From compliance to foreign exchange rates, businesses must consider various factors while hiring international freelancers
Providing flexible work, contractors and freelancers are increasingly the backbone of many companies and startups as work becomes more remote and hybrid — also giving workers the freedom to move and work internationally, or become digital nomads.
But hiring international freelancers and contractors can be tricky for companies as they have to pay people in different local currencies, make timely international transactions and work around compliance and tax implications.
We asked the experts for some actionable tips to help businesses hire freelancers and contractors in different countries — and what payment tech payroll providers need to think about.
Flexibility for contractors, potentially complicated for companies
While international employees must comply with local laws and regulations regarding taxes, paid time off, social security, health insurance, pay periods and more, contractors and freelancers have a different set of considerations.
The contractors have a tremendous amount of flexibility in terms of how they want to receive their money… it’s everybody’s choice
“Contractors have to manage many aspects of their services on their own, particularly around paying their own taxes, as well as other contributions for the payments they receive for their services from the company they’re working for,” says Mike Bermingham, cofounder and chief business officer at Nium, the leading global payments infrastructure for the on-demand economy.
On the positive side, Matt Redler, CEO at Panther, a payroll platform for remote teams, says that this gives contractors the flexibility to be paid in whichever way they prefer: “When you are a contractor, and someone simply buys your services, you can barter and you can agree to pay one another in rocks for all it matters.
“So long as the payroll platforms working with the company can support it, the contractors have a tremendous amount of flexibility in terms of how they want to receive their money: Do they want to receive it in any of our 150 currencies? Do they want it in their local bank account? Do they want some of it to go to a virtual wallet? It’s everybody’s choice.”
But without the right technology, that flexibility can mean more hardship on the company’s side, Redler adds, saying that it could lead to companies having one-off manual transfers in many different places. Where time and resources are limited, this is where having a payroll partner could be useful, as payments can be automated and carried out in specific currencies and methods on-demand.
One late payment can tarnish trust
With 26.9m self-employed people working in the EU as of 2021 and a growing cost of living crisis, building trust between employees and employers has become more important than ever.
Companies should also consider how diverse they are because after incidents like what we just saw with Silicon Valley Bank, having too much dependency on a singular partner can be quite dangerous
“Payments for contractors and freelancers can vary a lot — that might not be a monthly payment or it could be project by project, so they’re always looking for speed, as well as reliability and security in receiving payments,” says Bermingham.
He adds that that’s where platforms like Nium comes in, by providing companies with the ability to choose how to pay the contractor, thereby removing any friction and simplifying the payment process worldwide.
Redler says that a key focus for companies partnering with payroll providers should be whether the potential partner uses payment wires or rails. While wire transfers move money electronically from one bank account to another, payment rails allow all digital money transfers to be made regardless of country, currency or digital payment method.
“Companies should also consider how diverse they are because after incidents like what we just saw with Silicon Valley Bank, having too much dependency on a singular partner can be quite dangerous,” he says.
Panther, for example, has many different payment partners so that “when a contractor is receiving money, we pick the fastest and most affordable rail that we can move money on; and that’s what you want in a great partner — being able to be super flexible, and to ensure that no matter what, everybody gets their money on time and the amount of money that they’re expecting”.
Flexibility and optionality from payroll partners
As remote work and digital nomadism grow in popularity for freelancers and contractors, employees may move and not mention it to employers. But this means a change in tax and compliance jurisdictions for the employer so it’s key to ensure that employee and contractor information is reviewed and updated regularly by the payroll partner.
Companies with contractors are looking for real-time payment services, because contractors are part of the global on-demand economy
According to Bermingham, there are a few questions that companies should ask payroll partners when deciding whether to partner with them:
- Do you have current partners that work with contractor plans or payments?
- Have you had any audits done on your API and internal network?
- Does your compliance team monitor processing payments?
- Does the payment provider meet the technological needs of the payroll provider? Is it API-based or does it have manual file processing?
- What kind of support will we receive when we partner with you — and what kind of ongoing support can you provide?
He adds that international contractors and freelancers are very aware of FX rates as they’re more vulnerable than other employees to the risk of losing money due to higher exchange rates.
“Companies with contractors are looking for real-time payment services, because contractors are part of the global on-demand economy where they’re very aware of FX rates and fees around receiving payments, and hence want multiple ways to receive their payments.
“So your payroll provider needs to be able to have those capabilities to receive their payments in multiple ways as well as manage the expectations of the contractor.”
To learn more about how you can enjoy the value of a truly modern payment system, download Nium’s latest ebook: Payroll Goes Global: Optimizing Workforce Payments for International Businesses, or contact us here.
