Ending your time in the military is just the beginning of a new journey. Reentering civilian life after serving is an exciting time — and one that comes with plenty of challenges. Rebuilding relationships and finding new ways to apply your skills can take some time, yet the rewards are worthwhile.

While every transition is filled with new opportunities, this one can also be overwhelming. Finding a new job to start your second career can be a real challenge. In fact, nearly half of American veterans since 9/11 say transitioning back to civilian life after military service was either difficult or very difficult.

Veterans can face a variety of obstacles when they end their military careers, including:

Uncertainty regarding skills transferability

One of the challenges veterans may face is how to find good, meaningful employment after service. Finding full-time employment can seem impossible at times, but it’s important for veterans to consider every option, not just traditional paths for employment. There are so many different opportunities that can help guide you to a path of financial stability. With the advent of remote work, veterans now have more choices than ever when it comes to finding great new careers.

Many veterans have begun working as independent contractors in a host of different industries to see how their skills translate to the needs of businesses. From software to communications and mechanical work to graphic design, contractor career paths provide not only flexibility but great earning potential for self-starters. Throughout this guide, we will explore the ins and outs of what it means to become a freelancer as a veteran. 

The differences between freelancing, contract work, and full-time or part-time employment

Before we dive deep into how to obtain a freelancing job, we must establish what it is and how it differs from the other types of employment. Let’s take a closer look at the differences between freelancing, contract work, and traditional employment so you have a thorough understanding of each option. 

According to the IRS definition of independent contractors, “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” Simply put, if you operate as an independent contractor, you are self-employed.

Because contractors are self-employed, they choose how often they work and what a typical workday entails. While the freedom can be enticing, this work style brings more uncertainty, less stability, and a responsibility to consistently organize more work. Contractors can make lots of money, but that all depends on how much work the person puts in to market themselves and their services.

Another difference between contractors and part-time or full-time employees is that self-employed individuals are responsible for managing their own tax obligations. The contractor must obtain any required documentation, like a 1099 form, and file their taxes on their own. Employees are sent their tax information from their employer, but contractors have to manage this process without assistance. 

Contractors often work for agencies even though they’re considered self-employed.  Agencies deal with finding the customers so the contractor can focus on doing the work. Of course, taking this path means the contractor typically earns less, as the agency has to make a profit as well.

One advantage to contract work is the possibility of finding more permanent employment with a long-term client. After both parties have worked together on a project or short-term contract, there is always an opportunity to convert from a contractor to an employee. A contractor may become a full-time employee of an agency or an employee of a direct client. Contractors may also use their time working solo to fill in gaps in employment history. If you provide freelance services for six months between jobs, you were not unemployed during that time — you were working for yourself.

It’s important to note that if you are employed as a contractor (working either in-person or remotely), any agency or client should treat you with the same respect as they would a regular employee. Many employers who want to demonstrate their care for contractors develop fair and equitable compensation programs that may even include offering benefits to contractors to match those afforded to employees.

Similar to contractors, freelancers are also self-employed individuals with time flexibility. However, where contractors can be either full-time freelancers or contractors for one company at a time, freelancers typically do not tie themselves down to any one contract at one time. 

Remember the hidden danger of misclassification

Businesses must avoid employee-contractor misclassification to steer clear of hefty fines and penalties. In a similar vein, contractors should typically avoid working for companies that have had issues with misclassification in the past. 

If employers treat a contractor like an employee, even if both parties have agreed to a contractor relationship, regulators may still view that relationship as one between an employee and employer — which can lead to serious taxation ramifications. Although the dangers of misclassification are more significant for the employer, contractors must be aware of how to avoid misclassification, as crossing the line could lead to losing a client or other headaches.

Most countries levy heavy penalties against companies found breaking classification law intentionally. If businesses want to stay compliant, they must follow through on their good intentions.

Let’s take a look at a few contract job examples and the skills you’ve accumulated while serving in the military that can give you an advantage in the market:

Advisor or consultant: Becoming a consultant can include providing legal advice or becoming a health, fitness, mind, or leadership coach, but there are all sorts of consulting possibilities out there. The communication, coaching, teaching, and conflict resolution skills you learned during your training will be sought after in industries outside the military. If you can adapt the subject matter to suit each client, you could develop a structured product well-suited to regular contract projects.

Designer or artist: This includes graphic design, glass cutting, woodworking, sculpting, and writing for marketing agencies or businesses. Many veterans even find success in the performing arts after service with many contracts available for actors, musicians, and technical production roles. Skills useful for these positions include creativity, integrity, dedication, and the ability to focus in high-stress situations. 

Tradesperson: The trades include fields like electrical work, plumbing, carpentry, mechanical repairs, painting, and machinery. Skills useful for this position include precision, attention to detail, and problem-solving.

Think about the skills you enjoy practicing the most, then research the specific technical requirements of each type of job that might require them. Following this exercise can help ensure you’re choosing a path that aligns with your skills and your goals.

Even if you don’t possess all the necessary skills for an opening, you can learn technical skills in a short period of time with commitment and focus. Lean on the discipline and training you have already received to learn and improve. Once you have the basic qualifications and certifications required, you can demonstrate how your previous experience has helped prepare you for the role.

A freelancer is someone “who earns money on a per-job or per-task basis, usually for short-term work.” Rather than working steadily for a company as a contractor or employee, you take on one-time gigs with as many companies as you please.

Freelance jobs come in many different forms. For example, some businesses will hire a freelance artist to paint a mural on their storefront windows for the holidays. Someone may hire you to build their company website. One project may last for an hour. Others might run for months on end.

The pros of freelancing as a veteran include:

Being able to complete jobs that are specific to your unique skill set

Freedom in choosing which clients and how many clients at once

Responsibility for obtaining and filing your tax records

Complete accountability for finding more work and generating more income

Before you decide to become a freelancer, you must consider whether you’re able to make a living with so much uncertainty. Veterans are encouraged to contact their local U.S. Department of Veterans Affairs (VA) office for resources on overcoming financial instability if problems arise. 

Examples of freelancing jobs include but aren’t limited to:

Coding: Military skills useful for coding include good communication, attention to detail, and, of course, experience writing code and working with computers.

Digital marketing: Military skills useful for digital marketing include creativity, the ability to collaborate well with others, and a passion for research and analysis.

Writing: Military skills useful for writing jobs include time management, excellent communication skills, and the ability to follow instructions closely. If you are multilingual, you could even get translating work, which often comes with higher pay.

Similar to finding contracting jobs, finding freelance work that highlights your skill set is a great way to put what you learned while serving to use. The pay for each job type varies based on your skills, experience, and location, but you are always free to set your own rates. Do plenty of research to understand the market, and don’t sell yourself short on the value of your services!

Part-time employees typically work 30 hours or less a week. The specifics on the exact hours a part-time employee works vary from employer to employer. 

A few advantages of working part-time include the ability to create a more balanced work-life balance and open up doors to new job opportunities in different fields. Working part time also allows you to work freelance on the side with your extra hours. Part-time work arrangements could allow you to pursue other options outside work, such as caring for children or going back to school.

On the downside, working fewer hours also means less money on your next paycheck. Freelance work can help bring in additional income in between paychecks. If you’re able to balance part-time employment while you freelance, you not only earn more in the short term but can develop new skills to help grow your career. Frequent freelance work could potentially lead to full-time employment, depending on the company.

Some part-time employees are eligible for benefits while others are not. If you obtain part-time employment, be sure to discuss the organization’s benefits program with the hiring manager to understand your coverage. 

There are many examples of part-time employment, ranging from retail and tourism to food and hospitality, music and the arts, and more corporate fields like publishing, media, and professional services. Let’s take a look at a few examples of stable part-time roles that could provide regular and flexible work ideal for veterans:

Finding part-time employment is a great way to get more freedom than full-time employment while maintaining the financial certainty that can be lost when freelancing or taking contract work. However, you still need to confirm your eligibility for benefits like health insurance before accepting any part-time employment agreement.

While there is no one set definition for full-time employment, the Internal Revenue Service (IRS) defines a full-time employee as someone who is “employed [for] at least 30 hours of service per week, or 130 hours of service per month.” The specifics of what it means to be full-time vary for each employer.

Working full-time means you are guaranteed a minimum number of work hours along with other benefits. A few advantages of being a full-time employee may include:

Of course, working full time has its benefits, but it comes with some comparative downsides. Those who work a full schedule are at a higher risk for burnout and often have less time to dedicate to family and other parts of life outside work. Further, people who are salaried (that is, not paid by the hour) may be asked to work extra time without receiving additional compensation.

Veterans should consider the advantages and disadvantages that come with a full-time schedule. Jumping into a full-time job right after service could take a bigger toll on you mentally and physically if you’re not ready for that type of commitment. 

It’s worth noting that just because someone works full time doesn’t mean they’re guaranteed to generate more income than a self-employed individual. How a full-time employee is paid and the amount they’re paid varies with each employer — some are paid hourly, and some are paid a salary. In many cases, your benefits package may make a lower salary worth taking, especially for public sector jobs.

The number of full-time employment examples is endless. Virtually every company with employees has multiple full-time employees on staff. 

To narrow it down, let’s take a look at a few examples of full-time employment that are A, work that can be done remotely, and B, may align with the skills from your military career.

Some veterans may even consider seeking full-time employment while doing freelance work on the side. Keep in mind that pursuing freelance work while holding down a full-time job would require long hours.

We’ve already addressed the advantages of freelance work in general, but it’s important to understand why this path is beneficial specifically for veterans.

Because freelance work means setting your own hours, wages, projects, and deadlines, your skills in time and project management are critical. Military life often involves creating order out of confusion, which is a common theme for freelancer life.

Veterans who freelance can dictate when and where they work, which may be helpful to those who would prefer not to be tied down to one place or schedule. Of course, the greatest benefit of freelancing (besides the flexibility of time) is the ability to earn as much as your skills can demand. Freelancers with experience in high-demand work, such as specialized machinery or computer engineering, can make significant money in a short period of time. For those without high-dollar expertise, though, freelancing still offers great opportunities to earn.

Working independently can be rewarding. You’re able to put your skills to the test and watch your vision come to life knowing you were able to accomplish it all on your own. However, working independently can also be just that — lonely. 

It's important for veterans to rebuild their social life upon returning to civilian life. Your support structure is critical, and the more you invest in it, the more you are able to lean on it when times are difficult. Benefitting from a robust support network is not unique to freelancers who recently left the military, but anyone returning to civilian life should recognize the advantages of having a group. If you aren’t sure where to start, ask around to find others who served and may be facing similar challenges.

Finding freelance work that capitalizes on your existing skills is a great place to start. However, we’ve collected a few other tips to consider when seeking freelance opportunities:

Choose a job that will give you a steady yet balanced workload

Both freelance and contract work are types of employment veterans should consider when returning to civilian life after service. The benefits of time flexibility and the ability to work remotely may outweigh the downsides. But where should veterans begin?

Guide to freelancing jobs for veterans

Making payments is a pain, especially when you work with multiple contractors. 

Not only do you need to find the right payment provider (and add yet add another tool to manage), but you’ll need to carefully copy and paste account details, double check the right payment amounts, and triple check that everything is set up correctly. And if you get it wrong, it’s almost impossible to get that money back. Especially if you’re working with regular contractors for the same amount each month on an ongoing basis, the time involved in invoice approvals and payment administration can quickly add up.

At Remote, we’re making it easier for employers to onboard, manage, and pay contractors wherever they’re based in a legally compliant, simple way. 

Streamline admin with automatic approvals and payments

On the Pay contractors screen in Remote, you’ll now see a new option for Automatic invoice payments.

Here, you can set up automatic invoice approvals and payments for your contractors. 

Getting up-and running is as easy as 1-2-3! 

Select the payment method that should be used from the card and direct debit methods you’ve already set up. This is the method that will be used to pay any applicable contractor invoices. 

Next, you can set a maximum daily invoice amount per contractor. Any invoices under this threshold will be paid automatically. Invoices above this amount will need manual approval, to help prevent fraud.

Lastly, you can select the contractors whose invoices should automatically be paid! You can select individual contractors, or everyone you work with.

You’ll receive the same email notifications as usual, and invoices will appear in your dashboard. You can download invoices for your records and share payment receipts to make life easier for your finance team.

This new feature is live now for employers who pay in USD, with Euro and other currencies rolling out shortly.

With automatic payments in Remote, your contractors will be paid faster without the traditional delay.

No more waiting for approvals, reviews, and manual payments. Invoices are typically settled within 3-6 days after a successful payment, helping contractors to improve their cashflow situation, and helping you build stronger working relationships.

Not using Remote for contractor management yet? 

It’s easy to get started with fast, free, and flexible contractor management with Remote. Sign up today to onboard new contractors, ensure compliance with localized contracts, and pay contractors in over 130+ countries around the world. 

Find out about how you can streamline contractor invoice approvals and automatically send payments free with Remote contractor management.

New: Automated contractor payments in Remote

To pay international contractors, you must consider a few extra requirements to ensure everyone is treated fairly — and to ensure you don’t expose your business to unnecessary risk. You’ll need a plan for handling things like payment methods and foreign exchange before you start onboarding new team members. 

Remember, there’s more to global payroll than a simple financial transaction.  At the very least, you want to ensure your business is compliant with employee classifications and reporting requirements in your home country and in every country where your extended team resides. 

This is where things can get confusing.  

When paying international contractors, you need to navigate unique labor laws for each location (especially if your team is spread across multiple countries). It can be a frustrating and expensive process, especially if you’re engaging professional tax and payroll services in every country. 

Understanding how to pay overseas contractors, and doing it at scale, is essential for startups and businesses looking to take advantage of the benefits of having a global workforce. This detailed guide tells you everything you need to know about paying independent contractors in other countries. Here’s the good news: with the right service provider, this process can be a stress-free and inexpensive experience. 

If your company is based in the U.S., an international contractor is someone who does not reside or work in the U.S. and is not a U.S. citizen. For other countries, the distinction is the same: different country AND non-citizen status. It’s important to note the definition has more to do with where the services are performed than with what passport the independent contractor holds. If the actual work occurs in a country outside of the U.S., even if it’s done by a U.S. citizen, the local government almost always imposes an income reporting requirement and possibly a withholding obligation. Put simply, you cannot simply pay US contractors working abroad without considering where they perform their work.

There are advantages and drawbacks to working with international contractors, so make sure you’re compliant with the local definitions. In some countries, these changes are based on the length of your relationship with a service provider. If you aren't careful, you could wake up one day to discover your favorite longtime contractor is now technically an employee and entitled to benefits.  Misclassifying employees as contractors can bring harsh consequences, even if the mistake is unintentional. 

Nothing prevents you from paying foreign contractors. You can pay from your business account(s) in the U.S., or you can use a variety of payment methods including fintech services, digital wallets, or common payment platforms like PayPal. Global employment partners like Remote make paying global contractors easy to manage in a fast, simple, and compliant way.

Below you'll find an overview of some of the most common ways to execute the challenge of paying international contractors, along with some of the pros and cons for each option.

Your bank can arrange your international money transfers, but this is usually the most expensive way to pay overseas contractors. Bank transfers do not give competitive exchange rates and you’ll have to pay a service charge for every transfer. Another annoying feature of bank transfers is hidden fees. Intermediary bank fees, sometimes called "receiving bank fees," can be levied multiple times in a single transfer depending on how the money is routed. Fees can run between $15 and $30 and are hard to predict. One transfer may attract multiple fees, then the next might incur none.  You won’t receive any accounting of these fees either. As a result of these fees, your international contractor may end up shorted on their invoice, making you look like an unreliable client. 

You can write a check from your business account and post it to your contractor through the mail or express courier. Checks are not a popular option with international contractors because they may be charged a fee to deposit; they’re at the mercy of the bank’s exchange rate; and funds are held in escrow until the check clears. With global delays in mail due to Covid-19, combined with a 4-6 week clearing period, your overseas contractor could wait months before they’re paid. 

International money orders or wire transfers 

Once a quick and safe way to send money, going down the wire transfer route through companies like Western Union is now almost as outdated as paper checks. Both money orders and wire transfers attract large deposit fees and require the foreign contractor to deposit the payment physically. In countries where digital payments aren’t accepted, this might be the only choice, but these situations are few and far between today.

Perhaps the best known way to make digital payments is using PayPal. The platform is useful for paying international contractors in different currencies, and you can make mass payments for up to 5,000 vendors at a time. You can also link credit cards to your PayPal account. You will pay fees of around 4% of the total payment, which can add up quickly. The other drawback to PayPal is the recipient must have a PayPal account to receive payment, which is not always straightforward, depending on the country.

Formerly known as Transferwise, Wise is one of the best fintech platforms for sending international contractor payments. Wise lets you set up multiple foreign currency accounts, gives you bank-level security, and lets you make batch payments of up to 1,000 transactions in one click. You can send money using the real exchange rate to more than 70 countries, and it’s the fastest way to get money to your international team.  Wise claims half of all payments arrive instantly or within the hour. You stipulate how much you want to deposit into your overseas contractor’s account and there are no hidden fees. Wise is one of the most cost-effective ways to send money overseas, coming in about 19 times cheaper than PayPal. 

Remote has the ideal platform to simplify paying international contractors. Financial transactions for international payments are fast and easy. Here’s the best part — paying contractors through our contractor management platform is completely free of charge. There are no additional or hidden fees. 

Remote lets you stay compliant globally, mitigates your risk when working with overseas contractors from more than 170 countries, and enables you to scale your international team. 

Research in detail: You can find out more by reading our Remote Contractor Management Platform overview.

What is the best way to pay international contractors?

Putting policies in place for paying overseas contractors can be tricky, especially if you don’t have an internal HR department or legal department who understands international labor laws. Depending on the country where your contractors work, the payment structure you use can have ramifications on their employment status. 

A project fee is a pre-agreed amount for a specific piece of work. This is also called a fixed-price project fee. Both parties know at the start what the budget is for the project. It’s important to have an ironclad contract when working on fixed- price projects to consider things like project milestones, progress reporting, and sanctions for missing deadlines. Major projects like technology development or engineering design often attract a fixed-price arrangement. Be sure to include language regarding ownership of intellectual property in these (and all other) contractor agreements.

A retainer is a set amount paid on a regular basis. A common retainer arrangement is for a monthly payment and is renegotiated at the beginning of each financial year. You should clarify in the contract what the retainer covers in terms of deliverables and/or time spent working on your behalf. This can be an attractive arrangement if you have multiple tasks or a variety of work you want performed regularly. Make sure to address what happens if you haven’t supplied enough work to keep your contractor busy for the hours retained. Will you forfeit those hours, or will they roll over into the next month? It’s also important to understand whether it’s legal in the contractor's country of residence to expect the contractor to roll hours over into the next period.  

Time and materials projects are good for work you can easily manage at the task level. The contractor submits an invoice with a time sheet and expense report to prove the time and materials consumed for the payment period. If you can closely time the effort it takes to produce the outcome you want, this could be the best payment arrangement for you. For creative industries, time and materials can be costly, because it’s hard to determine how long it will take to arrive at the desired result. The other problem is time and materials contracts offer no incentive to work efficiently. The longer it takes to deliver results, the more the contractor is paid. 

Beware the dangers of contractor misclassification

Keep in mind different countries determine employment status based on contract and payment structure. For example, you may run into a situation where a country does not recognize long-term contractor agreements and instead requires companies to hire contractors as full-time employees.

After a certain period, say six months of continual work with the same business, your contractor may be considered an employee due to the labor laws of the country. It’s essential to understand the local formula for classifying employees (i.e., how your payment structure, plus length of time, impacts the local classification of your foreign contracting staff). 

Misclassification of contractors is serious business and can attract hefty penalties. 

Determining what currency to pay contractors

Before you can know how much to pay, you need to confirm in which currency the contractor will be paid. Because foreign exchange rates are constantly changing, the way you manage payment to independent contractors in other countries can make a big difference to your cash flow and operating expenses. Options include:

Pay everyone in US dollars. This works well if your international contractors have US dollar accounts. Otherwise, they’ll have to pay a fee to receive US dollars into their account. 

Pay each contractor in their local currency. This is good for contractors but means you’ll have to have multiple foreign accounts or use a payment platform that can handle the conversions for you. Expect to pay more in foreign exchange fees. Reconciling your accounts can be complicated. 

Use a hybrid method of payment. Use a contractor management platform or a digital payment tool to help you take advantage of currency fluctuations. 

Pros and cons of common international contractor payment options

Here is a quick breakdown of the advantages of different international contractor payment options:

Pros: Designed to manage international contractors including payments, contracts, and IP protection for more than 170 countries. Remote’s free Contractor Management platform lets you:

Onboard contractors quickly and safely with localized contracts

Pay contractors on time in their local currency with zero exchange fees

Manage all employment documents in one secure platform

Protect your intellectual property and invention rights  

Cons: Because Remote was founded in 2019, Remote's contractor payment services are less well known than Wise or PayPal.

Pros: Everything you need to grow your business and operate internationally but without the high fees and headache of opening bank accounts in multiple countries. Wise provides a transparent pricing structure, and you know exactly how much will be deposited in your contractor’s account. 

Cons: Does not provide any contract management services or IP protections.

Pros: Mature platform with widespread adoption. Transaction fees average about 4% of invoice amount. 

Cons: Does not provide any contract management services or IP protections. Recipients must have a PayPal account. 

Pros: Your bank will be motivated to give you personalized attention through an account manager. 

Cons: Poor exchange rates and high service fees. Your contractors are likely to experience hidden fees and receive less than you sent them. Does not provide contract management services or IP protections.

International money orders or wire transfers

Pros: People can receive money if there is no option for digital payments in the area where they live.

Cons: High fees. Must appear in person to receive funds.

Pros: There are very few upsides to using paper checks to pay contractors, although some traditional vendors may prefer checks for certain types of work.

Cons: Dependent on international mail services. Highly susceptible to fraud. High fees. Long payment cycles. 

How much do international contractors make?

Ideally, you’ll want to attract, retain, and motivate the right talent at the right point in time and help your business achieve its goals in a financially sustainable way. Before you start onboarding anyone, it’s worth considering the financial and social consequences of your payment structure.

With a global workforce, determining fair compensation policies can be complex. Contractor pay expectations vary from country to country for the same role. Cost of living in each country has a big impact on those expectations. Some contractors will be comfortable telling you what they need or negotiating with you to arrive at a mutually agreeable pay rate. Others may not negotiate at all and merely accept or decline your initial offer. 

#1. Set a global payment standard by role and pay everyone the same amount in U.S. dollars

You know exactly how much it will cost your business to bring on new contractors.

No one in the organization will feel disadvantaged or disrespected.

Your costs for contractors will be higher than average.

Your labor costs hinge on the strength or weakness of the U.S. dollar.

Your rates may not be attractive to people living in countries with a higher cost of living than the U.S.

#2. Localize your pay structure to meet the going rate for each country

You know you’re offering a locally competitive rate without overpaying your contractors.

Your international contractors can enjoy a local standard of living in line with their education and skills.

Your contractors may resent not making as much as contractors from other countries.

If an international contractor moves from one country to another, they may not be happy if their wages decrease to reflect the local economy.

Your company could be seen as taking advantage of cheap labor, fragile economies, or supporting governments who have oppressive policies if you don’t have a thoughtful approach to localization. Remote cares deeply about offering fair and equitable compensation to everyone, everywhere. We strongly advise our customers and partners to do the same, and we share insights on how to manage this in practice.

Research in detail: Read through Remote's dedicated guide that explores how to calculate compensation for remote employees

Offering benefits to international contractors

Fringe benefit packages can be a great way to attract the top contractors in a region and, in some cases, may be more important than pay. As much as pay varies between countries, so do benefit packages. 

If the contractor has access to socialized healthcare, like the United Kingdom and Australia, health insurance will be of limited value. In other countries, the norm is to provide additional benefits that may seem unusual in the United States. For example, in Latin American countries, contractors may be looking for childcare subsidies and food allowances. Also consider offering paid time off for public holidays, cultural or religious festivals, and vacations. 

Keep in mind, fringe benefits are taxed differently overseas. You need to understand the fringe benefit tax obligations for each country where you have contractors. In addition, while you can offer benefits to international contractors, crossing certain lines could lead you to misclassification.

Research in detail: Use Remote’s Country Explorer to find specific data about typical benefits and holidays for more than 170 countries. 

If you’re confused about the best way to approach your pay and benefit policies for international contractors, Project FAIR has developed principles and standards for fair reward. Project FAIR is supported by the University of Edinburgh Business School and focuses on helping international aid organizations arrive at fairness in overall compensation through a combination of pay and benefits. Any business paying international contractors can use their toolkit, including:

Self-assessment quiz designed to help you think through different aspects of your pay and benefits

Key strategic considerations to consider as you review your international contractor compensation policies

Project FAIR bases all their efforts on the United Nations’ Sustainable Development Goals and aligns with the Core Humanitarian Standard on Quality and Accountability. Their five principles and standards for fair compensation across international borders provide excellent guidance for startups and businesses who want to ensure their contractors feel valued and connected. 

Understanding the ins and outs of contractor management is essential to attracting the top talent to your company, from all parts of the globe.

How To Pay International Contractors [Expert Guide]

How to pay international contractors: Expert guide

Managing independent contractors working abroad is a simple and effective way to grow your business. Using foreign contractors can be a fast, affordable, and productive option while giving you access the best talent in the world. You’ll want a good system to scale your hiring process, especially if you’re working with contractors in multiple countries. Using a contractor management platform lets you kickstart the whole process.

Because here’s the deal — every country has their own employment rules and regulations. These include different labor laws and tax obligations. If you’re working with independent contractors abroad, being legally compliant from the very beginning is going to save you countless headaches and keep you out of trouble with local authorities. It’s not hard, but it is serious business.

Read on to find out everything you need to know to onboard, pay, and manage the best talent for your business, anywhere in the world. This expert guide is designed to give business owners and hiring managers the blueprint required to protect their team and their business. You can focus on scaling and growing your operations knowing you’re working to international hiring standards and ensuring compliance. 

An international contractor, also called a foreign contractor, is someone who works under the laws of a country other than the United States. They are self-employed, work for multiple companies, and are not controlled by your company. 

For American companies, the International Revenue Service (IRS) determines the difference between a local and international contractor. Here are things to keep in mind:

All U.S. citizens are taxed on worldwide income and will not be considered international contractors by the IRS.

It does not matter where the contractor was born or what passport they hold. 

Where the work is performed is a critical factor in determining local vs international contractor status.

If you’re paying someone in the U.S., even if they live and work outside the U.S., there will be a U.S. tax obligation for them.

Your contractor may not understand their own classification and could be genuinely mistaken about their status.

Here’s a quick overview you can use as an indicator to tell whether your contractor is considered local or foreign by the IRS. 

Must be a U.S. citizen, or a permanent resident who meets the green card test

Perform the majority of work in the U.S., as defined by the substantial presence test. It’s a slightly complicated calculation, but a contractor must work for a total of 31 days in the current calendar year and a total of 183 days in the 3-year period that includes the current year and the previous two years. 

Cannot pass the green card test or substantial presence test

Must report income to a foreign government

One last thing to consider is the foreign government where your contractor resides may legislate your relationship differently than the U.S. would. In some countries, this can be quite straightforward. For example, a contractor's status is defined by the length of the engagement or the exclusivity of the relationship. 

In other countries, the status of a contractor can switch to an employee automatically, and without notice, if the status changes during the course of the relationship.

Research in more detail: You can investigate the specific labor laws for more than 170 countries using Remote's Country Explorer.

What are the benefits of hiring foreign contractors?

Working with remote contractors brings a wealth of benefits, especially if you’re experiencing a limited talent pool in the local market or require a highly specialized skill to complete a project. One advantage of the post-COVID business world is how many people became familiar with work-from-home and remote-work technology. This transition reinforced the benefits of globalization to growing companies and makes the decision to target the international contractor pool easier than ever. 

Here are some of the major benefits to working with foreign contractors.

You have a chance to design your projects any way you want. You can bring people on for single tasks, assemble a team of differently skilled workers for a special project, or supplement your existing team with a foreign contractor who can help you with capability building. The opportunities are only limited by your imagination. 

Consider working with an independent contractor abroad to consult with and advise you on functions outside of your area of strength. If you find an international expert who is not actively working with a competitor, you can gain valuable insight from an industry veteran without the pressure, cost, and delays involved with a full-time employment relationship. 

Common knowledge and best practice are enemies for anyone working towards building the foundation of an innovative company. Hiring international contractors gives you access to different perspectives and a diverse approach to innovation. These, in turn, become the building blocks to develop a competitive advantage. Your people provide the foundations of a sustainable business. Diverse people from different backgrounds, cultures, and locations can give you an edge, especially if you sell to an international market.

Different cultures have different value systems when it comes to education and career development, so skills that are scarce in America may be in abundance elsewhere. The U.S. always comes near the top of the Global Innovation Index, but there are many countries punching above their weight in various sectors. You could find that opening up your hiring across borders delivers a gold mine of specialised candidates. 

If you’re looking to outdistance your competitors, you can use the Global Innovation Index to compare two economies, using indicators like technology, creativity, or business sophistication. This lets you tap into a potentially hidden talent pool and find the countries who are likely to produce the best chances of finding the unicorn your business needs. 

How would it feel to go to bed each night knowing your projects were being progressed even as you sleep? Leveraging multiple time zones is another reason to work with foreign contractors. 

You can find built-in efficiencies for areas like quality assurance or quality control if your teams are divided in different parts of the world. Imagine the pure joy of working on the nuts and bolts of code or content and then having it tested for quality and back on your desk when you arrive to work the next day. 

Asynchronous (async) work maximizes productivity, improves your workflows, and makes every minute of a 24-hour day count without burning out your staff. 

Perfect for enabling 24-7 customer support teams

For as good as async work is for your business, it’s even better for your customers. Offering around-the-clock support ensures your business is operating 24/7 and any problems or questions your customers encounter are managed in real time. You can comfortably focus on your strategic role, knowing your operational support is ticking along. 

When your business is entering new markets, international contractors are invaluable for having on the ground intelligence. They can represent you for in-person meetings, advise on local customs, localize marketing and advertising, and provide insight into the best way to manage a multitude of tasks. They will also have a local network of skilled professionals and can make referrals to your business. 

Research in more detail: You can learn more about the processes you need to work with remote contractors abroad in our expert guide to working with remote contractors.

How do I hire international contractors compliantly?

Compliance is the one issue hiring managers need to be diligent about when hiring international contractors. Understanding local labor laws from country to country adds complexity but it also adds risk to people who don’t respect the upheaval and chaos non-compliance can cause your business. 

Even if you’re currently on top of things for your foreign contractors, the situation is always changing. These employment laws are updated regularly in many countries, and often a worker may be deemed an employee over time, many months after the initial engagement is analyzed and the initial classification is assessed. Chances are you won’t be notified when this occurs. It’s also possible the international contractor who has become part of your team won’t know the local labor laws unless their expertise is in Human Resources. 

Make sure you minimize the risks of misclassification

The last thing you want is to stumble when figuring out how to classify employees and contractors. There can be harsh consequences for misclassifying contractors, even if the mistake was completely unintentional. You may incur fines and penalties, lose your IP (don't neglect IP protection if you have remote workers), and even lose permission to operate.

If you don’t have the support of local labor experts in every market, it’s essential to find help. Luckily, Remote provides a way to hire global contractors for an affordable price, with a clean and simple service.  

How do a country's labor laws affect hiring contractors abroad?

While business fully embraces the benefits of globalization, there’s still no universal body or agency to manage global workers. As a result, the onus is on each business to navigate local hiring practices on a country-by-country basis. Areas to consider when drawing up a contract with an international contractor include:

National and regional labor laws – Some countries, like Canada, have varying laws between provinces or states. In addition, some countries split their labor laws between regional and federal jurisdictions.

Worker protections – Each country has different focus and put different weight on protections. Common areas to consider in your international contracts include age, religion, sexual orientation, gender expression, and race.

Are you hiring independent contractors abroad? Find out what you need to know about paying contractors and staying compliant with foreign labor laws.

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