Paying international contractors through banks often means slow transfers, high fees, and unpredictable exchange rates. Cryptocurrency offers a faster, more transparent, and cost-effective alternative for global contractor payments. 

In this guide, learn how crypto can simplify your cross-border payouts, what challenges to watch for, and how to choose the right crypto payroll provider.

Want to simplify international payments? Book a demo with Gloroots to see how crypto payroll makes global contractor management effortless.

Benefits of paying international contractors by crypto

There are multiple advantages to paying your contractors through cryptocurrency. Companies, especially those dealing with international employees or contractors, prefer Crypto as it is a much faster, more convenient, cheaper, and secure payment option. 

Crypto pays are faster

Pay with cryptocurrency involves fewer steps to sending money, as the payer doesn't have to depend on banks or other financial institutions. While traditional international bank transfers can take days, crypto transactions can take just a few minutes, regardless of geographical boundaries.

Crypto pays are cost-efficient

Crypto pay involves lower transaction fees than traditional banking or other money transfer services. Cost-effectiveness like this can add significant savings over time, especially for companies that send out many foreign payments.

Cryptocurrencies are decentralized

Pay with cryptocurrency uses a peer-to-peer payment method so that you can send money to your contractor directly. Your payment will be secured; you don't have to be concerned about legal obstacles.

It is independent of bank or financial institutions

There are countries like Argentina, where inflation has been notoriously high for decades. Paying with cryptocurrency gives workers of those nations a chance to be paid in a currency that retains its worth on the international market.

Moreover, people don't need to worry about currency conversions. Cryptocurrencies like Bitcoin are worth the same in the US, Colombia, and France.

Cryptocurrency is secure and transparent

The core of cryptocurrencies, blockchain technology, provides high security and transparency. As crypto transactions are recorded on a public ledger, it is practically impossible for fraud to occur without detection.

Crypto pay influences broader access to a diverse talent pool

Contractors in areas with no access to conventional banking systems can now achieve financial inclusion through crypto pay. As a result, businesses may have easier access to a diverse talent pool.

Crypto pay simplifies record-keeping

Cryptographic transactions can be digitally tracked. So, companies and contractors can maintain records and conduct audits more easily. This transparency can improve trust and accountability in the payment process.

Read More: How to hire independent contractors

Challenges of pay with cryptocurrency

There are several challenges to paying with crypto. These may include:

Risks related to value fluctuations

Cryptocurrencies are known for their price volatility. Like stock, cryptocurrencies can lose value. This means having cryptocurrencies on your company's balance sheet can create complications, particularly for tax-related reasons. Businesses risk non-compliance(e.g., not paying at or above minimum wage) if the value of cryptocurrencies falls below a specific threshold.

Even contractors can face challenges when they find the value of their payments fluctuates significantly between the time of receipt and conversion into fiat currency.

Regulatory risks

The legal framework related to cryptocurrencies varies considerably from nation to nation and is dynamic. Businesses must carefully manage these restrictions when working with international contractors to maintain compliance.

Taxation challenges

Pay with cryptocurrency can complicate the taxation process. Companies must deal with the tax implications of paying contractors with cryptocurrency and ensure proper reporting and withholding.

Insufficient information about crypto pay

Every contractor may not be familiar with cryptocurrencies. So, recruiters have to provide the necessary training and infrastructure to receive and manage crypto pay. Providing education and support to contractors to get ready to be paid in crypto can be time and money-consuming.

Read More: Cost of an employee vs. cost of a contractor

Legal and Tax Considerations When Paying Contractors with Crypto

Paying international contractors with cryptocurrency comes with unique legal and tax implications that employers must carefully manage.

1. Regulatory Compliance

Cryptocurrency regulations vary by country. Ensure you comply with local laws regarding crypto payments, anti-money laundering (AML), and know-your-customer (KYC) requirements.

2. Tax Reporting Obligations

In most jurisdictions, crypto payments are treated as property or income. Track the fair market value in local currency at the time of payment and report it accurately for tax purposes.

3. Contractor Tax Responsibilities

While employers report payments, contractors may also have tax obligations in their home country. Clearly define responsibilities in the contract to avoid disputes.

4. Documentation and Record-Keeping

Maintain detailed records of all crypto transactions, including wallet addresses, transaction IDs, dates, amounts, and exchange rates. Proper documentation ensures audit readiness.

5. Stablecoins and Volatility Management

Using stablecoins like USDC or USDT helps reduce price volatility and simplifies tax calculations compared to cryptocurrencies with high value fluctuations like BTC or ETH.

6. Legal Contracts

Draft clear agreements specifying crypto payment methods, exchange rates, frequency, and tax responsibilities. Written contracts protect both parties and provide legal clarity.

How to pay international contractors in crypto?

Paying international contractors with cryptocurrency is fast, cost-effective, and secure. Follow this step-by-step guide to streamline the process:

Step 1: Get Contractor Authorization
Obtain written or verbal consent from your contractor. Make sure they understand the process, risks, and benefits of receiving crypto payments.

Step 2: Establish Clear Communication
Agree on the preferred cryptocurrency, payment schedule, and exchange rates. Transparency helps build trust and prevents misunderstandings.

Step 3: Select the Appropriate Cryptocurrency
Choose the crypto your contractor prefers. Stablecoins like USDC or USDT minimize volatility, while Bitcoin (BTC) and Ethereum (ETH) are widely accepted.

Step 4: Calculate Payment Amount
Determine the payment based on the agreed-upon exchange rate and the contractor’s local currency. Use a reliable exchange for accurate conversion.

Step 5: Verify Wallet Address
Confirm your contractor’s cryptocurrency wallet address. Double-check to avoid errors or lost payments.

Step 6: Initiate the Transfer
Send the payment using your crypto wallet or exchange platform. Input the correct wallet address and the agreed amount carefully.

Step 7: Notify the Contractor
Inform the contractor after initiating the transfer. Share the transaction ID or a blockchain explorer link so they can track the payment.

Step 8: Monitor the Transaction
Track the transaction until it’s confirmed on the blockchain. Depending on network congestion, this may take a few minutes to a few hours.

Step 9: Maintain Records
Keep detailed records of each transaction, including wallet addresses, dates, amounts, and transaction IDs. This ensures accounting accuracy and compliance.

Step 10: Ensure Tax Compliance
Consult tax or legal experts to understand reporting obligations. Track the USD fair market value at payment and maintain documentation.

Step 11: Consider a Crypto Payroll Provider
For simplicity and security, use a trusted crypto payroll provider. They automate payments, manage compliance, and offer security measures like multi-signature wallets and cold storage.

Let’s discuss how you can get the best crypto payroll provider.

How to choose a crypto payroll provider?

Looking for your first crypto payroll provider? Here are some pointers to consider.

1. Check supported cryptocurrencies

When choosing a crypto payroll provider, ensure that the service provider supports the specific cryptocurrencies you plan to use for payments. Some renowned options like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), or stablecoins such as USDC and USDT are preferred by most contractors. You must look for a payroll provider with various options that can provide flexibility for both parties.

2. Payment security

When dealing with crypto pay, security is of the highest priority. Make sure the payroll service has strong security measures, such as:

a. Multi-Signature Wallets: A provider using multi-signature wallets for storing and managing funds offers better payment security. Multi-signature wallets require multiple private keys to authorize a transaction, making your crypto pay more secure.

b. Cold Storage: A provider using cold storage to store a significant portion of their funds is less susceptible to hacking.

c. Two-factor Authentication (2FA): Ensure the provider offers 2FA for account access. 2FA gives an additional layer of security to your account.

d. Insurance: Before selecting a payroll provider, ensure that the provider has insurance coverage in case of theft or loss of cryptocurrency funds.

3. Compliance

Cryptocurrency regulations vary from country to country. So, you must ensure that the payroll provider is experienced in cryptocurrency regulations and compliant with local and international laws. This includes:

1. Anti-Money Laundering (AML) and Know Your Customer (KYC) Compliance: When dealing with international payments, ensure that the provider must have procedures in place to verify the identity of users.
2. Tax Reporting: Make sure your crypto payment provider facilitates tax reporting. It must generate necessary reports for your accounting and tax purposes as well.
3. Legal Expertise: The provider should have access to legal expertise to navigate regulatory changes and ensure compliance.

4. Reputation and reviews

Do a proper background checking of the crypto payroll provider by reading reviews and seeking recommendations from trusted sources. A provider with a good reputation and positive track record for security and reliability is preferable.

5. User-friendly interface

An efficient and user-friendly interface can better manage your cryptocurrency payment. So, look for a provider offering an easy-to-navigate dashboard and clear transaction history.

Pay International Contractors in Crypto via Gloroots

Paying international contractors in Crypto can revolutionize the way businesses handle cross-border transactions. While it offers multiple benefits, it is essential to navigate the challenges effectively to ensure a smooth and compliant process. 

By following the steps outlined in this guide and choosing a reputable crypto payroll provider like Gloroots, businesses can embrace the power of cryptocurrencies to streamline their global contractor payments, reduce costs, and enhance efficiency.

Gloroots can make your contractor's payment management much simpler through crypto pay. We offer a user-friendly, fully automated, and efficient system to pay your contractor with cryptocurrency. 

With Gloroots, you can pay your contractors with cryptocurrency and give your business a competitive edge, allowing it to get the best talents worldwide without the hassle of traditional payment methods. 

All the risks involved in paying international contractors with Crypto can be handled. With efficient payroll management, Gloroots will also take care of payment security and compliance.

To know more about paying in cryptocurrency, contact the Gloroots team now!

FAQs

1.Can I pay contractors without a crypto wallet?

No. Contractors need a wallet to receive payments, or you can use a crypto payroll provider that handles wallets for them.

2.How do I handle crypto value fluctuations?

Use stablecoins like USDC/USDT or agree on a fiat-equivalent amount in the contract to avoid volatility issues.

3.How long for contractors to receive crypto payments?

Payments are usually completed within minutes to a few hours, depending on network speed and congestion.

4.Are crypto payments secure?

Yes. Blockchain ensures transparency and security, and using secure wallets and trusted platforms adds extra protection.

5.What if a payment fails or gets stuck?

Check the transaction ID on the blockchain; most platforms allow retries, and support can assist if needed.

6.Can I pay contractors in any country with crypto?

Not always. Some countries restrict crypto payments, so verify local regulations before sending funds.

7.What fees are involved?

Fees are generally low network or transaction fees, much cheaper than traditional international bank transfers.