According to Bloomberg, in 2019, about 54% of the tech giant Google's workforce were freelancers. Remember, this was the situation before the world transitioned towards the new normal and even before the Great Resignation.
In their recent study, LinkedIn found that 83% of SMBs have the opinion that freelancers have greatly helped their businesses grow forward. Freelancing is increasing day by day, and the statistics strongly indicate its impact is impossible to ignore.
In addition to these studies, a Forbes article brings to light the impact of the global freelancer economy contribution during the pandemic, which stands at a whopping 1.2 trillion dollars. By now, you would have realized freelancing, and its impact is no joke!
With such a background, while employing freelancers, the last thing you want is shaking hands with them without a proper strategy and tools to manage their payments. With over 53% of global Gen Z workers turning into freelancing, it is high time to have a smooth and clutter-free solution to paying overseas freelancers.
When it comes to managing freelancers, the most important aspect is figuring out how to pay freelancers overseas. Having a suitable freelancer payments software / platform can help you ease up your responsibilities, make the right payments at the right time, in their desired local currency. Additionally, this can save you from penalties and maintain your credibility as a brand. In the same way, it can give the freelancers an assurance of rightly paid and work satisfaction.
Before we dive deep into the paying overseas freelancers solutions, let’s look at the common challenges employers face (clients for freelancers) in paying skilled talent overseas.
Every country has its own set of laws and taxations. As an employer, when you employ international talent, there is a need to be compliant with the local laws and regulations. Working with freelancers is no different, and it can become challenging, considering there is no direct contractual relationship with self-employed individuals. Failing to adhere to the local policies may result in financial penalties. It needs a pair of expert hands to help you swim through the local rules and thus avoid fines for breaking the rules.
As an employer, you may work with a single or a group of freelancers. If you are employing different freelancers, each will have their own contract terms, agreed payment terms, and schedules. To keep track of their work manually and issue payments on their respective schedules is cumbersome. Additionally, working with freelancers from various countries can cause processing delays with some payment methods, which can affect the working relationship. All these factors need to be contemplated while paying foreign freelancers abroad.
Paying foreign freelancers abroad is not as simple as sending money to your pal's bank account locally. Imagine converting every penny you spend on the fluctuating local currencies and dealing with the processing fees every time! It is an expensive affair. You need to have a scalable, user-friendly payment facilitator to make your job easier. This is not a choice but a necessity for those employing freelancers.
To alleviate these challenges, the following solutions can be helpful.
Drafting a contract with the proposed freelancer at the beginning of the work partnership is a crucial step in untangling the payment nuances. Mutual understanding of the work timeline, payment mode, the currency of payment, and its schedules, can bring clarity to both parties. It is also important to standardize the process and thus make future audits easier.
The taxation process and its related laws vary with country. Mostly, as a client, it is not your burden to deal with the local taxations, but in some instances, it might not be the case.
US companies do not have to pay or report international freelancers' taxes who live outside the United States. Instead, these freelancers abroad need to fill out a W-8BEN form, which will include an International Taxpayer Identification Number confirming the person is actually working from outside the States. Expert knowledge can help you stay informed in order to keep freelancer payments in sync with the taxation.
It is best to align to a mutually agreed payment schedule so that there is no room for confusion at a later point. Some choose payments based on hourly or per-day work, while others may opt for fixed pay for the whole. And when it comes to payment methods, analyze which payment mode works best for you and your freelancer.
When you choose a particular payment method, ensure the cost factor and time factor are considered. This becomes extremely crucial for countries that do not have the right infrastructure. Choose the right payment tools and choose them wisely, like a pro. There are chances of hidden charges, fluctuating fees, delay in transfer, and other issues, which needs to be ruled out before choosing your trusted payment facilitator. Also, ensure scalability options in case you plan to expand your capacity beyond.
Once you have mutually agreed on the contractual agreement, the payment terms, and payment method, it is imperative to know how to set it up for a seamless experience.
Setting up international payments varies depending on your payment mode. If dealing through a freelancer marketplace, the payment will be taken care of according to the platform guidelines. But when dealing with an overseas freelancer outside of a platform arrangement, you may need to choose the payment mode accordingly to serve the purpose.
Since a large part of today's freelancing community are youngsters, digital transfers through mobile, bank, or payment apps are the common options. In addition to the bank account details, make sure you have the following information before paying your freelancer abroad:
Transit number (in the case of Canada)
Also, before you finalize the payment method, consider these factors as well:
Quite a number of payment options are available to pay international invoices, and as a client, you have to make an informed decision, weighing in the strength and weaknesses of each of these available methods.
You can pay foreign freelancers abroad through payment apps and are facilitated by their intermediaries.
Convenience is the highlight of this mode of payment, as it needs only a decent internet connection and a mobile phone for the payment.
Freelancer marketplaces are platforms that allow finding and paying foreign freelancers abroad.
The highlight of such platforms is the convenience with which clients can find freelancers and make payments on the same platform.
Platforms can be expensive and can cost higher amounts than your freelancer budget. This is because of the comparatively higher commission rates charged by the platforms.
International wire transfer, which is commonly through the SWIFT transfer, involves transferring money from your bank to the recipients'. This is a secure way for enterprises to have monetary transactions.
The method is considered the best way to pay an international invoice for its ease, security, and high transaction limits.
International money orders are guaranteed money transfer mode.
Easy availability for purchase in common stores and the fact that the bounce rates are negligible, the payment mode is popular in Latin and South American countries.
Each day, an increasing number of freelancers are adopting cryptocurrency as their desired payment method.
While different payment methods have their advantages and disadvantages, it is important to be aware before you decide how to pay foreign freelancers.
Since we have discussed the various payment methods and their complications, it's time to look for a freelance payroll solution - a way that can uncomplicate the processes and avoid nuances of payment. That is what Multiplier offers.
Multiplier is a global employment platform that can help you onboard your workforce compliantly and offers the best way to pay international invoice. Working with Multiplier as your payment facilitator partner, you can easily pay overseas freelancers on time and schedule, in just a click!
Contractors who provide their service in a US location are liable to pay tax. If the freelancer is a non-US resident, they must pay taxes if they:
Every employer must take note of the labor laws of the freelancer’s country, as they may have to withhold taxes while paying overseas freelancers.
If you are using an EOR platform like Multiplier, you can accept or reject invoices in a few simple steps. Go to “Freelancer Invoices” under the “Payments” section to view and pay international invoices.
However, if you manage your freelancers internally, you must retrieve all the invoices manually and ensure they include the relevant taxes.
Yes, freelancers must pay taxes from their worldwide income, even if paid in foreign currency. However, if a freelancer delivers their service in a foreign country, they are liable to pay taxes to foreign and home countries. To avoid paying double taxes, they can use their foreign tax credit according to their home country’s laws.
Remote & Global Workforce
Remote & Global Workforce
Remote & Global Workforce