you simply pay your project fees directly to your contractors’ e-wallets. Contractors can then withdraw the funds from their e-wallets via bank transfer. Or, they can use the digital wallet like a regular bank account and even request a debit card which can be used at an ATM or any point-of-service. 


  • Widely accepted: Many contractors already have e-wallet accounts or would be willing to sign up for one from a reputable platform to receive payments quickly.
  • Easy to use: E-wallets are convenient to sign up for and use for sending and receiving money. 
  • Mass payouts: In PayPal, you can quickly send up to 15,000 payments at once via API or 10,000 via batch upload.


  • Delays: Payments are sent instantly, but the recipient still has to submit a separate request to withdraw the funds to their bank account.
  • Fees: For international transactions, PayPal charges a flat percentage of the amount sent plus a currency conversion fee. Needless to say, the nickels and dimes add up, and you and your contractors could be paying a pretty penny to send and receive money.
  • Contractors must have an account: Not everyone necessarily wants to get paid in a separate account, adding another step to accessing their money. Factors like unavailability in certain countries or currencies can make it impossible for affected contractors to even use these e-wallet providers. 

Paper checks

We wouldn’t recommend paying your contractors via paper checks in this digital age — especially if your contractors live in other countries. But maybe your payroll department (or a particular contractor) is old school and prefers that the business issues physical checks. If so, here’s what you can consider:


  • Record keeping: Checks leave a paper trail for both contractors and employers to keep clean payment records. Employers that pay their domestic workers via checks might prefer to keep doing the same for their international contractors as well.


  • Extremely slow: Because you have to physically put each check in an envelope and mail it out, you and your contractors are subject to the delays and limitations of the postal service. First, you have to carve out time to go to the post office or find a mailbox. Then, thanks to unpredictable mail delays and check clearing periods, it could take anywhere from a few days to several months for contractors to actually get paid for their work. 
  • Risk: Mailed checks are not secure; they can get lost in the mail or fall into the wrong hands. Anyone can open a sealed envelope and steal the bank account information, which can lead to dealing with fraud concerns. And after all that, you’ll still owe your contractor their payment.
  • Fees: Even when your contractor receives their check, the deposit fees and exchange rates charged by banks can seriously cut into the total amount a contractor gets in the end.

Pilot: Paying international contractors made easy 🫰

When the transaction fees, compliance concerns, and delays start adding up, global payroll and international contractor payments can cost you — and your workers — big time. But this nightmare doesn’t have to be your reality!With Pilot, pay international contractors in over 240 countries directly, securely, and equitably in their local currencies. Our platform takes care of all the tough stuff, like staying compliant with local laws, so you don’t have to. All you have to do is set up payments in our platform; we’ll handle the rest, saving you and your contractors time and money. 😉We help US companies provide a dependable payroll experience for everyone in their global team, using just one platform. And we mean everyone: we believe that your international team members should be paid as easily and on time as your US employees, and we help pay all your employees and independent contractors quickly and fairly, whether in the US or in foreign countries.Ready to learn more about why Pilot is the best international payroll partner for you? Book a free 1:1 demo with our team – or watch our demo video – to discover how Pilot can help you hire and pay international contractors and employees at scale, wherever they may be.

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