International contractor payouts without an EOR: Practical guide to multi-currency payments

Paying international contractors doesn't require an EOR. You can pay contractors directly in 70+ currencies via Wise, PayPal, or Payoneer, handle foreign exchange conversion, track confirmations, and maintain a complete audit trail—all without per-seat fees or per-payout charges.

This guide covers the practical aspects of international contractor payments: currencies and FX, transfer timing, proof and confirmations, tax documentation, and risk mitigation. It's designed for businesses paying contractors in multiple countries.

Why EORs aren't necessary for contractor payments

First, a critical clarification: contractors aren't on payroll. Payroll is for W-2 employees—people you employ directly, withhold taxes from, and provide benefits to. Contractors are independent businesses you pay for services.

When people say "international contractor payroll," they usually mean "paying international contractors regularly." The process is simpler than payroll: you pay invoices, track payments, and maintain records. There's no tax withholding, no benefits administration, no employment compliance.

This is why you don't need an EOR to pay contractors. EORs employ people on your behalf (making them W-2 employees). If you're working with true independent contractors, you can pay them directly and save thousands per year in EOR fees.

Managing currencies and FX conversion

When paying international contractors, you'll deal with multiple currencies. Here's how to handle it effectively:

Pay in the contractor's local currency. Contractors prefer to receive payment in their local currency (EUR, GBP, INR, AUD, etc.) rather than USD. This eliminates foreign exchange risk for them and ensures they receive the full agreed amount without needing to convert themselves.

Use Wise for FX conversion. Wise converts at mid-market rates (the real exchange rate you see on Google or XE.com) with low fees (0.35-1%). This is significantly cheaper than PayPal (3-5% markup on FX) or wire transfers (2-4% FX markup).

Example cost comparison: You're paying a contractor in Poland €3,000 per month. With Wise, you pay approximately $3,200 USD (including 0.5% FX fee). With PayPal, you'd pay approximately $3,300 USD (including 3% FX markup). That's $100 per month or $1,200 per year in unnecessary fees per contractor.

Lock in rates for budgeting. If you're paying contractors monthly, you can use Wise's rate alerts or forward contracts to lock in FX rates. This protects you from currency fluctuations and makes budgeting easier. Forward contracts let you lock in a rate for future payment, reducing uncertainty.

Choosing payment providers for international transfers

Different providers serve different situations:

Wise is best for most international contractors. It supports 70+ currencies, charges low fees (0.35-1%), completes transfers in 1-3 business days, and shows real mid-market exchange rates. It's the most cost-effective option for regular international payments.

PayPal works for contractors who prefer PayPal. It supports 25+ currencies, charges higher fees (2.9% + $0.30 domestic, 4.4% + fixed fee international), provides instant or next-day transfers, but adds a 3-5% FX markup. It's convenient but expensive for currency conversion.

Payoneer is popular for contractors in emerging markets. It supports 150+ countries, charges competitive fees (1-3%), takes 2-5 days for transfers, and works well where Wise isn't available. It's good for batch payments to many contractors.

Wire transfers are a last resort. They support all currencies, cost $15-50 plus a 2-4% FX markup, take 3-7 days (going through multiple intermediary banks), and are expensive and slow. Use wires only for large payments ($10,000+) where the percentage savings justify the flat fee.

For most international contractors, Wise offers the best combination of low fees, reasonable speed, and currency support.

Understanding transfer timing and managing expectations

International payments take longer than domestic payments. Set proper expectations with contractors about timing:

Wise transfers: 1-3 business days for most currencies. Some currencies like INR (India) or BRL (Brazil) may take longer due to local banking systems. Wise shows estimated arrival time before you confirm the transfer, so you know exactly when to expect delivery.

PayPal transfers: Instant to 1 business day if the contractor has a PayPal account. If they need to withdraw to a bank account, add 1-3 business days for the bank to process.

Payoneer transfers: 2-5 business days depending on destination country and local banking. Contractors receive funds in their Payoneer account, then can withdraw to their local bank.

Wire transfers: 3-7 business days, sometimes longer. Wires pass through multiple intermediary banks, and each adds 1-2 days processing time. This is why wires are slow.

Always notify contractors when you send payment and provide the expected arrival date based on your payment method. This prevents confusion and reduces "where's my payment?" inquiries.

Maintaining proof of payment

For international payments, proof of payment is critical for audits and dispute resolution. Collect these four pieces:

Transaction ID: Every payment provider gives you a unique transaction ID when you send payment. Save this immediately. It's your primary proof that payment was sent and the provider's reference for tracking.

Payment receipt: Download a PDF receipt from your payment provider showing transaction details (date, amount, recipient, fees charged, exchange rate applied). Attach this to the contractor's record for permanent documentation.

Contractor confirmation: Ask contractors to confirm receipt once funds arrive. Record the confirmation date and method (email reply, platform message, verbal confirmation). This proves the contractor actually received the payment.

Bank statement: Your bank or payment provider statement shows the debit from your account. This is secondary proof that payment was sent from your account.

With these four pieces of documentation, you have a complete audit trail: proof you sent payment, proof the contractor received it, documentation of the amount and date, and the exchange rate applied.

Tax documentation for international contractors

International contractors handle their own taxes in their country of residence. Your tax responsibilities are minimal:

Collect W-8BEN form. For U.S. tax purposes, collect a W-8BEN (Certificate of Foreign Status) from each international contractor. This documents their foreign status and exempts them from U.S. tax withholding. Store it with their contract for your records.

No 1099-NEC required. You don't issue 1099-NEC forms to foreign contractors. 1099-NEC forms are only for U.S. contractors paid $600+ per year. Foreign contractors don't receive 1099s because they're not subject to U.S. employment tax reporting.

No tax withholding. You don't withhold taxes from payments to foreign contractors. They're responsible for paying taxes in their own country of residence based on their local tax rules.

Contractor requests for documentation. If contractors need documentation for their own tax purposes, they can use your payment receipts and invoices. Some contractors may request a letter confirming total payments for the year—this is optional but helpful and takes minimal time to provide.

Always consult a tax advisor for specific situations, especially if you're paying contractors in countries with U.S. tax treaties or special requirements.

Managing risks in international payments

Risk: Currency fluctuations. Mitigation: Pay in the contractor's local currency to eliminate FX risk for them. Use Wise's rate alerts or forward contracts to lock in rates for your budgeting.

Risk: Payment delays. Mitigation: Use Wise for faster transfers (1-3 days versus 3-7 for wires). Notify contractors of expected arrival dates and follow up if payment doesn't arrive within the expected window.

Risk: Incorrect bank details. Mitigation: Verify contractor bank details before the first payment. Send a small test payment ($1-10) to confirm details are correct before sending the full contracted amount.

Risk: Payment disputes. Mitigation: Maintain detailed records of invoices, approved amounts, transaction IDs, and confirmations. If a contractor claims non-payment, you can provide proof with transaction details showing payment was sent.

Risk: Misclassification. Mitigation: Ensure contractors are truly independent—they control how work is done, use their own tools, work for multiple clients. Use clear contracts with scopes of work, not employment terms. This prevents labor law issues.

Cost comparison: Direct payments vs EOR

Let's compare the cost of paying international contractors directly versus using an EOR:

For 5 contractors paid $3,000 per month each: Direct payments via Wise cost ~$600 per year in fees. An EOR costs $2,940-5,940 per year. Annual savings: $2,340-5,340.

For 10 contractors paid $2,500 per month each: Direct payments cost ~$1,200 per year. An EOR costs $5,880-11,880 per year. Annual savings: $4,680-10,680.

For 20 contractors paid $2,000 per month each: Direct payments cost ~$2,400 per year. An EOR costs $11,760-23,760 per year. Annual savings: $9,360-21,360.

Direct payments via Wise cost a fraction of EOR fees. For 10 contractors, you save $5,000-10,000 per year by managing payments directly. That's enough to hire another contractor or invest in better tools.

Setting up your payment system

Establish a repeatable process for international payments:

Step 1: Collect payment details during onboarding. For each international contractor, collect their bank name, account number, IBAN or SWIFT code, and preferred currency. Verify details before the first payment.

Step 2: Set payment schedules. Define when you'll pay (monthly on the 28th, upon milestone completion, etc.) and communicate this in the contract.

Step 3: Collect W-8BEN forms. Get W-8BEN forms before the first payment to document their foreign status.

Step 4: Process payments systematically. Collect invoices, review and approve, send payments through Wise or your chosen provider, download receipts, and ask for confirmations.

Step 5: Keep organized records. Store contracts, tax forms, payment details, receipts, and confirmations in one location (encrypted cloud storage or contractor management software).

Step 6: Reconcile monthly. Compare your payment records with your bank and payment provider statements to catch errors early.

The bottom line

Paying international contractors doesn't require an EOR. You can pay contractors directly in 70+ currencies via Wise, handle foreign exchange conversion at low rates, track confirmations, and maintain a complete audit trail—all while saving thousands per year in EOR fees.

The key is using the right tools: Wise for low-cost multi-currency payments, proper documentation (W-8BEN forms, payment receipts, contractor confirmations), and a systematic process.

For businesses paying contractors in multiple countries, direct payments are simpler, cheaper, and give you more control than using an EOR. You maintain direct relationships, use your own payment accounts, avoid per-seat fees, and keep more money in your business.

The investment required is time to set up the system initially. Once established, the process is straightforward and scales easily from one contractor to fifty.