As an international employer, you're already aware of contractor payments. But as you grow in size, operations, and geographical spread, you may find the conventional ways — such as bank deposits, wire transfers, or checks — to pay international contractors increasingly challenging.
You may also already have digitized many aspects of your business — and you see how digitization, including automation of services and processes, has resulted in positive outcomes for your business. Still, you may handle contractor payouts manually and not have a contractor payment platform.
In a digital and automated world, payment automation is no longer a consideration that organizational leaders are still contemplating. If COVID-19 alone can provide lessons, automated payments are already becoming a standard in many businesses in different industries.
There are already many established benefits, if not necessities, of using automated payroll systems for paying foreign independent contractors. These benefits may negatively impact your contractor experience and expose you to a wide range of regulatory and financial risks.
There are several advantages to using automated contractor payment solutions as an increasingly critical business tool to stay competitive, enhance the contractor experience, and save contractor payment costs.
To learn how automated contractor payment services work, read on.
An automated contractor payment platform or service is a company's payment vehicle to make international payouts to contractors, usually remote, using any methods preferred by contractors.
There are many reasons why automated payments have become so widespread in recent years. COVID-19 has accelerated automated payments, if only for health reasons. Automated payments are increasingly spilling over into more companies and industries. Part of a global shift toward digitization and automation, automated payments for contractors are a groundbreaking payment method for international employers hiring a combination of employees and contractors distributed globally.
The way automated contractor payment platforms work is simple and can take a few different forms:
- Proprietary platforms. International employers may own automated proprietary platforms, costly as they are, to handle payroll processes end-to-end, including:
- Collecting contractor information, such as name, nationality, contact information, and ID
- Issuing statements in CSV, PDF, or Excel format for contractors' review and record-keeping purposes
- Customizing contractor payments to provide discounts on exchange rates and more frequent, recurring payments
- Generating automated invoices
- Making recurring or one-time payments using the methods of payment contractors prefer
- Payroll management platforms. These are similar to proprietary platforms but are offered by external providers to perform payroll management functions, including contractor payment services. Fully outsourced platforms lift the payroll management burden by making the payroll process compliant with local laws, cost-effective, and contractor-centered. These platforms are usually part of employer record services.
- Payment processing platforms. These are platforms whose range of contractor management services is limited compared to payroll management platforms and only provide payout services for employers.
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Why a contractor payroll platform is necessary
The benefits of using contractor payroll platforms are, as noted, many. This is especially true for small-to-medium enterprises struggling to maintain a balance between internal operational consistency and external growth. The most important benefits of using automated contractor payment platforms include the following:
- Contractor experience enhancement. By making payments accurately, instantly, and on time, you, as an international employer, ensure your contractors are happy and stay with you for as long as possible to grow your business.
- Cost minimization. By automating payments, contractor payroll platforms slash the costs you, as an employer, usually incur using manual, paper-based methods.
- Record retention. Having everything automated in contractor payments enables you as an employer to keep records of all transactions handy and easily recoverable in many formats for internal control, external auditing, and tax compliance purposes.
- Competitive advantage. The automated platform or service you opt for to pay your contractors, whatever it may be, is always an edge enabling you to access international markets you may never be able to enter otherwise.
The regulatory benefits you gain using automated contractor payment platforms cannot be overemphasized. Consider compliance. Having a best-fit automated platform for you and your contractors should include, among many other factors, features enabling compliance with local labor, payroll, and tax laws and regulations. For example, suppose you are a U.S.-based employer hiring international contractors. In that case, the best way to pay contractors is to choose a platform that makes 1099-K-compliant payments — an essential requirement for U.S.-based employers using contractors.
Finding the right automated payroll platform for your business
Choosing the best way to pay international contractors depends on many factors, such as
- Your size and operations
- Contractor skill base and location
- Your financial ability
- Contractors' most preferred and standard methods of payment
- The laws, regulations, and practices in markets you operate in
On the other hand, as an international employer, you need to ask important questions about your prospective payroll platform to decide if you should opt-in or move on, including:
- Do my preferred providers offer integrated payroll management services? This is important since you might need additional payroll services along your growth journey. You may want to use only a few providers, incur growing expenses, and, in some cases, experience lower service quality as providers change hands.
- Where are my contractors most concentrated? This is also critical to ask so you can decide which provider to use more in which jurisdiction you should use more than one, or should you need only one automated provider where you have the most contractors.
- Do I need to automate mass payouts only, or do I need to be fully automated? This is a question about your long-term investments or plans to make in digitizing your business assets.
- Which is more cost-effective and sustainable: having a proprietary platform or outsourcing contractor payment?
In any case, you need to ensure your chosen provider is not only your best fit culture-wise but also has established capabilities to handle an increasingly complex world of payroll management for contractors.
Skuad, an established employer of record, is an industry-recognized and award-winning integrated HR services provider. Having years of experience handling employment end-to-end for a diversity of employers in different industries and sizes, we are experts at what we do, and we know best what sets apart a "good" from an "exceptional" service match for each employer.
At Skuad, we handle the international employment process end-to-end and let you, the global employer, focus on what matters most: growth.
Our decades-long experienced in-house legal experts and fully automated HR platform guarantee you get the best-in-market service to hire, pay, and onboard skilled employees and contractors anywhere.
With Skuad, you, as an international employer, can:
- Make global mass payouts in a matter of clicks at competitive pricing
- Pay all worker types: employees, contractors, and agency-sourced contractors
- Pay in 100+ currencies
- Get built-in compliance
- Access optimized exchange rates at zero transfer fee
- Get expert advice on contractor payment
- Ensure all contractor payments are made securely and based on each contractor's most preferred method of payment
You can opt for a fully integrated and automated payroll management service with us or subscribe to our unmatched automated contractor payment service only. In either case, paying or managing your contractors using our services is what we do best.
At Skuad, we cover every employer's employment, payroll, and payment needs. Having Skuad at your back makes automated contractor payments seamless and compliant, no matter how frequent or complex the changes introduced to in-country employment laws and regulations.
The time is ripe for automation and making your contractors happy and engaged. Take advantage of optimizing payment for your international employees and contractors anywhere. Book a demo with Skuad today.