For a long time now, having overseas contractors fulfil certain roles has been a popular option for many businesses. In 2019 and beyond, this trend is going to continue as our world becomes more connected.
From administrative tasks to more complex projects such as web development or UX design, the benefits of hiring overseas contractors are clear. Businesses are saving money that can then be used elsewhere to drive more profit.
Is hiring an overseas contractor something you’re looking to do for your business? Or perhaps you’ve already hired an overseas contractor and want to know how to pay them accordingly?
If this sounds like you, then you’ve come to the right place.
In this article, we’re going to discuss everything you need to know about dealing with and paying overseas contractors.
Firstly, we’ll look at the cheapest way you can handle an invoice that requires you to make payment in a different currency.
Secondly, we’ll take a brief look at the important tax regulations you should be aware of, and show you where you can find all helpful resources around tax and paying overseas contractors.
And lastly, we’ll go over three important tips you can follow to get the most out of your overseas contractor.
Firstly, it’s important that we discuss the benefits of using a dedicated money transfer provider to pay your overseas contractors.
You might be thinking, why can’t I just use my bank for this?
After all, their service is convenient, right?
While the banks offer an easy option to pay invoices in a different currency, they certainly don’t provide the cheapest option. If you choose to pay your invoices with the banks, they will charge you more on the overall transaction in two ways.
Firstly, they will often charge you an unreasonably high transfer fee. This fee is to simply send the money, and if you’re looking to pay multiple overseas contractors regularly, these seemingly small fees add up fast.
Secondly, the banks will often charge you a 3 – 5 percent mark-up on the market mid-rate. Meaning you won’t be getting the live exchange rate you see on Google, instead you’ll be getting the exchange rate the banks choose to charge.
Once again, if you need to pay regular invoices to overseas contractors, or these invoices are for large sums, then you need to be careful because paying these invoices with the banks will be expensive.
Instead of using the banks, the majority of business that deal with overseas contractors use a dedicated money transfer service like BFX Money Transfer.
Doing so allows them to receive the cheapest exchange rate possible with cheaper transfer fees. Sometimes, this fee can be waived altogether.
An important part of paying an overseas contractor is understanding the tax regulations.
In Australia, if you deal with an overseas contractor for more than 60 days, you are obliged to pay certain taxes on the transaction. After this point, the location of your contractor is irrelevant, and you need to follow the Australian tax guidelines.
Another important regulation to consider is double-withholding tax agreements, otherwise known as tax treaties.
Knowing if the country your overseas contractor resides in has a double-withholding tax agreement with Australia – or not – is important because without a treaty in place, you will be forced to pay tax both here in Australia and overseas. All of a sudden, the cost of your project can sky-rocket.
Luckily, Australian has an agreement in place with over 40 different countries. This is great because it promotes growth across many different industries.
We could write a different article on the tax regulations when paying an overseas contractor alone, but for this article, we’ll only introduce the basics. While we’re here though, if you would like to see a blog on the topic let us know!
Here’s a list of three important resources from the ATO. Each link will help you learn about what you need to know around tax and overseas contractors.
In this part of the blog, we thought it would be useful to give you a few tips to maximise the value you get out of your working relationships with overseas contractors.
By now, you should have a solid understanding of the cheapest way to pay your overseas contractors and the various tax regulations that you need to be wary of.
At BFX Money Transfer, we work with hundreds of businesses that use overseas contractors to grow. Over the years, we’ve come to understand what’s been important to them when making sure they build successful relationships with their contractors.
To summarise what we’ve learnt from years of dealing with our clients’ international payments, we’ve highlighted three hot tips you can use when engaging overseas talent.
It seems simple, but this is where so many businesses go wrong. In a rush, they provide an unclear scope of work without clarifying the important milestones of the project.
In order to leverage overseas contractors, it’s important that you take the time to understand the project yourself and then provide a clear and detailed brief.
When writing the brief, it needs to be written in plain English, with little to no jargon, regardless of the experience of the person you’re dealing with. Even the best contractors can come unstuck with a poor brief, and in the end, no one wins.
Providing a clear brief pays.
Following on from having a clear brief, it’s important that we set realistic expectations for either party. Too often people see overseas contractors as cheap labour and expect outstanding results.
Thinking like this is isn’t productive. When you’re engaging with an overseas contractors, it’s always important to consider the viability of what you’re asking for, given the rate of pay you’re offering.
The age-old saying ‘you get what you pay for’ has never been more applicable as we enter the age of the gig economy.
Lastly, building genuine relationships with your overseas contractors can determine the quality of the output you receive from them. If you take the time to get to know them outside of the work you’re doing, you might just find that they will go the extra mile for you when the time comes.
Overseas contractors are employees of your business – same as the ones that work in your business day-to-day.
Overseas contractors grow your business
A money transfer provider is the cheapest way to pay overseas contractors
Tax regulation knowledge is vital
Set clear briefs and expectations of overseas contractors
Build genuine relationships with your overseas contractors
Throughout this article, we discovered that using overseas contractors is a trend that more and more businesses are following. The diverse pool of talented and cost-effective labour is a big draw-card towards helping businesses grow.
We established that using a dedicated money transfer provider such as BFX is the cheapest and easiest way to pay overseas contractors.
When dealing with an overseas contractor, understanding the various tax regulations is important to ensure your business is financially above-board with the ATO.
Lastly, based on the stories and information we’ve gained from hundreds of our clients, providing clear briefs with realistic expectations is important when getting the most out of your overseas contractors.
We hope that this article gave you a better understanding of how to pay your overseas contractors. If you have any pointers of your own, feel free to leave them in the comments below.
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