What Is a Global Contractor? | US Guide

Expanding your business internationally can be a complicated task, but hiring a global contractor can help. A global contractor – also known as an international contractor or foreign independent contractor – is a worker who carries out tasks or projects for a business while based in a different country to the business.

If you’re looking to hire remote employees, this article will answer the question ‘what is a global contractor?’, explain how the hiring and payment process works, and help you decide whether taking on a global contractor is a suitable option for your business.

💡 Hiring a global contractor means you’ll need a fast and cost-effective way to pay them. Consider a Money Services Business (MSB) provider, such as Wise Business, which can save you money on international payments.

What Is a Global Contractor?

A global contractor is an independent, self-employed worker located in another country who is not considered an employee of the company to which it provides services. Global contractors can work from anywhere and control how and where they work.

Contractors can save businesses money as they do not receive employee benefits and employers do not need to withhold taxes from their pay checks. Contractors are responsible for their own taxes, insurance and equipment. Rather than receiving wages or salary through a client’s payroll, contractors must invoice their clients for each project or milestone to receive payment.

Employers typically hire global contractors for temporary work when they need specific skills or a larger team for a specific project and workers that meet their needs are not available locally.

Hiring international contractors allows businesses to access a global pool of top talent and add new workers to their teams quickly. They can do this without having to set up foreign business entities or provide the same level of onboarding and training as long-term employees. As contractors are typically hired for short periods, employers can easily scale up or reduce their workforce in line with business and market needs.

How to Hire a Global Contractor

Any US company can hire an independent contractor abroad. You’ll need to sign a written contractor agreement that complies with local regulations and outlines the services the contractor will provide, the terms of the contract and payment details. The contractor will need to complete an IRS W-8BEN form, which confirms that the contractor is not a US citizen or resident and does not need to pay US taxes.

☝️ As labor and worker classification laws vary in different countries, you should understand the local regulations that apply to the contractors you hire.

Ensure That the Contractor Is Classified Correctly

Misclassifying employees as contractors is illegal in many countries. Employees are entitled to benefits and other legal protections they would not be entitled to as contractors.

If you classify a contractor incorrectly, you can face severe penalties including fines, back payments and unpaid taxes, as well as legal consequences.

For example, if you hire a worker as a contractor for a short-term project but control their work schedule and location and have them sign an exclusivity deal, authorities may determine they have been misclassified and are instead an employee.

Create a Contractor Agreement That Complies With Local Regulations

You should research what to include in the contractor agreement to ensure it meets the legal requirements of the contractor’s home country as well as US law.

Determine Which Tax Forms are Required

In addition to the US W-8BEN form, contractors and their employers may have to complete tax forms for the contractor’s local jurisdiction. As each country will have different regulations and tax forms, it’s advisable to consult a tax advisor.

Establish the Payment Terms

You’ll need to agree with each contractor on the payment terms for their invoices, which set out now how and when to pay the invoice and the consequences of late payment. Payment terms include whether the payment is due upon receipt of the invoice or on a specified date, whether some of the payment should be made upfront, and incentives for early payment.

Choose a Suitable Payment Method

Some countries have regulations requiring businesses to pay workers in their local currency or which payment method you can use, e.g. local banks only. Spending time to do thorough research on your options can save you time and money later on, reducing the hassle of making payments.

How to Pay Global Contractors

Paying a contractor abroad can be a more complex process than paying your long-term employees. It’s important for your relationship that you pay them the right amount of money on time, which means having to consider different exchange rates and timezones.

Wise Business

Wise Business is a Money Services Business (MSB) provider and a smart alternative to banks. Wise allows you to make international payments at the mid-market exchange rate without hidden charges or monthly fees, saving you money on paying contractors abroad.

Features such as batch payments and the ability to handle multiple currencies in one account take the hassle out of foreign currency transfers.

Payment Providers

Online payment platforms like Payoneer and PayPal Business can be a convenient option to pay contractors who already have an account. This can help simplify their invoicing and accounting. However, you should be aware that they can charge currency conversion fees and transfer rates that can add to the cost of sending and receiving payments for both you and your contractors.

Bank Transfer

It might seem convenient to pay international contractors from your US business checking account, but not all banks support transfers to banks abroad in foreign currencies. If your bank does all you to make international payments from your local US account, you should look out for fees on sending payments to an account in another currency – charges can be steep and some banks add a markup on the exchange rate.

What's the Difference Between a Global Contractor vs Employee?

It’s important to follow legal guidance on what distinguishes a global contractor from a regular employee. According to the IRS, the evidence is based on whether the company controls what the worker does and how they do their job and whether there are written contracts or employee-like benefits.

In addition, whether the business aspects of the worker’s job are controlled by the employer – such as how they’re paid, whether expenses are reimbursed, and who provides tools or supplies, are also considered.

Discover Wise Business: The Smart Way to Pay Global Contractors

Paying international contractors doesn’t have to be a complex or costly process. A Wise Business account can help you save time and money by providing international payments at the mid-market rate with transparent fees and no monthly account charges.

You can hold and manage over 40 currencies all in one place, and make easy batch transfers to pay multiple contractors at the same time. This not only saves your business time and money, but also helps build a relationship with global contractors who will appreciate getting paid on time and in their local currency.

You can find out more about the features of a Wise Business account and how it can help you save money on international payments here.

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