In the post-COVID gig economy, remote work and geographically-dispersed teams are vital business imperatives. In addition to business continuity, one of the best things about a remote team is that you can hire the best and most skilled people at a lower cost, regardless of their location. To ensure that your international team of employees, contractors and freelancers stays with you for the long haul and continues to contribute to your success story, it’s important to pay them well, and on time.
In this brief article, we highlight 4 methods to honour your international payments, along with the advantages/disadvantages of each. If you work with cross-border freelancers and workers, this article is for you.
Why You Should Pay Your International Team on Time
Money is the grease that strengthens business relationships and keeps them going for the long term. This is one of the primary reasons to pay your international team on time. Another is that timely payments motivate your employees to go the extra mile for you. They may even provide an extension on payment terms and offer you better deals, because they trust you, and want to continue their relationship with you.
By paying them on time, you can also avoid interest charges on late payments, and maintain a reputation for fairness and honesty. On the other hand, a failure to make timely payments can strain your relationships, damage your financial position, and harm your market standing.
Choosing the Right Payment Method: Important Factors
Before choosing a particular payment method, here are the five key factors to keep in mind:
i. Countries supported
Which countries are supported by the payment provider? If your team members reside in countries that are not serviced by the provider, there’s no point selecting this provider.
ii. Currencies supported
If your staffs are willing to accept a common currency that’s on the provider’s list (e.g. USD) but is different from their home currency (e.g. MYR), you can still select the provider. If not, look elsewhere.
What are the provider’s charges for international payments and transfers? Do they charge transfer and currency conversion fees? A “quick send premium” for same-day transfers? Are there hidden fees or charges? Make sure you’re aware of these possible costs before signing up.
iv. Payment speeds
Payment speeds differ by different payment methods. What speeds are desirable to you, and to your recipients?
v. Ability to serve business
If your business regularly transacts internationally, you will need ongoing support and business features like bulk sends and multi-level approvals for FX payments. Make sure the method you choose supports these needs.
4 Ways to Pay Your International Staffs & Freelancers
#1. International bank transfers
Pros: Safe, reliable
Cons: Slow, expensive, opaque
Banks still dominate the international business payments landscape. Granted, an international wire transfer is one of the safest methods to make business payments. However, it is also slow. Payments in major currencies take 2-5 business days, depending on the sending and receiving countries and banks, and transfer amounts. More “exotic” currencies can take even longer.
International bank transfers are also expensive. Banks often take a margin of over 5% and charge an additional transaction fee on each transaction. After calculating the mid-market rate, the bank adds a “spread” of 0.07%-7% above the mid-market rate. These numbers are constantly fluctuating, which affects how much the exchange will cost you. Wire transfers can be expensive for receivers as well, since they often have to pay additional fees to accept their money.
Pros: User-friendly, well-known, free account setup
Cons: Hefty fees, slow transfer speeds, sending limits
PayPal is one of the pioneers of digital money transfers and payments, and is therefore a popular option for many businesses worldwide. It’s easy to set up and use. With a simple (valid) email account, users can link their credit card or bank account to their PayPal account for withdrawals and funding. They can also review your transactions, create invoices, and manage their cash flows. PayPal also provides a high level of protection for both data and monies.
These benefits notwithstanding, PayPal is not the best payment solution for small businesses. Recipients are charged 2.9% (as well as $0.30) when receiving money for goods or services. Chargebacks also attract hefty fees. When transferring funds from a PayPal account to a bank account, users may have to pay additional fees. All these outgoings can add up over time.
#3. Business Credit Card
Pros: Good for managing cashflows, rewards
Cons: Varying fees, exchange rate fluctuations
By converting unused corporate credit card limits into cashflows, you can pay employees and freelancers without paying interest for a set number of days. Some cards also offer rewards on every transaction.
However, exchange rates factor into every international transaction, and every transaction, regardless of its size, attracts a foreign transaction fee which can add up over time. Payments made after the expiration of interest-free days attract late payment fees, another substantial expense. Most cards also charge an annual fee, which varies by card provider. Another cost is Dynamic Currency Conversion (DCC), which usually results in unfavourable exchange rates, and increases your costs.
#4. International payments account
Pros: Fast transfers, low cost, transparent processes
An international payments account from a provider like Wallex is one of the fastest and cheapest ways to pay international employees and freelancers. Through this account, you can make payments to 180+ countries in 47 currencies, including ‘exotic’ currencies that are usually not supported by banks and other providers such as VND, KWD, SAR, etc. You get access to the lowest FX rates and the most transparent fees, so you can save big on every cross-border payment compared to international wire transfers or card payments. Plus, payments are transferred super-fast. For most countries, Wallex offers same-day* transfers, and even real-time* transfers from Singapore to BCA Accounts in Indonesia.
Wallex also offers a range of other services and features to streamline and simplify your business payments, including bulk payments, bulk approvals and multi-level approver matrix. These offerings are designed around convenience, speed and cost-effectiveness, so your company doesn’t have to waste administration time (or money!) on international payments. You can set up the account in just a few minutes, and start sending or receiving funds almost immediately. No unnecessary waiting, and no annoying paperwork! Manage everything through a single platform that’s completely online, fully transparents, and highly secure. You’ll even get regular updates on the progress of your transfers to simplify your life even further.
Firms with overseas employees and freelancers now have several options to manage their global payments cheaply and conveniently. Each method has its pros and cons, but if you’re looking for a truly affordable, fast and convenient cross-border solution, do consider the international payments account from Wallex. Sign up for free here or talk to our FX expert.