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Send payments to partners, contractors, and vendors in 200+ countries—without the complexity.
Hiring the best talent is no longer limited by geography, yet as you take on remote workers, paying international contractors becomes a complex web of dealing with different currencies, local rules, and payment methods.
From foreign exchange fees to failed transactions, these issues can strain your finance team and your contractor relationships.
This article breaks down a step-by-step framework for paying independent contractors compliantly and efficiently, and compares the best global payment methods to support your business as it scales.
Key Takeaways
- Local labour laws, taxes, and classification rules vary across jurisdictions and their understanding is vital to avoid penalties and manage compliance risks effectively.
- A structured four-step framework (onboard, agree, choose, execute) is the key to creating a scalable global payment process.
- Every international payment method has trade-offs. Comparing costs, speed, compliance features, and integration capabilities helps identify the right solution.
- Automation platforms like Tipalti streamline payments by reducing manual work, simplifying tax compliance, and integrating with accounting software.
How Local Laws Impact Global Payments
Working with contractors across borders may subject your business to different local laws and regulations, which you must ensure you comply with.
Avoiding the Contractor vs. Employee Trap
One of the biggest sorting risks you’ll face is when a self-employed contractor is seen as a full-time worker by local authorities in the contractor’s country of residence.
Many countries have strict employment laws that define who is a contractor and who is an employee, and misclassifying a worker can have severe consequences.
In the United Kingdom, for example, IR35 rules check the true nature of a person’s working relationship to determine if a contractor should be classified as an employee for tax purposes. An incorrect classification could leave your firm liable for additional taxes and penalties.
Considering an Employer of Record (EOR) as an Alternative
To avoid the complexities of managing contractors directly in certain countries, many businesses turn to an Employer of Record (EOR). An EOR serves as the legal employer in that country, handling compliance, benefits, and global payroll on your behalf.
This effectively classifies the worker as an employee of the EOR, reducing your misclassification risk. While this guide focuses on paying independent contractors you manage directly, understanding the EOR model is essential to a global workforce strategy.
Misclassification, tax complexity, and compliance risk are just the beginning. Many UK finance teams say their AP systems can’t keep up with the demands of a growing global workforce.
Pro Tip: 51% of UK finance teams say their AP systems can’t scale without major upgrades—a growing risk when managing international contractors.
For insights into how top performers are closing the compliance and scalability gap, explore the UK Finance Outlook report.
Meeting Local Tax Requirements
Beyond classification, you must manage tax information. While your self-employed contractor is responsible for their own taxes in their home country, collecting the right information from them is crucial for your own records and compliance with regulations, such as Making Tax Digital (MTD) for VAT.
For example, you will need to gather details such as their legal entity name, address, and local tax identifiers, including a VAT registration number. This ensures your payments are properly documented and auditable.
Understanding Permanent Establishment Risk
Finally, be aware of how your contractors represent your business. If a contractor in another country starts acting like an official agent for your company—for example, by signing contracts or using a company title—local authorities could decide you have a “Permanent Establishment.”
This decision can unexpectedly subject your business to local corporate taxes in that country, highlighting why a compliant payment process is your first line of defence.
How to Pay International Contractors: A 4-Step Framework
Building an efficient and compliant process for paying talent in various countries is key to managing your global workforce effectively. Before comparing payment tools, you need a solid operational framework. Following these four distinct steps ensures that you gather the right information, make strategic choices, and execute payments in a way that is scalable, secure, and professional.
Step 1: Onboard Contractors and Securely Gather Information
The foundation of any good payment process is a standardised and secure onboarding system. A self-service portal is the gold standard here, as it allows contractors to enter their own data, reducing the risk of manual entry errors. During this stage, you must collect the contractor’s legal name, address, local tax IDs, and validated banking details.
Step 2: Determine and Agree Upon Payment Details
After onboarding, use a formal contractor agreement to establish clear payment expectations—including schedule (e.g., bi-weekly, monthly, or milestone-based)—to avoid surprises later.
This is also where you make the strategic decision about the payment currency to avoid future hassle. Will you pay in your local currency (GBP), USD, or the local currency of your country? Agreeing on this upfront, along with who will bear the cost of any transaction fees or currency fluctuations, is essential for maintaining a transparent and trusting relationship.
Step 3: Choose the Right Payment Method for the Job
With all the information gathered, you can now choose the most suitable method for sending the funds. It is helpful to think of payment methods as different payment rails. The most common rail for international transfers is the SWIFT network, but it is often the slowest and most expensive option.
Modern alternatives, such as SEPA (Europe) or BACS (UK), offer faster and lower-cost transfers by bypassing the correspondent banking system. The most efficient strategy is to use a platform that provides access to these local rails wherever possible.
Step 4: Execute Payments and Ensure Ongoing Compliance
The final step is to execute the payment run and manage ongoing compliance. Before any payments are released, a critical check must be performed: screening all payees against global watchlists, such as government sanctions lists like the Office of Foreign Assets Control (OFAC). Sending a payment to a sanctioned individual, even by accident, can have serious legal and financial repercussions.
Once the payment is sent, providing automated status notifications to your contractors can drastically reduce enquiries. Finally, for your finance team, the process is not complete until the payment is reconciled in your accounting software or Enterprise Resource Planning (ERP) system, allowing you to close your books quickly.
Comparing the 7 Best Ways to Pay International Contractors from the UK
Choosing the right payment solution is a strategic decision that depends on your company’s size, the volume of payments you make, and your need for financial control. The table below compares some of the most common methods across the key features that matter most to a growing UK business.
| Method | Best For | Key Features | Integration | Automated Tax Compliance | Typical Fees |
|---|---|---|---|---|---|
| Tipalti | Scaling businesses needing end-to-end control | Self-service payee onboarding, mass payments, global payment rails | API and pre-built sync with major accounting software and ERPs | Yes | Platform fee with lower per-transaction costs |
| Wise | Small businesses focussed on low-cost transfers | Multi-currency account, mid-market exchange rates | Basic API connectivity | No | Transparent, low percentage-based transfer fee |
| PayPal | Businesses paying contractors already on the platform | Digital wallet, widely recognised brand | Limited integrations | No | Higher percentage-based fees plus currency conversion markups |
| Payoneer | Companies paying freelancers on gig economy platforms | Digital wallet, debit card, integration with platforms like Upwork | Limited to specific platform partners | No | Varies; can be free between accounts, with fees for card usage and withdrawals |
| Western Union | Payments to contractors with limited banking infrastructure | Global reach, extensive cash pickup network | None | No | High fees depending on funding method, destination, and receipt method |
| Revolut | UK start-ups and SMBs wanting an all-in-one finance app | Multi-currency accounts, local and international payments, corporate cards | Basic API and some accounting software integrations | No | Monthly fee plus variable transaction fees |
| International Wire Transfer | High-value, one-off payments | Universally accepted by most banks via the SWIFT network | None | No | High flat fees from sender, intermediary, and recipient banks |
The 7 Best Ways to Pay International Contractors
Paying foreign freelancers and independent contractors can be simple and cost-effective when you use the right global payment tools and follow best practices. With the gig economy expanding, it is more likely your company will need effective ways to pay these non-employees on time and with their preferred payment options.
1) Tipalti
For a growing business that needs to manage the entire global payout lifecycle, a finance automation platform like Tipalti is designed to solve these complex challenges at scale. It unifies the entire process—from payee onboarding and tax compliance to mass payments and reconciliation—into a single, controlled system.
How to Use Tipalti as a Payment Method
Tipalti is designed to automate the 4-step framework for paying contractors. The process begins with a self-service portal, where contractors onboard themselves and select from a list of locally available payment methods in their country. The platform features a global tax engine with built-in UK VAT number validation, enabling you to collect accurate details from payees in over 60 countries, thereby supporting compliance.
Once onboarded, payments are scheduled and executed in large batches. The system routes these mass payments through the most efficient rails available—like BACS, Faster Payments, or SEPA—and all payment details are reconciled back to your accounting software in real-time.
Tipalti Payment Methods
Tipalti offers a range of payment methods for international and cross-border transactions, including:
- Local bank transfers include SEPA transfers (Europe), BACS and Faster Payments (UK), as well as other local bank transfer options.
- Global ACH (International ACH or IACH).
- PayPal.
- Wire transfers.
This flexibility enables you to select the method that best suits the needs of local contractors, thereby enhancing their payment experience.
Tipalti Global Regulatory and Tax Compliance
Tipalti’s mass payments automation software uses thousands of rules to help ensure global regulatory compliance. Authorised by the Financial Conduct Authority (FCA) as an Electronic Money Institution, the platform screens every payment against sanctions lists to help prevent illicit transactions. It also helps you adhere to local and international tax laws by collecting and validating local tax IDs from payees.
Tipalti Customer Voice from the UK
Spitfire Audio, a UK-based music technology company, demonstrates the value of using Tipalti for global payouts:
It took us four to six weeks of solid work to do all the statements and payments, whereas now, it’s 30 minutes of solid work. We were spending a long time trying to get royalty payments done, and now we’re ahead.
— Shahid Khalid, Head of Finance, Spitfire Audio
Tipalti Key Strengths
- Automates global payments to 200+ countries and territories in 120+ currencies via 50+ methods—ideal for scale.
- Built-in compliance features include sanctions screening and collection of local tax details (including UK VAT numbers), providing robust record-keeping to align with MTD for VAT and DAC7.
- API and pre-built integrations for reconciliation (e.g., NetSuite, QuickBooks, Xero) help accelerate the financial close.
- Self-service onboarding and multilingual support can significantly reduce payee inquiries and errors.
Tipalti Considerations
- Requires integration with your ERP or accounting system for full automation benefits.
- Best suited for scaling businesses that pay a significant volume of contractors.
Streamline Contractor Payments at Global Scale
Manual processes create bottlenecks and compliance risk. Tipalti simplifies contractor onboarding, tax validation, and mass payouts in 200+ countries—cutting payment errors by up to 66% and accelerating financial close.
2) Wise (formerly Transferwise)
Wise has become a popular and cost-effective service for paying international contractors, especially for businesses focused on transparency and avoiding hidden bank fees.
How to Use Wise as a Payment Method
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 also use the SWIFT system to send payments to contractors in countries not covered by local transfers.
Wise Key Strengths
- Transparent pricing and foreign exchange (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 a clean interface and estimated arrival times provided upfront.
Wise Considerations
- No automated tax compliance features—collection of VAT numbers and other tax details must be handled manually.
- Lacks deep integration with most accounting systems, requiring manual reconciliation which increases the finance workload.
- Not built for high-volume, recurring contractor payments.
- Best for start-ups paying a handful of freelancers, not for scaling global operations.
3) PayPal
As one of the most widely recognised digital payment platforms, PayPal offers a convenient and fast online payment option for international contractors, particularly for businesses that pay individuals already active on the PayPal network.
How to Use PayPal as a Payment Method
To pay a contractor, both your business and the payee need a PayPal account. The contractor can send an invoice 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.
PayPal Key Strengths
- 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.
PayPal Considerations
- High FX fees and limited fee transparency—currency conversions often include undisclosed markups.
- No automated tax compliance or screening—requires manual work.
- No deep integration or reconciliation tools, making it difficult to scale or audit.
- Risk of account freezes or disputes with limited support, which is not ideal for B2B control and oversight.
4) Payoneer
Payoneer has carved out a niche as a global payments platform tailored for digital commerce and the gig economy. It is a particularly strong solution for businesses that hire and pay contractors, for example, through freelance marketplaces.
How to Use Payoneer as a Payment Method
You can pay your contractors either directly through 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 or access via a Payoneer-issued prepaid debit card.
Payoneer Key Strengths
- Integrated with platforms like Upwork, Fiverr, and Airbnb for seamless freelancer payouts.
- Digital wallet with prepaid card access means no local bank account is required for recipients in some cases.
- Multiple withdrawal options, including bank transfer, ATM, or mobile wallet.
Payoneer Considerations
- Not a complete payables solution—lacks support for off-platform contractors, deep compliance checks, and reconciliation.
- No tax automation features—critical compliance responsibilities are left to your finance team.
- Lacks connectivity with most ERP or finance systems, meaning all reconciliation must be done manually.
- Best used as a supplemental tool, not for managing all payables at scale.
5) Western Union
Western Union is one of the oldest and most recognised names in international money transfers. Its business solutions offer a legacy option for paying international contractors, particularly in regions with less developed banking infrastructure.
How to Use Western Union as a Payment Method
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.
Western Union Key Strengths
- Extensive global reach in 200+ countries and territories and 130+ currencies.
- A cash pickup network is ideal for paying contractors in areas with limited banking access.
- An online business portal is available for some business use cases.
Western Union Considerations
- High fees and FX markups.
- No accounting system integration or automation, so payments must be tracked and reconciled manually.
- Lacks the tax and compliance tools needed for a regulated, audit-ready business operation.
- Best for specific edge cases only, not for regular use in a finance-led payables process.
6) Revolut
Revolut Business is a popular financial platform for UK start-ups and SMBs, offering an all-in-one solution for domestic and international payments.
How to Use Revolut as a Payment Method
With a Revolut Business account, users can hold multiple currencies and pay contractors in over 100 countries. Payments can be executed directly from the Revolut web or mobile app.
Revolut Key Strengths
- Strong multi-currency accounts make it easy to hold and manage funds.
- User-friendly interface with good mobile functionality.
- Offers a suite of business tools, including corporate cards and expense management.
Revolut Considerations
- Lacks automated tax compliance and self-service payee onboarding.
- Has faced a high volume of customer complaints filed with the Financial Ombudsman Service (FOS), with some reports highlighting issues related to account stability and fraud handling.
- Integrations with accounting software can be basic, often requiring manual reconciliation.
- Primarily designed for SMBs and may not scale for high-volume payment operations.
7) International Wire Transfer
An international wire transfer is a traditional bank-to-bank method for sending money overseas using the SWIFT network. It allows you to send a payment from your business account directly to your contractor’s bank account.
How to Use an International Wire Transfer
To initiate a wire transfer, your team must collect specific banking details from the contractor, including their account number and their bank’s SWIFT/BIC code. These details are then provided to your bank to execute the transfer.
International Wire Transfer Key Strengths
- 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 are required as it is handled directly via your bank.
International Wire Transfer Considerations
- Slow and expensive—fees can be high for each transaction.
- High risk of error due to manual data entry.
- No tax compliance automation or checks.
- Not scalable—every wire requires a separate setup and reconciliation.
Smarter Global Payments Start Here
Relying on manual processes to pay international contractors is not scalable. As your firm grows, this approach eventually leads to payment errors, compliance risks, and wasted time for your finance team.
A unified platform is the logical solution. Tipalti’s Mass Payment solution automates the entire contractor payment process—from onboarding and tax compliance to mass payments and reconciliation.
Make Global Contractor Payments 80% More Efficient
Manual payouts slow down your financial close and frustrate your team. Tipalti automates the entire contractor payment process across more than 200 countries and territories, helping reduce payment errors by 66%.
Paying International Contractors FAQs
How to pay international contractors from the UK?
Follow these four key steps: securely onboard contractors and collect their tax and banking details; establish clear payment terms and currency in a formal contract; select a cost-effective method, such as local payment rails (e.g., SEPA); and execute payments with compliance checks and reconciliation.
Does IR35 apply to overseas contractors?
Yes, IR35 rules can apply to overseas contractors if the hiring UK business is a medium or large-sized private sector entity. The responsibility for determining the contractor’s employment status falls on the UK client. If the contractor is deemed an employee under IR35, the client is responsible for deducting income tax and National Insurance contributions.
Which platform offers the best way to pay international contractors?
It all depends; for start-ups with a few contractors, Wise offers a straightforward, low-cost solution. For businesses needing to pay hundreds of contractors globally, a mass payments automation platform like Tipalti may be the better option, as it offers self-service onboarding, automated tax compliance support, and a wide range of payment methods to handle payments at scale.
Can a foreign contractor work in the UK without a work visa?
Of course, a foreign contractor can work remotely for a UK company from their home country without needing a UK work visa. However, if they intend to undertake physical work within the UK, even for a short period, they may need to obtain the appropriate visa or work permit, depending on their nationality and the nature of the work.
