A guide to pay your remote worker or freelancer
The dynamics of remote work not only requires new digital tools so that both employer and employee can maintain a stable and fluid communication about the development of the work that is being done. This is how we have seen CRM software in the cloud that allows monitoring and control over the proper development of projects.
But what is being done at the payroll level to be able to pay remote or self-employed workers?
Surely you have heard of payment platforms such as Wise, Revolut, PayPal, WeTransfer, Payoneer and many others that serve as a means to receive financial compensation for a specific job or when the person is part of the company’s payroll, but is located in a city different from the organisation’s headquarters.
The first four questions to answer
Before we begin, there are four fundamental questions that must be answered in order to pay a remote or independent worker.
1. Is it an employee or an independent contractor?
In the case of an employee, first it must be clear if it’s a short, medium or long-term job. If it’s a contractor, be clear about what the job is about and how long it should last.
In both cases, it must be ensured that they have the necessary tools to carry out the work and, in addition to that, make it clear that as an employer a tracking software will be used to ensure that working hours are met.
2. In which country is the employee or freelancer located?
Not all laws are the same in all countries, so it is important to bear in mind that the employee may demand that their fees be paid with a local payroll, for which the employer, in case of not being in the same country, must turn to a Global Employment Organization (GEO) to do this.
3. In what currency will he/she be paid?
The amount of the fees must be well clarified, since payment through online platforms can entail expenses, taxes and commissions that reduce the amount initially agreed. Not to mention that many times fluctuations in the price of the currency is also a decisive factor.
All of the above if the employee or contractor requires that their payment be made in their local currency.
4. Is it a permanent employee or just hired for a project?
If it’s a permanent employee, all the parameters are established from the beginning of the employment relationship and payment is automated while he/she is within the organisation.
In the case of a project contract, he/she will be paid once the work has been completed and it will be done systematically, but manually.
Negotiate The Payment
Whether it is a remote employee or a person hired to carry out a specific job, it is important to be clear about the amount that is going to be paid and to take the provisions for situations such as those already mentioned, such as that the fees may carry expenses, taxes or commissions that reduce the amount that was initially agreed.
We must also bear in mind that it is not the same to pay a person who is located in countries with a high standard of living and costs, than to pay a person who is located in low-cost countries. For example, an employee’s rate in the United States can be between $20 and $80 per work hour, while in a country like India it can be between $5 and $30 per work hour.
Monitor hours worked and billing
As we said at the beginning, the dynamics of telecommuting has allowed the creation of software that allows remote supervision of employees and contractors. With them you know if they are meeting deadlines and are at their workstations.
These same possibilities have allowed the creation of software that allows the supervision of the working hours that the employee or contractor must fulfil.
That software allows the registration of the time used and in turn generates an hourly report automatically, which in turn will allow to know how much is the amount that is owed to each person, having previously entered the hourly rate of payment.
In both cases, payment is usually a quick and easy operation. For contractors, you just have to verify that the billing is correct so that the amount indicated for the stipulated work is being paid. For the employee, the salary that corresponds to him will be paid at the end of the month, checking that he has fulfilled his work and his expected hours.
Tax deduction and Social Security
Taxes and payments to Social Security are all issues when it comes to receiving payment for remote work. It can become a problem for remote employees, depending on where you live and the country from which the payment is handled.
If there is a tax treaty or agreement between the two countries involved, it is most likely that it covers the possible double taxation of employees, with available tax credits and compensation.
In case the employee lives in the same city where his employer is, the latter must withhold taxes if either outsourcing payroll or using a local partner. If the employee lives in a different country, the employer may have to withhold some taxes, although the employee can later request a refund claiming that he does not live in the same country.
For the payment of Social Security, it is possible that the remote worker will not benefit if the payment is received from the country where the company that has hired him is located, although he could have access to some benefits.
In this case, it is recommended to use a GEO company to pay the fees to the employee or contractor in the same country where they reside. These types of companies are established so that they can handle all matters concerning withholding taxes and benefits for the worker.
Paying the worker or contractor
After the employee or contractor’s work is completed, it’s time for payment. There are four alternatives to be able to make the transaction.
In the first place, there are electronic payment platforms such as Wise, Revolut, PayPal, TransferWise or Payoneer, among others, that when using them money is deposited therein immediately and the user only has to decide whether to leave the funds in the same or if you transfer them to your bank account.
These apps have different rates that apply at the time of use. Some charge for receiving money, for transferring to bank accounts and even for currency conversion.
In the case of Payoneer, it even has a debit card backed by MasterCard that can be used at ATMs and merchants around the world.
Traditional remittance services like Western Union are another option for sending and receiving funds to pay remote workers or contractors. However, using this option can be more expensive in the long run.
Bank transfers or ACH transfers are a slightly more expensive alternative, although it all depends on the bank that is used and the fees they charge for depositing the money in the worker’s account.
Freelance work platforms such as Fiverr, Upwork and Freelancer, among others, also have a payment system through which the employer can enter the money agreed for the work and then the employee or contractor can transfer it to the bank account, from Wise, PayPal or Payoneer you have affiliated with.
As remote work and the trend of digital nomads grows, more digital alternatives are appearing in parallel that will make it easier to hire employees or contractors so that they can fulfil their work functions in the distance and, in addition, they can enjoy the benefits resulting from it.
The recommendation for both parties is to be well aware of the conditions that we have presented here so that there is no confusion and the work can be completed without any type of setback.
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