Working with independent contractors can be a beneficial way of partnering with individuals who are experts at what they do without bringing them on as full-time employees. This can be particularly helpful when you want to work with candidates on short-term projects or expand your team for your busy season.
Partnering with foreign independent contractors allows you to take this one step further by accessing candidates from all around the world. However, any time you enter into a working relationship, whether with an employee or a contractor, you will need to remain compliant with local employment laws.
This can be challenging when considering international laws, especially if you hire contractors in multiple foreign countries.
Continue reading to learn about the benefits of hiring foreign international contractors and everything you need to know about paying independent contractors in other countries.
Why should I hire independent contractors from other countries?
There are numerous reasons to enter into an international independent contractor agreement, listed below.
When you hire an employee, there are additional payroll considerations, such as taxes, social security, healthcare, and more. These costs can be particularly high in some foreign countries.
When you hire independent contractors, the individual is responsible for paying these costs, which can save you money.
Tapping from the global talent pool
Widening your talent pool from local or even national talent to a global talent pool means you'll have access to premier talent all across the globe. This is a huge opportunity for companies interested in hiring remote workers or those planning to operate subsidiaries in foreign countries.
Furthermore, by hiring foreign independent contractors you can work with candidates who may already be working elsewhere or are self-employed, which means significantly fewer restrictions for both parties.
Another primary benefit of hiring foreign independent contractors is having access to ethnically, culturally, and racially diverse candidates. This diversity will not only promote an equitable and inclusive company culture but can enhance the growth of your business.
Diversity drives innovation and productivity, as well as allows you to better connect with your customer base.
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What are the ways to pay international independent contractors?
If you're wondering about the best way to pay international contractors, you can select an option that best meets your business needs. Consider some examples of how to pay international independent contractors listed below.
International bank transfers
International bank transfers are a simple way of paying independent contractors in other countries that involve transferring money from a local bank account to an international one.
Employers can legally pay employees and independent contractors using cryptocurrency. This may be a preferred method for some global employers, although it will require establishing a cryptocurrency treasury.
A digital wallet is simply an electronic wallet that allows you to save your bank information and pay international contractors via electronic methods.
Some of the most common types of digital wallets used for payroll include PayPal, Cash App, and Venmo.
Global payroll platforms
Perhaps the most secure way of paying international independent contractors is through a global payroll platform. By using a global payroll platform like Skuad you can efficiently pay contractors and employees in multiple currencies, ensure that payroll is processed compliantly, withhold any necessary payroll taxes, and more.
What to consider when paying independent contractors from other countries
When paying independent contractors in other countries, you must comply with the local labor and tax expectations, including the following.
Methods of classifying workers
The misclassification of employees as independent contractors is one of the most substantial risks that you will need to consider as an international employer. You can classify a foreign worker in several ways, including:
- An independent contractor
- A full-time or part-time employee
- A seasonal worker
When you partner with an independent contractor, you will need to ensure that every aspect of your working relationship aligns with the local regulations for what defines a contractor; these regulations vary by country.
When you pay independent contractors living in foreign countries, you are subject to the tax laws in their country of residence. This includes factors such as:
Typically there are fewer tax obligations for organizations partnering with foreign independent contractors than employees, but every country has unique tax laws, and you will need to ensure compliance in every country where you enter into employment relationships.
Paying independent contractors in other countries with Skuad
Skuad enables global employers to hire independent contractors and full-time employees in more than 160 countries worldwide without needing to establish legal entities or subsidiaries.
We can help you manage the entire employment and contractor lifecycle, including onboarding, payroll, and ensuring country-specific compliance. Book a demo with Skuad today to learn more about how we can help you manage all aspects of global hiring and payroll on our unified platform.
Below is a list of frequently asked questions regarding paying independent contractors in other countries.
Can a U.S. company hire a foreign independent contractor?
A U.S. company can hire an independent contractor living in a foreign country as long as they enter into a compliant international independent contractor agreement and abide by the local tax and labor regulations.
Can a U.S. company pay a foreign independent contractor?
A U.S. company can pay a foreign independent contractor using methods such as global payroll platforms, digital wallets, international bank transfers, and more.
Can you issue a 1099 to someone in another country?
If you hire a foreign independent contractor, you will not be required to have them fill out a 1099 form, as they will not be expected to pay taxes in the United States.
However, you may be required to issue a 1099 form if the independent contractor is a U.S. citizen living abroad.
Do independent contractors need to be U.S. citizens?
Independent contractors do not need to be U.S. citizens. However, you must comply with local laws when hiring and paying independent contractors in other countries.