How to hire international contractors

The global talent pool has experienced consistent growth since the COVID pandemic of the 2000s. Despite “return-to-office” orders from several major companies, the data shows that freelance work is here to stay:

Freelancers in the global market, 2020-2025 (est)

(These figures are assumed in a general sense from various reliable sources; actual numbers may vary.)

It’s more important now than ever to understand how to hire international contractors and take advantage of excellent talent. This is easier said than done, however, as the process of hiring international contractors varies significantly based on the country in which you are hiring. 

As a result, our team created a simple guide to provide business owners with an overview of how to hire international contractors.

How to hire international contractors, step-by-step

One of the central challenges of hiring an international contractor is the risk of misclassification; contractors are subject to different regulations for payment, benefits, and taxes, so there are significant penalties for inaccurately registering them as employees. 

This means before you get started, you should be sure the role fits the requirements of a contractor, not an employee. So how do you know the difference?

International Contractor vs Employee: A Primer

	Contractor	Employee
Control	The contractor determines where and how the work is completed	The employer determines where and how the work is completed
Training	No training is provided	The employer provides necessary training to complete the work
Profit/Loss	A contractor cannot make a profit or incur a loss from the project	An employee cannot make a profit or incur a loss from the project
Payment	Payment is project-based, typically in milestones. Paid via invoice	Payment is hourly or salaried, paid via check or direct deposit
Tools & Materials	The contractor provides any tools and materials to perform the work	The employer provides any tools and materials to perform the work

If you are still unsure if the worker would qualify as a contractor, consult our IRS 20-point checklist for a more detailed breakdown of the distinctions.

From here, there are some standard steps to hiring an independent contractor. We’ve covered these steps in further detail before, but here are the broad strokes: 

• Determine your budget. Freelancers are typically paid hourly, by project, or in milestones. Evaluate your needs and select the option that best fits your contract. 
• Vet Applicants. You will need to collect a slew of documents like State ID/passport, business registration, W-88EN form, and background check materials (check with the agency performing your background check) to verify the applicant’s credentials. 
•  Draft a contract. It’s here that your legal representatives are essential; contracts need to include the project scope, payment terms, IP ownership, exit agreements, tax filing responsibilities, NDA clauses, and any subsections about local law.
• Onboard the new hire. Set up payment and invoicing, approve security & access clearance, and manage the contractor’s preferred communication channels.

What do I need to legally hire international contractors?

The previous steps are standard, no matter where you are hiring intentional contractors. When hiring internationally, however, you will need to make a few additional considerations:

Currency conversion	Local entities
It’s probable, if not likely, that your contractor will require payment in a different currency than you currently use. A multi-currency wallet is ideal for navigating payments while reducing conversion fees, but it may be difficult to come by if you are hiring manually.	Unfortunately, hiring internationally may be subject to jurisdictional restrictions, limiting access to local talent. Additionally, companies hiring in a new country must stay compliant with local labor laws and classify talent correctly to operate with minimal risks.

Unless you plan on using some kind of contractor management system, this process gets very time-consuming, not to mention expensive. Between the massive amounts of filing government forms and the hefty currency conversion fees, companies going the manual route should expect several months and thousands of dollars before their contractor can begin working.

What is a safe way to pay international contractors?

When determining how to hire international contractors, you likely have several options in front of you. Contractor management platforms offer a greater degree of utility. However, different contractors may involve different levels of need.

The table below outlines the four central payment options for paying international contractors (e.g., contractor management platforms, freelancer marketplaces, bank transfers, and digital wallets), comparing them across several key tools for hiring and managing contracts.

Tool	Contractor Management Platform	Freelancer Marketplace	Digital Wallet	Bank Transfer
Multi-currency wallet	✅	❌	✅	❌
Localized payment	✅	✅	❌	✅
Bulk payments	✅	❌	✅	❌
Invoicing	✅	✅	❌	❌
Compliance Support	✅	✅	❌	❌
Tax form collection & reporting	✅	✅	✅	❌
Onboarding tools	✅	✅	❌	❌

As this table might suggest, each of these options is best for a specific use case: 

• Contractor management platforms are a reliable fit for companies seeking a comprehensive solution for international hiring. This could be companies seeking to shore up their compliance as they enter new markets for talent, smaller companies seeking to reduce costs by keeping staff to a minimum, or mid-market companies looking to expand their payment capabilities.

• Freelancer marketplaces work best for companies engaging with a few freelancers in a few countries. They provide compliance options to reduce misclassification risks, but they lack more robust payment options that support a larger workforce. 

• Digital wallets are ideal for companies with an in-house legal team to handle compliance, since these options are limited to payment and tax services alone. 

• Bank transfers are a good choice for companies handling one-off projects that don’t require consistent distribution. They eliminate monthly costs and reduce transaction fees to a single/limited payment.

Still have questions? 

If you are still unsure how to hire international contractors, we understand. The process is difficult because it is rarely, if ever, the same due to local labor laws. 

Working with a contractor management platform like Payoneer Workforce Management can help you manage those difficulties with an industry-leading AOR and reduce expenses while streamlining the international hiring process.

Request a demo today.

FAQs

1. How to legally hire international contractors?

To legally hire international contractors, draft a compliant contract that outlines the scope of work, payment terms, and intellectual property rights. Confirm their legal status in their country, collect the correct tax form (usually a W-8BEN), and ensure you’re not treating them like an employee. Using a contractor management platform can help with compliance and payments.

2. Do I need to issue a 1099 to a foreign contractor?

No, you do not need to issue a 1099 to a foreign contractor. Instead, you should collect Form W-8BEN from them, which confirms they are a non-U.S. person for tax purposes.

3. How do I pay an international contractor?

You can pay international contractors through secure methods, such as contractor management platforms like Payoneer Workforce Management, wire transfers, or global payment platforms like Payoneer. Choose a method that supports compliance, tracks payments, and handles currency conversion efficiently.