The freelance workforce continues to surge. There are already 1.57 billion freelancers operating globally, which adds up to 46.6% of workers. This shift in working practices opens up a new way to flexibly capitalize on essential skill sets. 

There’s no settling for a generalist ‘jack of all trades’ in the local area anymore. Instead organizations now have unprecedented access to specialized talent worldwide. It allows them to tap into resources and skills as and when they are needed, without geographical constraints. 

But a problem still exists. While communication and access to people anywhere in the world is easy, paying international freelancers still involves complex regulations and currency conversion. 

Businesses that aren't adapting to take advantage of this flexibility and global talent risk falling behind both in the quality of their team and potential cost advantages.

Without reliable global payment solutions, freelancers might choose to work with clients who are able to pay faster and more reliably… So efficiently paying freelancers abroad is essential to keeping hold of the best workers.

The global freelance landscape

With the ‘gig’ economy growing 3x faster than the traditional job market, the pool of freelance talent available is expanding rapidly. As more businesses hire these skilled workers overseas, it further fuels the engine as growing numbers of employed people jump to become specialized freelancers. It’s what you could describe as a ‘freelancing flywheel’ effect.

For individuals, it provides an attractive, flexible lifestyle and for businesses, it offers the ability to scale quickly in a cost effective way.

Understanding the skills that are in demand helps businesses target the right freelancers to stay competitive in their industries. For example, tech, digital marketing, content creation and design are the most sought after skills worldwide. 

This demand also needs to be balanced with regional differences. Western Europe, North America and Australia tend to command higher prices and also come with stricter employment regulations. Something that makes hiring freelancers in these countries slightly less advantageous, although cultural fit with your organisation might be closer. 

On the other hand, Eastern Europe and Asia can offer more competitive rates, especially when it comes to specialized tech talent.

Of course, moving across continents and cultures creates several payment issues. Insight into the regional differences is important for smarter budgeting and payment timelines, while also avoiding any regulatory surprises.

How to pay freelancers overseas: Top payment methods

If you’re keen to work out how to pay someone internationally, then read this next section closely. We’ll walk you through the best platforms to pay freelancers in other countries, including the fees, pros and cons of each method.

Acctual

Acctual is an all in one cross border payment solution that supports fiat and stablecoin payments. It enables businesses to pay freelancers overseas using multiple currencies whilst staying compliant and minimizing costs.

The inbuilt invoicing and payments features allow businesses to choose the currency they want to pay in and freelancers to choose the currency they receive payment in or vice versa. For example, a business in the US could pay in US dollars and a freelancer in Nigeria could receive payment in USDC stablecoin.

Not only can both freelancers and businesses use Acctual to create and send invoices, businesses can also pay bills directly on the platform. It provides unrivalled flexibility to pay bills via a crypto wallet or a bank account, all without the hassle of managing multi currency accounts like many of the other options. 

The other key element setting Acctual apart is its global reach. Where other digital payment platforms fall down, it delivers reach into a wider choice of emerging global markets. A factor which opens up an even wider pool of freelancers that many of your competition won’t be able to access with popular platforms like PayPal.

PayPal

PayPal is a widely used and fast payment method that is a well known brand leader for digital payments. While it is convenient, relying solely on PayPal can exclude many overseas freelance payments due to its unsupported regions.

For example, it's unavailable for many countries in Africa and Asia, such as Bangladesh, Pakistan, Turkey and even European hubs like Monaco. In addition to this, fees can be very high with PayPal, with businesses having to pay transaction fees and markups on market spreads for transferring between currencies.

Another restriction is that both parties need valid PayPal accounts to send and receive payments. And freelancers often get frustrated as fees on their side end up higher once local currency conversion rates are taken into account. So, while convenient and well tested, fees and geographical restrictions make it problematic

Wise

Wise, which was previously known as TransferWise, is another popular way of paying freelancers overseas. It's gained traction over the last few years with its low fees, real exchange rates and a multi currency accounts feature.

On the platform, you can send money to more than 60 countries at a real time exchange rate. This helps avoid inflated fees like you might find on PayPal and its multi currency account feature is like getting paid into a bank account with your local currency.

While great for freelancers, it presents extra headaches for businesses as it requires close management of multi currency accounts. If your freelancers are across a number of different regions, you might need to start moving money across these different currencies, opening more and more accounts.

This can create a maze of payment tracking and currency conversion for your accounts team. Adding to this, there are several regions where Wise isn't supported, again restricting access to talent. For example, there are restrictions on Russia, Ukraine regions, Israel and Indonesia, among others.

Payoneer

Payoneer helps you reach many popular developing countries with support for multiple currencies. This can be a way to expand your pool of freelancers to regions with limited banking options, giving you an advantage over competitors in better rates and different talent pools.

It's become a very popular platform with freelancers, thanks to its streamlined and cost effective way of managing international payments. Payoneer also helps reduce some of the headaches of managing multi currency accounts, with currency exchanges handled automatically on the platform. So freelancers can receive payments in their preferred currency and businesses can pay in their own currency.

But like many of these centralized platforms, it has the potential for higher fees and issues with payment verification. Some freelancers have reported problems with payments getting stuck, blocked or even with minimum withdrawal limits and its customer service has often been criticized when things go wrong.

Cryptocurrency and alternative methods

Stablecoins for global payments, such as USDC and USDT, have skyrocketed in popularity in recent years. These types of stablecoins are often pegged one to one to the US dollar, meaning one USDC is always worth one dollar. If you’re wondering how to pay someone internationally without fees, then crypto is your nearest zero fee solution. 

Because cryptocurrencies like these are peer to peer in design, using blockchain to make them completely decentralized, it allows borderless payments to be made almost instantly with minimum fees and volatility.

With no need for a middleman or third party processing, these crypto payments can bypass the delays of traditional banking or the high fees of digital payment platforms. For freelancers in developing countries, it can offer access to a financial system they might otherwise be restricted from.

Traditional banking methods

Traditional payment methods using the established banking rails, such as bank transfers and wire transfers, might be comfortable, reliable and familiar, but for international payments, they're slow, expensive and can be inaccessible to many people.

Methods like wire transfers can be critically expensive for individual freelancers and businesses. Fees can jump up as high as $50 and currency conversion rates can cost both parties. Adding to this, payment can take days if not weeks.

While digital payment solutions and information transfer are almost instant these days, traditional banking rails are still cumbersome and antiquated. It can reflect poorly on your company, alienating freelancers, making your brand feel unmodern and slow, plus increasing the admin burden on your team.

Freelancer marketplace payment systems

Freelancer marketplaces like Upwork and Fiverr have built in payment systems. This is reassuring for both parties as money can be held in escrow during a project. As a business, you can fund projects by milestone or task and that money is only released when you approve the work from the freelancer. Likewise, a freelancer can be sure that projects have been funded and the money is there to be paid once the project is successfully completed.

Now, while they clearly have their upsides in terms of guarantees and assurances for both parties, fees can be eye wateringly expensive. It's not uncommon for freelancers to have 10 to 20% of their payment swallowed up by a platform like Upwork.

Adding to this as a business, there will be fees associated for posting jobs and making payments, all of which reduce the budget you're able to pay to talent and the amount the freelancer receives for their work.

Financial and tax considerations when paying freelancers abroad

Along with working out how it's best to pay a freelancer overseas, there are several financial and tax considerations to take into account, from currency exchanges to compliance with local tax laws.

Many digital payment platforms allow you to use multi currency accounts. This means businesses can hold, send and receive funds in almost any currency. 

This, however, presents a new consideration for businesses. While you might be saving on transaction fees and currency exchanges, it means new systems and strategies need to be put in place to manage multi currency accounts. This not only means ensuring you hold funds in an advantageous currency but also needs to be factored into your accounting processes.

And what about tax obligations when paying freelancers abroad? For businesses, some countries require companies to hold a certain percentage of payments for tax purposes. Take the US, for example, which requires a 30% withholding unless a tax treaty applies.

It's important for freelancers to provide official documents such as a 1099 or a W 8BEN to prove income and comply with their own tax authorities. Make mistakes with your tax reporting and payments in some jurisdictions and non compliance results in heavy fines or even frozen transactions. Not only does this hang regulatory penalties over your company, but it also directly impacts your relationship with freelancers if there are any mistakes.

Both multi currency and financial reporting require careful documentation, both for your internal accounting team and any external audits. Top digital payment platforms should automatically provide downloadable reports and transaction histories. This will make it easy to reconcile accounts and prepare tax reports.

Establishing effective payment processes

At the start of a relationship with a freelancer, it's important to outline the payment process and even include them in contract clauses. This will help to remove any hidden surprises or demands along the way.

Clearly outlining the payment currency can help both parties avoid confusion and prepare for unexpected conversion fees. Plus, agreeing on the payment method, such as bank transfers, PayPal or crypto, will make for smooth payments in the long run and ensure that freelancers have access to the relevant platforms or banks.

Payment schedules and structures should also be clearly outlined. If your business is new to hiring freelancers, then it's best practice to establish the timeline in which you pay freelancers. Having clear processes can help you show top freelancers that you're a professional organized company.

Before making any payments, make sure to implement payment verification steps. This includes adhering to AML and KYC rules. These often require verification of a freelancer's identity and bank account details before transferring funds.

Any payment platforms you use should have steps in place and checks against international lists for payments, such as Office for Foreign Assets Control (OFAC) and the United Nations Security Council, to ensure the geographical locations of your freelancers are compliant with international trade and financial regulations. 

Common challenges and how to overcome them

So, what are the biggest challenges that businesses face when paying freelancers overseas?

1. High transaction fees

International payments have to pass through different currencies, different payment processes and intermediary banks, so the fees can rack up quickly. As we've discussed, digital payment platforms can cost a lot of money in currency conversion spreads. Traditional banking systems are cumbersome and expensive and certain cryptocurrencies can be volatile.

Choosing a stable, efficient payment system can help reduce fees, allowing businesses to have more budget to spend and freelancers to enjoy higher returns for their work.

2. Payment delays

If payment practices and platforms are not established, then payment delays can frustrate freelancers. Avoiding payment methods such as traditional bank transfers can ensure payments are timely, helping to build trust and improve freelancer motivation.

Overall, using an efficient, quick payment method can help you retain and attract top freelancers and avoid your company gaining a reputation as a slow payer.

3. Compliance issues

The complex nature of cross border transactions means that compliance and geographical limitations can cause issues in payments. For example, hiring a freelancer in a country where your payment platform doesn't provide coverage is going to cause a real problem, particularly if the freelancer has already started work.

As a business, this might require you to open new accounts, adding further admin and financial tracking or open you up to legal risk as you find ways to try and pay freelancers in abnormal circumstances.

4. Banking limitations

In many developing countries, access to traditional banking features is limited. It's why digital platforms and alternative options like stablecoins are growing in popularity. The expense and access limitations of traditional banking methods just aren't attractive to freelancers accepting smaller payments. Using alternative platforms that allow you to easily switch between fiat and stablecoin currencies will expand your talent pool and give you an advantage in accessing talent 

Pay freelancers internationally with Acctual

Acctual is the best solution to pay international freelancers. Businesses can pay freelancers in other countries with less hassle and lower costs. As a business, you can pay in your preferred currency and the freelancer can choose to receive funds in their chosen format.

It means both parties get paid quickly and efficiently, making your business a preferred client for top freelancers. For example, as a business, you could choose to pay a freelancer in US dollars and a freelancer in a developing country could choose to receive funds in USDC stablecoin directly into their crypto wallet or vice versa.

Acctual also removes the stress of compliance, making sure your organization stays on the right side of regulations like AML and KYC. Plus, it integrates directly with your accounting and ERP systems to save time and reduce human error.

If you like the sound of that, then try Acctual today in less time than it takes to make a cup of coffee, so you can focus on growing your business with the help of the world's top freelancers rather than managing the headache of paying freelancers in other countries.