Here Are A Few Cost-Effective Ways For Your Business To Pay International Contractors

With the adoption of virtual meetings, online recruitment software, and e-marketplaces for freelance services, the business of hiring and paying foreign contractors of any sort has become easier than ever.

Still, as we'll see in this guide, there are better and worse ways of getting the job done, and many misconceptions exist about avoiding exchange rate fees and hidden charges. This guide gives you an overview of your options by ranking the best ways to pay foreign contractors depending on your needs: Wise Business, Payoneer, or international wires transfer using a money transfer provider. We compare the fees, features, accessibility and more to provide you with an overview of how to pay your foreign contractors without a hassle!

Method 1: Wise Business

Wise Business isn't a bank but a Money Services Business (MSB), meaning it offers your business a low-cost online business account with much of the same functionality as a typical business bank account without being registered as a full-service bank, but at a fraction of the price.

Specifically, Wise allows your business to manage its cash flow in over 50 foreign currencies and provides local business account details in ten currencies (specifically, you can transact in AUD, CAD, EUR, GBP, HUF, NZD, RON, SGD, TRY and USD). It also gives your company a Visa debit card with low fees for use abroad.

Using your Wise Business account, your team can request money seamlessly, withdraw from e-commerce stores in up to ten currencies, and use your ten details to create invoices. When you're ready, you can convert your revenue denominated in foreign currency into your local currency at industry-low rates that can save you thousands compared to traditional banks.

In our opinion, Wise's strongest point is its exchange rate transparency, always using the actual mid-market exchange rate per transfer. Instead, Wise charges fixed fees per transfer, which range from as low as 0.4% to over 2%, depending on the currencies used in the conversion. Common conversions like USD to EUR may cost around 0.4% of the total transfer amount, while less commonly-traded conversions like BRL to THB may cost around 2.2 or more. This allows you to pay foreign contractors extremely cheaply, even as much as 19 times more cheaply compared to PayPal, according to Wise's own research! To make even further savings with Wise, you can even set up a desired exchange rate to trigger a currency conversion once the mid-market rate meets it.

Method 2: Payoneer

Payoneer is an internationally renowned financial services company that provides customers with digital payment services, access to working capital, money transfers, and access to local bank details in multiple foreign currencies.

Your three account numbers will support GBP, USD, EUR, and five other currencies, so you can make and receive payments as though your business was local in those countries. Because it seamlessly integrates with some of the world’s leading marketplaces in so many currencies, we think Payoneer is the ideal choice for any small business, freelancer, or company working in the borderless e-commerce market and makes a great tool for paying foreign contractors due to its low foreign exchange costs and convenient payments. Integration with payment systems like Stripe and Amazon's check-out system can broaden your international market reach and save you money while you're at it.

Finally, Payoneer is free to sign up for in most countries and is available for dozens of nationalities worldwide. However, it's worth noting that it comes with a $29.95 annual account fee and another $29.95 annual card fee.

Method 3: International Wire

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Another common option for paying a foreign contractor is using an international wire transfer initiated from your business bank account. This typically happens when your business either doesn't use a payment platform like Wise or Payoneer or your contractor specifically requests it.

In any event, sending an international wire can be extremely expensive, and both your business and the contractor will probably come off short. For example, suppose your business is located in the USA, and you pay a contractor based in the Philippines a remuneration of $750. In that case, you'll pay around $45 in fixed service fees plus 3% to 7% in hidden exchange rate margin fees with most American banks. If you make a 'BEN' payment instruction and pass along those costs to your recipient, only around $650 would be converted to pesos at the real mid-market exchange rate. (On the other hand, an 'OUR' payment instruction would lead your business to shoulder these costs directly such that the $750 you owed your contractor would debit your bank account with around $795.)

Compare this to Wise, where you'd pay just $6.61 in total fees (at the time of writing), and then your conversion would take place at the mid-market rate, saving your business money and your foreign contractor from getting an unpleasant surprise! To run the calculation out in full using the prevalent exchange rates when writing this article, your Philippines-based contractor would receive around 36,670 PHP with the bank, whereas with Wise, they'd receive 41,635 PHP. That's a whopping 13.5% more, with exactly the same amount being sent both times!

At Monito, we've been comparing and reviewing international money transfers for more than ten years. You can use our free real-time comparison engine to compare the market and find the best deal for your transfer by entering your country, your contractor's country, and the transfer amount below:

Other Useful Methods

In addition to the methods above, there are other good platforms that also let you pay your international contractors while providing other solutions to your business. We've highlighted just three of them below:

Deel

When it comes to onboarding and managing foreign contractors before paying them, Deel stands out as another excellent choice. More of a contractor management platform than a payment service like Wise is, Deel offers other business solutions in addition to international payments, including compliance and contracts all rolled into one.

With Deel, your business can effortlessly onboard foreign contractors and ensure compliance with local labour laws and tax regulations and help simplify the complexities of cross-border payments. After paying your contractor, they can withdraw their earnings using various means, including a bank deposit, via Wise or Revolut, or via a debit card.

In fact, we've been using Deel ourselves at Monito for years, and every month, it saves our admin team a lot of time and effort! We can say first-hand that it's a reliable solution if your company is looking for a way to efficiently manage its global workforce through compliant invoicing, onboarding, and contract management. If you'd like to optimise further, we recommend using Deel for the above purposes and then using a low-cost money transfer app like Wise to handle the currency exchange. Sign up to Deel today to use its best-in-class platform for your contractor management needs!

Revolut Business

Similar in many ways to Wise, Revolut Business offers a convenient web-based solution that lets your business handle international payments with ease.

Just like Wise, Revolut's online platform provides fast, low-cost transfers in multiple currencies, making it ideal for companies with global operations. With features like expense management and multi-currency accounts to transact in over 25 foreign currencies, Revolut Business simplifies financial workflows and can help your business save time and money on cross-border transactions when settling the bill with international contractors.

Novo (USA Only)

In the US international business checking account space, Novo has the most straightforward and transparent fee schedule that we have seen: no fees except for one overdraft fee.

You can get a physical or virtual Mastercard, which charges zero foreign transaction fees and reimburses all ATM fees (even for withdrawals abroad). Novo's digital platform also lets you track your sales and balances across many payment platforms like Etsy, Stripe, or Amazon.

Novo, powered by Middlesex Federal Savings F.A., allows you to integrate your accounting software, like Xero and Quickbooks. The online banking platform has also partnered with Wise to send your international money transfers at the real exchange rate, which (as we discussed earlier) is an excellent way to pay your international workforce.

Methods To Avoid

On the other hand, just like there are many good ways to pay a foreign contractor, there are also a few ways you definitely want to avoid on account of the high costs. We've highlighted two of the most popular mistakes you should avoid below:

PayPal

PayPal's business platform, PayPal Business, lets your business send money to bank accounts and other PayPal accounts across the globe. With over 300 million people using PayPal, there's a good chance your foreign contractors might expect payment over that platform, so make sure you know why it's a bad idea!

Although PayPal is convenient and quick for processing payments domestically, whenever currency conversion comes into the equation, PayPal immediately becomes a bad idea. To convert currencies, PayPal normally charges a fixed fee plus an exchange rate margin of 3% to 5%, depending on the currencies. Just like we saw earlier with banks, in the end, these kinds of fees serve no one but PayPal and disadvantage both you and the contractor you're paying in the end.

Bank-to-Bank Transfers

As we touched on earlier, bank wires are often not the best option for paying foreign contractors due to their high fees and unfavourable exchange rates that eat right into your contractor's earnings.

However, the disadvantages don't end there. Bank wires via SWIFT also come with slow processing times, which can take as long as seven business days to arrive.

For all these reasons, if you want to transfer money directly to your contractor's bank account, we recommend comparing the market and choosing a business money transfer service to suit your company's needs. Get started and compare your options for free on Monito today