How to pay international contractors

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How paying an international contractor works

1. Confirm the person is actually a contractor. The IRS weighs behavioural control, financial control and the type of relationship; no single factor decides it. The contractor's own country applies its own test on top, and it is the stricter of the two that bites. If you set the hours, supply the tools and the work is core to your business, stop and reassess before the first payment.
2. Collect the right tax form before the first payment. A US-person contractor completes Form W-9. A foreign individual working outside the United States completes Form W-8BEN to document foreign status. Collect the form before money moves; chasing paperwork after year end is how reporting deadlines get missed.
3. Agree the contract, currency and payment terms in writing. The contract should name the currency, who absorbs transfer fees and FX spread, the invoicing cadence and the notice terms. A contractor quoted in their local currency knows what they will receive; a contractor quoted in USD is carrying your FX risk, and pricing usually reflects that.
4. Run the payment over a rail you have priced end to end. A bank wire, a money-transfer platform and a contractor-management platform can all deliver the same money at very different total cost once flat fees, intermediary deductions and the FX margin are added up. Price the whole journey, not the advertised fee, and confirm what the contractor actually receives on the first run.
5. Keep records and handle year-end reporting. Keep the signed form, the contract, invoices and payment confirmations together per contractor. Payments to US-person contractors are reported on Form 1099-NEC where required; payments to documented foreign persons for work performed entirely abroad are generally outside that regime, which is exactly why the W-8BEN on file matters.

The three ways to move the money

Direct bank transfers (SWIFT wires) work everywhere banks do, but carry flat sending fees, possible intermediary bank deductions and a retail FX margin, and they leave the compliance work entirely with you. They suit a small number of high-value payments to contractors who invoice cleanly and want funds in a major currency.

Money-transfer platforms cut the FX margin and give better tracking, but they are still just a rail: classification, forms and records remain your job. Contractor-management platforms sit on top of the rail and add the workflow: they collect W-9 or W-8BEN forms, generate compliant contracts, handle invoicing and pay out in local currency, for a flat monthly fee per active contractor. The vendors in our index publish those fees on their own pricing pages, and the table on this page quotes them verbatim with the date we verified each one.

The right choice is mostly a function of volume. One or two stable contractors rarely justify a platform fee; a dozen contractors across several countries almost always do, because the cost of one classification mistake or one missed form exceeds years of platform fees.

Misclassification is the real cost

The payment itself is the easy part. The expensive failure is paying someone as a contractor who is, in law, an employee. In the United States that exposes you to back employment taxes; either party can ask the IRS to rule on the relationship using Form SS-8, and a misclassified worker can report uncollected social security and Medicare taxes themselves on Form 8919, which means the question can be forced without your consent.

The contractor's own country matters at least as much. Most jurisdictions apply their own employee tests, and a long-running, full-time, single-client arrangement looks like employment almost everywhere. When a contractor relationship starts resembling employment, the clean fix is converting them through an employer of record rather than hoping the arrangement is never examined. Nothing on this page is legal or tax advice; the statutes and your contracts control, and a real case needs a professional who can read both.

Common questions

Do I send a 1099 to a foreign contractor?

Generally not for a documented foreign person performing all work outside the United States; the W-8BEN on file is what supports that treatment. Payments to US-person contractors are reported on Form 1099-NEC where required. Confirm the specifics with a tax professional; this is not tax advice.

Should I pay in USD or the contractor's local currency?

Agree it in the contract. Paying in local currency means you carry the FX cost visibly; paying in USD pushes conversion onto the contractor, who usually prices it back into the rate. Platforms that pay out in local currency at a disclosed margin make the cost easiest to compare.

When should a contractor become an employee?

When the working pattern looks like employment: set hours, your tools, ongoing core work for one client. At that point the classification risk usually outweighs the cost of converting them, either through your own entity or an employer of record in their country.

Can I just use my bank for everything?

You can, and for one or two contractors it may be cheapest. But a bank moves money without collecting forms, checking status or keeping your records, so everything a platform automates still has to happen somewhere, done by you.

Coverage by country

• Employer of record vendors covering Singapore
• Employer of record vendors covering Mexico
• Employer of record vendors covering Spain
• Employer of record vendors covering Colombia
• Employer of record vendors covering United Kingdom
• Employer of record vendors covering France
• Employer of record vendors covering Hungary
• Employer of record vendors covering New Zealand