How to Pay International Contractors: Best Methods Explained

Tipalti is designed to automate the 4-step framework for paying contractors. The process begins with a self-service portal, where contractors onboard themselves, select from a list of locally available payment methods in their country, and are guided through a KPMG-certified digital process to complete the correct W-8 or W-9 tax forms.

Once onboarded, invoices are processed, approved, and scheduled for payment in large batches. The system then executes these mass payments through the most efficient payment rails, and all payment details are reconciled back to your ERP in real-time, giving you a continuously accurate picture of your cash flow and spend.

Tipalti offers a range of international and cross-border payment methods, including:

• Local bank transfers: SEPA payments (Europe), BACS payments (UK), EFT payments (Canada), and other bank transfers via local networks
• Global ACH, also known as International ACH or IACH
• PayPal: payments to PayPal eWallets
• Wire transfer: SWIFT payments

Domestic payment methods in the US include ACH and paper checks.

Global ACH offers a cost-effective way to send payments that function like local bank transfers in regions such as Europe’s 36 SEPA member countries. While international wire transfers are an option for reaching almost any country, Tipalti helps manage their higher costs. This option enables contractors to choose the method that best suits their needs, enhancing their payment experience.

Tipalti’s mass payments automation software uses thousands of rules to ensure global regulatory compliance. It screens every payment against OFAC and other international sanctions lists to prevent illicit transactions. The platform also helps you adhere to local and international tax laws, including any required VAT and payout taxes.

By guiding foreign contractors to submit the correct W-8 tax forms through the portal, Tipalti helps you achieve tax compliance. The system tracks payments for year-end IRS Form 1099 or 1042-S tax reporting and calculates any required tax withholding.

The Art of Problem Solving is an educational company offering online courses and multiple physical locations for classes. A case study from Art of Problem Solving, a Tipalti customer since 2020, demonstrates the value of using the Tipalti AP automation add-on app and mass payments software, integrated with their ERP system/accounting software, for making global contractor payouts.

The Art of Problem Solving used Tipalti automation software to:

• Save five days by switching from manual to automated contractor payment processes
• Speed their monthly close by 20 days
• Gain tax compliance through self-service onboarding of contractors and partners (and Tipalti 1099 payment tracking and 1099 reporting)

Our monthly close was slow because we couldn’t record contractor expenses until we could figure out the payments. That was a 20-day process. At the same time, if we wanted to offboard a contractor, there wasn’t a good way to ensure they didn’t submit and get paid. Now, with Tipalti, payments flow smoothly. It took four to five business days for one person to take care of all the contractor payments. And now it takes me an hour.

—Jessica Hardy, Art of Problem Solving, VP of Finance

• Automates global payments to 200+ countries in 120+ currencies via 50+ methods — ideal for scale.
• Built-in compliance: OFAC screening, W-8BEN validation, DAC7, and 1099/1042-S tax prep.
• ERP-integrated reconciliation (e.g., NetSuite, QuickBooks) can reduce the month-end close by up to 25%.
• Self-service onboarding and multilingual support cut payee inquiries and errors by up to 66%.

• Requires integration with your ERP or accounting system (e.g., NetSuite, Xero) for full automation benefits.
• Best suited for scaling businesses — may be more complex than needed for small teams paying less than five contractors.

Tipalti becomes especially valuable when manual processes begin to create bottlenecks for your finance team. As your contractor network expands and payments span multiple countries, currencies, and tax jurisdictions, maintaining accuracy and compliance becomes increasingly challenging.

If your team is spending too much time onboarding contractors, tracking payment statuses, or reconciling data across systems, Tipalti can simplify and secure these workflows. With automation, built-in compliance checks, and real-time visibility, it helps reduce risk, improve accuracy, and free up your team to focus on more strategic work.

To pay your international contractors, you use the Wise Business account. This provides a multi-currency digital wallet, enabling you to fund payments that Wise then sends out, typically through local payment rails in the recipient’s country. 

You can still use the SWIFT system to send payments to contractors in countries not covered by local transfers.

• Transparent pricing and FX rates using mid-market rates with low transfer fees.
• Multi-currency wallet makes it easy to pay contractors in their local currency.
• Good user experience with clean UX and expected arrival times provided upfront.

• No tax compliance automation — W-8BEN collection and OFAC checks must be handled manually.
• No ERP or accounting system integration — requires manual reconciliation, which increases the finance workload.
• Lacks bulk payment capabilities — not built for high-volume, recurring contractor payments.
• Best for startups paying a handful of freelancers — not scalable for global operations.

The best time to use Wise is when you are a startup or small business managing a limited number of contractors, and your primary goal is to minimize the cost of each individual transaction. It is an excellent tool for simple, direct payments where the manual workload of compliance and reconciliation is still manageable for your team.

To pay a contractor, both your business and the payee need a PayPal Business account. The contractor can initiate the payment by creating and sending an invoice directly through the PayPal app, which you can then pay using your PayPal balance, a linked bank account, or a credit card. 

For businesses with recurring payment needs, PayPal’s Mass Payments feature allows you to send funds to multiple recipients simultaneously.

• Instant payments to global freelancers already using PayPal.
• Built-in invoicing tools and simple setup reduce friction for small vendor engagements.
• A mass payout option is available for basic bulk payments.

• High FX fees and limited fee transparency — currency conversions include steep, undisclosed markups.
• No tax form automation or compliance screening — requires manual work to stay compliant.
• No ERP integration or payment reconciliation tools — difficult to scale or audit.
• Risk of account freezes or disputes with little support — not ideal for B2B control and oversight.

The best time to use PayPal is when you need to make a quick, one-off payment to a contractor who already uses the platform, and when speed is a higher priority than minimizing transaction costs and FX fees. It can be a useful tool for ad-hoc payments, but it is not built to serve as the core of a scalable, compliant global payables process.

You can pay your contractors either directly through the freelancer platforms that have integrated Payoneer or by sending funds from your business’s Payoneer account to theirs. The contractor receives the payment in their Payoneer account, which they can then withdraw to a local bank account in one of over 150 currencies or access via a Payoneer-issued prepaid debit card.

• Integrated with platforms like Upwork, Fiverr, and Airbnb for seamless freelancer payouts.
• Digital wallet with prepaid card access — no local bank account required for recipients.
• Multiple withdrawal options, including bank transfer, ATM, or mobile wallet.

• Not a full AP solution — lacks support for off-platform contractors, invoice processing, and compliance checks.
• No tax automation or W-8/W-9 support — critical compliance responsibilities left to the finance team.
• No ERP or finance system connectivity — all reconciliation must be done manually.
• Best as a supplemental tool — not suitable for managing payables at scale.

The best time to use Payoneer is when a large portion of your contractor workforce is already active on its partner platforms, such as Upwork or Fiverr. It serves as an efficient bridge within that ecosystem. 

However, for a business seeking to establish a single, unified process for paying all its international vendors and contractors, it lacks the end-to-end functionality necessary for scale.

Western Union Business Solutions allows you to initiate payments through its online platform. While you can send funds directly to a contractor’s bank account, the platform’s key differentiator is its extensive network of physical agent locations worldwide. This allows a contractor to pick up their payment in cash, which can be a critical feature in certain countries.

• Global reach in 200+ countries and 130+ currencies.
• A cash pickup network is ideal for paying contractors in areas with limited banking infrastructure.
• An online business portal is available for B2B use cases.

• High fees and FX markups — can exceed $50 per payment, depending on location and funding method.
• No ERP integration or automation — payments must be tracked and reconciled manually.
• No tax or compliance tools — not suitable for regulated or audit-ready B2B operations.
• Best for edge cases only — not recommended for regular use in a finance-led AP process.

The best time to consider Western Union is for the rare but necessary scenario where you must pay a contractor who does not have access to a bank account and requires a physical cash pickup. For regular, bank-to-bank B2B payments, more modern and cost-effective digital solutions are better suited for business needs.

MoneyGram allows you to send payments that can be delivered to a contractor’s bank account, mobile wallet, or, most notably, picked up as cash at one of its many agent locations. The process is initiated through their business solutions portal.

• Cash pickup and mobile wallet support for contractors without access to digital banking.
• Presence in underserved regions where other methods fail.
• Fraud/AML features for basic compliance.

• Manual process with no bulk payment support — cannot scale to hundreds of contractors.
• No tax compliance automation or OFAC screening.
• No accounting system integration — creates reconciliation challenges for finance.
• High costs due to fees, FX markup, and payout method.
• Use only for rare payment scenarios where no digital alternative exists.

The best time to use MoneyGram is for the specific edge case where a contractor requires a cash payment and other digital methods are not viable. It is not a primary business solution for building a scalable, efficient, and compliant process for all contractor payments.

To initiate a wire, your AP team must first collect precise banking information from the contractor, including their full name, address, bank name, account number, and the bank’s unique SWIFT/BIC code. 

You then provide these details to your bank, either through its online portal or in person, to execute the transfer. The payment then travels through a network of correspondent or intermediary banks before arriving at its final destination.

• Bank-to-bank transfers via SWIFT are universally accepted and secure.
• Good for high-value, one-off transactions with trusted partners.
• No third-party platforms required — handled directly via bank.

• Slow and expensive — typical fees exceed $30–$50 per transaction.
• High error risk due to manual data entry (e.g., SWIFT code typos).
• No tax form automation or compliance checks — must be handled separately.
• Not scalable — every wire requires a separate setup, confirmation, and reconciliation.

The best time to use a direct wire transfer is when you are making a substantial, non-recurring payment to a high-value partner where the high cost is justifiable for the perceived security. For the day-to-day work of paying a global team of contractors, it is an inefficient and costly method that creates significant manual work for your finance team.