How to Pay International Contractors in 2025

How to pay foreign contractors efficiently: a business guide

If you thought the “gig economy” referred to musicians, fishing spears, or rowboats, think again. The gig economy, in reality, refers to an emerging global marketplace that enables business owners to hire talent from anywhere in the world for specific projects. At the heart of this international workforce are foreign contractors: independent professionals who temporarily offer their skills and services to your business.

Hiring foreign contractors provides your business access to a wider pool of global talent and can help establish early inroads into new international markets. However, managing payments to overseas contractors can present challenges, including drafting contractor agreements, handling currency conversions, navigating payment delays, and maintaining compliance with international regulations.

In this guide, we’ll walk business owners through the process of hiring and paying international contractors. You’ll learn about key considerations, common pitfalls, and modern payment solutions for foreign contracting. We’ll also show how Slash can simplify sending payments to different countries through automated global transfers, access to the SWIFT global payment network, support for stablecoin on- and off-ramps, and more.1, 4

What is an international contractor?

An international contractor is a self-employed individual based in one country who provides short-term services to a client or company located in another. Unlike full-time employees, contractors are not part of your company’s regular payroll, which means they handle their own taxes, benefits, and insurance. Employment rules vary by country, which affects how contractors are classified, compensated, and protected under local labor laws.

Contractors are classified based on the work they do and the manner in which they are hired by an employer. Classification is important because it determines the legal stipulations that are included in a contractor agreement. Common contractor classifications for international partnerships include:

• Independent contractors: Also known as self-employed contractors or freelancers, these individuals are hired directly by your company to perform a specific task or service. They represent themselves during the hiring process and typically determine their own schedules, rates, and methods of work.
• Subcontractors: A subcontractor is an independent contractor hired by another, primary contractor rather than directly by your company. For example, if you engage a consulting firm to conduct market research, that firm might hire a subcontractor to assist with data analysis. While subcontractors ultimately contribute to your project, the working relationship and payment are handled through the primary contractor.
• Agency contractors: These contractors work through an employer of record or a third-party organization that legally employs workers on behalf of another company. An employer of record typically manages onboarding, payroll, taxes, visas, and benefits, which can be advantageous for international projects where compliance and employment laws are more complex.

Benefits and challenges of hiring international contractors

Collaborating with freelancers and international contractors has never been simpler. Advancements in digital communication and global payment technology now make it possible to connect and send money worldwide in just moments. Still, employers must navigate several logistical and regulatory challenges to fully realize the benefits of global partnerships. Here are a few key advantages and considerations to keep in mind when sourcing international contractors:

Benefits

• Access to talent: The most qualified worker for a project may not always be nearby. Hiring internationally opens access to a vast network of skilled, motivated workers who can bring specialized expertise and diverse perspectives to your business.
• Cost efficiency: Global labor markets vary significantly, and certain tasks that are expensive in one country can be performed more affordably elsewhere without compromising on quality. This can help your business to manage budgets more effectively while maintaining high standards of work.
• Market expansion opportunities: Because hiring abroad requires understanding local laws and business regulations, it can serve as a foundation for future global expansion. By building these relationships early, your company gains practical experience operating across borders.

Challenges

• Payment management: Sending cross-border payments often involves fees from intermediary banks, recipient banks, or currency exchanges. Contractors may also have specific payment method requirements based on preference or regulations, too. Slash can simplify sending global payments by providing overseas transfers to over 160 countries via the SWIFT network or enabling crypto transactions that bypass traditional foreign exchange (FX) fees.
• Navigating legal requirements: When hiring international contractors, your business must comply with both your own country’s regulations and those of the contractor’s home country. This may include requirements related to cross-border payments, tax reporting, source income, expense documentation, and payroll reporting. By automating global contractor payments through Slash, your business can streamline these processes, maintain accurate records, and reduce the risk of non-compliance across jurisdictions.
• Intellectual property protection: Without proper safeguards, working with international partners can expose your company’s copyrights, trademarks, and patents to risk. If your business needs strong intellectual property (IP) protection, thoroughly vet both your contractor’s IP violation history and check if their home country participates in relevant IP treaties.
• Misclassification: Misclassification occurs when a company labels a worker as an independent contractor even though, under local laws, the individual qualifies as an employee. In such cases, the worker can be legally entitled to employee benefits, overtime pay, and more. Misclassification can also lead to fines, back payments, legal disputes, and IRS tax penalties.

How to pay international contractors: a step-by-step guide

Partnering with an international contractor can be more complex than a standard hiring process. However, with proper preparation and a reliable payment setup, you can streamline the experience and build strong, compliant working relationships. Below is a step-by-step overview to help guide you through the process:

Step 1: Find the right contractor for the job

Hiring an international contractor is an exciting opportunity, but it’s important to take your time during the selection stage. Begin by researching potential candidates, verifying their credentials, and initiating open communication about expectations, timelines, and deliverables. Because labor laws, contract requirements, and compliance standards vary across different countries, it’s best to confirm that a candidate is a good fit before investing time in preparing tax forms or legal documentation.

Step 2: Review legal regulations

Once you’ve chosen a contractor, the next step is to review all legal and regulatory requirements that apply to your partnership–both in your country and in the contractor’s. For US based companies, this includes checking IRS requirements about withholding taxes, expense reporting, and worker protection laws that may differ across jurisdictions. For example, some countries require foreign companies to register locally or file compliance documentation before making payments to independent contractors. Consulting a legal or tax professional familiar with international contracting can help ensure you meet all applicable regulations and avoid costly compliance issues.

Step 3: Form an agreement

Once you’re ready to make the partnership official, the next step is to draft a contractor agreement. This document should clearly define the nature of work, payment terms, legal protections, and each party’s obligations. It also needs to include relevant compliance measures to ensure the partnership adheres to both domestic and international labor and tax laws. It’s also in this phase that you’ll record the contractor’s bank account information, preferred payment method, and a tax identification number (if required).

Step 4: Payment preparation

Before sending any payments, calculate potential currency conversions, FX fees, and any applicable benefits or deductions outlined in your agreement. It’s essential to confirm that your payment system supports the contractor’s preferred method, whether that’s international wire transfers through the SWIFT network, international money orders, or cryptocurrency. Using a payment management platform like Slash streamlines this process by enabling fast, secure global payments through different rails with real-time insights and analytics.

Step 5: Execute payments

Now that your agreement is finalized and work has begun, it’s your business’s responsibility to issue payments on time and through the agreed-upon transfer method. Timely, reliable payments help maintain trust and strengthen your partnership. Be sure to keep detailed records of all invoices and payment information. Slash integrates with QuickBooks and Xero, which use artificial intelligence to automatically match and log outgoing payments with the correct invoices and documentation, helping your business stay organized and compliant.

Key elements to include in an international contractor agreement

The most critical step in hiring an international contractor is creating a well-defined contractor agreement. This document outlines the terms of your partnership and includes information on how you’ll remain compliant with relevant labor and tax laws. Below is a breakdown of the essential elements to include in an international contractor agreement:

Scope of work

This section should outline responsibilities, project timelines, reporting expectations, and performance standards. A well-defined work agreement not only provides clarity for the contractor but also protects your business in the event of a dispute or underperformance.

Payment terms

Add details regarding how and when your contractor will be paid. This includes:

• Payment method: Common payment methods for foreign contractors include SWIFT network wire transfers, intermediary bank transfers, international money orders, and crypto payments.
• Currency and conversion: Choose which currency will be used for payment and detail how exchange rates and foreign transaction fees will be handled.
• Invoicing: Include details about formatting, scheduling, and required documentation.
• Payment schedule: Choose a payment structure that fits both your business needs and the nature of the contractor’s work. Some options include milestone-based payments, weekly or monthly schedules, or a single payment upon project completion.

With Slash, you can automate direct payments from your business account to foreign contractors in over 160 countries, manage expenses, and handle crypto transactions while maintaining accurate records for compliance.

Obligations and contractor’s rights

This section outlines what both parties in the agreement are responsible for. For the contractor, this can include completing assigned tasks independently, maintaining confidentiality, and complying with local laws. For your business, it includes timely payment, clear communication, and respect for the contractor’s autonomy. This section can also stipulate whether the contractor is allowed to take on other clients concurrently.

Legal and compliance information

Include documentation about the governing law and jurisdiction that will apply to the agreement. This includes, but is not limited to, relevant tax forms, labor regulations, and data protection information for both your country and the contractor’s. Hiring legal counsel familiar with international labor law can ensure your contract meets compliance standards and reduces legal risk.

Termination and dispute resolution

Finally, add a section that illustrates how either party may terminate the agreement. Termination provisions may be “for cause,” meaning there is a specific, justified reason to end the contract. They may also be “for convenience,” which allows either party to terminate the agreement without needing to prove wrongdoing. Additionally, outline how disputes will be resolved, whether through mediation, arbitration, or the appropriate local court system.

Choosing the right pay structure for international contractors

Depending on the project’s scope, duration, and resource requirements, different payment arrangements may suit different contractors. Below are some of the most common options for contractor agreements:

• Recurring payments: Paying your contractor on a recurring basis, whether it's weekly, biweekly, or monthly, is often the most straightforward payment structure. This approach works well for ongoing tasks that don’t have a fixed end date or specified final deliverable.
• Milestone-based payments: This structure ties payments to specific project deliverables. Linking compensation to measurable progress can keep contractors motivated and improve accountability.
• Retainer payments: A retainer is an upfront payment for ongoing services. Retainers typically take two forms: a “pay-for-work” retainer, which covers a set amount of work over a defined period, or a “pay-for-access” retainer, where a contractor is compensated for their availability. even if their full time isn’t utilized.
• Time and materials payments: Used for projects that require the purchase of resources or materials, this structure covers both the contractor’s labor and the cost of materials used. It provides flexibility for projects where total costs may vary based on scope or complexity.

Regardless of the payment structure you choose, it’s important that contractors are paid from your accounts payable balance and not your company’s payroll. This is a common practice to safeguard against misclassification.

What are the methods for making payments to international contractors?

There are many different options available for making payments to contractors worldwide. While some may provide more convenience, others may offer better payroll management, accounting integrations, or low FX fees. Here are some of the payment methods available for paying international contractors:

International bank transfers

Bank transfers, like ACH or cross-border wires, are a common way to send large international payments. If your bank and the contractor’s bank have a direct relationship, transfers can be incredibly easy and efficient. However, out-of-network or complex payments require an intermediary bank to handle currency conversion and settlement, and those intermediaries charge fees. With Slash, you can make faster, direct payments to over 160 countries with direct transfers via the SWIFT network.

International money orders

An international money order is a paper-based payment that is purchased from a financial service provider (bank, post office, or vendor like Western Union) and mailed to the recipient, who then cashes it in their local currency. This method can be useful for contractors who don’t have a bank account. However, it’s slow, manual, and difficult to track or cancel once sent, making it less reliable for regular or high-value payments.

Cryptocurrency and stablecoins

Paying international contractors with blockchain-based funds can speed up transactions, eliminate FX fees, and strengthen security. Slash supports payments in multiple USD-pegged stablecoins—including USDC, USDT, and USDSL—allowing contractors to receive funds instantly without traditional currency conversion. When setting up a new contract, consider including onboarding steps to enable crypto payments so both parties can benefit from these cutting-edge capabilities.

Digital wallets

Digital wallets allow you to send electronic payments through platform-managed accounts on closed network rails. They’re typically fast, convenient, and come with transparent fees. And, using the Slash API, they can be added to the Slash dashboard where they’re automatically included in your company’s cash flow data. The downside of digital wallets is that they do not operate in every country, and withdrawals can be delayed or restricted by platform limits or account freezes. Common providers include PayPal, Wise, Revolut, and Payoneer.

Manage international contractor payments with Slash

Hiring international contractors can seem complex, but the right payment platform can make it seamless. Slash is an all-in-one business banking and expense management solution designed for global operations. It helps you minimize transfer fees, send payments quickly, and automate every step of your workflow.

With Slash, you get access to global banking through the SWIFT network, enabling direct account transfers to eligible banks in more than 160 countries. Instead of manually managing payment details, Slash lets you schedule, automate, and customize recurring transfers. Or, instead, you can make payments using the held USD-pegged stablecoins in your Slash account. Regardless of which method you choose, each payment to your contractor is automatically recorded, organized, and displayed in your Slash dashboard.

Slash offers more than just streamlined global payments:

• With the Slash Visa® Platinum Card, businesses can earn up to 2% cash back on purchases and issue unlimited virtual cards with customizable spending limits, category restrictions, and real-time tracking.
• The Slash Global USD Account enables non-U.S. entities to hold and transact in USD-pegged stablecoins, allowing global businesses to make dollar-to-dollar transfers without traditional FX fees or conversion delays.
• For companies managing multiple subsidiaries or markets, multi-entity support lets you consolidate accounts payable, receivable, and invoice management directly within the Slash dashboard, giving you a unified, real-time view of all your finances.
• Integrated accounting with QuickBooks or Xero can streamline your reconciliation, compliance checks, and invoice management.

Take your business global with Slash. Visit slash.com to learn more.

Frequently asked questions

What are the misclassification risks for contractors?

Misclassification occurs when a worker is labeled as an independent contractor even though, under local labor laws, they meet the criteria to be considered an employee. This can lead to serious consequences for your company, including fines, back taxes, legal action.

What to consider before hiring international contractors?

Before entering an agreement with an international contractor, evaluate your company’s IP protection needs, payment and banking options, and data security policies. Make sure you conduct a detailed review of labor, tax, and employment laws in both your country and the contractor’s home country to ensure compliance.

Which payment method is most reliable for cross-border payments?

There’s no single payment method that’s universally the “most reliable” for international transfers—it can vary depending on your business’s security measures, transaction volume, and location. For larger or recurring transactions, platforms like Slash can provide added reliability by integrating global banking, compliance checks, and automated payment tracking.