For BPOs and offshore hiring companies, working with foreign independent contractors is now a growing trend in global operations. But paying international contractors involves more than sending funds. It includes tax reporting, classification, onboarding, and aligning with employment and labor laws in different countries.

How Paying International Contractors Differs from Paying US-Based Workers

International contractor payments involve additional steps not typically required for domestic payroll.

Currency conversion and exchange rates

Payments issued in USD may be converted into the contractor’s local currency. Currency conversion fees and exchange rate margins can reduce the actual amount received.

Tax obligations and IRS forms

U.S.-based companies must collect IRS Form W-8BEN or Form W-8BEN-E from foreign contractors. These tax forms certify the contractor’s foreign status and guide any applicable tax withholding.

Misclassification and employment law risks

Foreign independent contractors must be properly classified to avoid violating local employment laws. A contractor agreement that includes payment terms, scope of work, and tax responsibilities can help reduce classification risks.

International payment process

Payments made through SWIFT-based bank transfers or global platforms may take several business days. Transfer fees, bank charges, and timing can vary by financial institution and the contractor’s country.

Common Payment Methods Companies Use for Their International Contractors

Businesses use different payment methods based on availability, cost structure, and local access.

Bank Transfers (SWIFT)
Used for international wire transfers between financial institutions. Typically takes multiple business days and may include bank and intermediary fees.

PayPal
A digital payment platform available in over 200 countries. Requires both sender and receiver to have PayPal accounts.

Wise
A money transfer service that supports payments to local bank accounts in supported countries. Shows fees and conversion rate before sending.

Payoneer
A platform for receiving international payments. Contractors can access funds via bank transfer, debit card, or other supported options.

Xoom
A digital remittance service owned by PayPal. Supports bank deposits or cash pickup in eligible locations.

Western Union
Provides international money transfers through digital and physical agent locations. Recipients may collect funds via bank deposit or cash pickup.

Paper Checks and International Money Orders
Physical forms of payment sent via mail. May take extended time to process and require manual handling by the recipient.

A Key Payment Consideration to Keep Your International Contractors Happy

Contractors working in different countries may be subject to transfer fees, currency exchange deductions, or delays in receiving funds. The payment method chosen affects how much they actually receive and when.

Using payment services that offer local currency payouts, clear fees, and reliable timelines helps protect contractor earnings and supports long-term working relationships.

To-Dos: Checklist Before Making Your First International Contractor Payment

Before initiating payments to overseas contractors, companies should:

• Prepare a signed contractor agreement covering scope, payment schedule, and payment terms
• Collect the appropriate IRS form (Form W-8BEN or Form W-8BEN-E)
• Verify contractor classification based on employment laws in both the U.S. and the contractor’s country
• Confirm the contractor’s preferred payment platform or bank account details
• Review local tax laws and tax withholding requirements
• Ensure onboarding includes tax compliance, payment setup, and banking information
• Confirm that contractors manage their own tax obligations if self-employed

These steps support legal compliance and help standardize the contractor payment process.

How Thera Supports Contractor Payments Within a Unified Financial Ecosystem

Thera is an ecosystem of apps built to run modern businesses.

It includes:

• US Payroll for domestic employees
• Contractor Management for payments, tax forms, and documentation
• EOR Support for hiring through an employer-of-record model

These tools support compliant, organized contractor payments across different countries.

See If Thera Aligns With Your Contractor Payment Process

Thera provides tools for managing contractor payments, documentation, and onboarding across different teams and regions. It’s designed to support businesses with varied financial operations.

Book a demo to see how Thera fits your contractor payment process.

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