Top 5 Things to Keep in Mind When Hiring International Contractors (2026)

Why companies hire international contractors

Hiring international contractors has gone mainstream. More than half of companies surveyed in Remote's 2025 Global Workforce Report expect to increase international hires in the year ahead, and the shift is no longer mainly about saving money. It is increasingly about reaching talent that is scarce at home.

AI is accelerating this fast. According to Deel's 2026 State of Global Hiring Report, general AI trainer roles grew 283% across borders in 2025, the single fastest-growing cross-border role on its platform, now spanning more than 70,000 workers across 600 or more organizations. Those workers cluster in a handful of countries: after the US, the largest pools of AI trainers sit in India and the Philippines.

The pattern shows up across functions. Companies hire software and AI engineers in India and Poland, English-fluent AI trainers, support, and operations talent in the Philippines, and specialized product and design talent wherever it happens to live. The common thread is hiring on skill rather than postcode: you bring someone on for a specific project or a skills gap and wind the engagement down cleanly when it is done, which keeps your business lean.

The flip side is that hiring across borders introduces a few things worth getting right: the contract, tax forms, a couple of compliance points, and how you actually pay people. For a contractor relationship, most of it is simple once you know what to look at. Here are the five things that matter most.

1. Keep the relationship clear: contract plus invoices

If you're hiring an independent contractor, you're on solid ground, and you don't need an EOR or a local entity to engage them. What keeps things clean is mostly common sense plus two pieces of paper.

First, a written contract. It should define the scope and deliverables, payment terms, and, just as importantly, intellectual property ownership and confidentiality. The IP point matters more than people realize: in many jurisdictions, including India, a contractor keeps ownership of what they create unless the contract explicitly assigns those rights to you. If a developer writes your code or a designer builds your brand assets and the agreement is silent on IP, you may not own the output you paid for. Include a clear IP assignment clause and confidentiality terms, and localize the agreement where you can, since enforceability differs by country (non-competes, for example, may not hold everywhere). If the contractor handles customer data, be mindful of local data privacy law (GDPR in Europe, India's framework, and others). A good contract is what establishes the engagement as a commercial relationship between two businesses, and it is also what protects what you are paying for.

Second, invoices. A contractor bills you as an independent business, and you pay against that invoice. Beyond keeping your books clean, the invoice documents the relationship: the contractor is running their own shop and charging you for services. A consistent invoice-and-payment record is one of the simplest things that keeps an engagement clear.

2. Collect the right tax documentation before you pay

For a US company, the tax paperwork for a foreign contractor is lighter than most people expect, but it has to be done before money moves.

If your contractor is not a US person and performs all their work outside the United States, you generally do not issue a Form 1099-NEC, and you do not withhold US income tax. What you do instead is collect a Form W-8BEN (for an individual) or W-8BEN-E (for a business entity). This form certifies the contractor's foreign status and is what protects you from the default 30% withholding requirement on payments to foreign persons.

A few practical points:

One exception: if a contractor performs any work while physically present in the US, that portion may need to be reported differently. For someone working entirely from their home country, that does not apply. [internal link: filing W-8BEN and W-8BEN-E]

3. Be aware of permanent establishment (PE) risk

This is the one most first-time hirers have never heard of, and it is worth understanding, though for most contractor relationships it simply won't apply.

Permanent establishment risk arises when your activities in another country rise to the level where that country's tax authority treats your company as having a taxable presence there. If that happens, you can become liable for corporate tax in that jurisdiction. The key point: it is triggered by what the contractor does on your behalf, not by the fact that you have a contractor at all.

The activities that raise PE risk are the ones that make a contractor look like they are running your business locally:

A developer, designer, or analyst delivering project work does not create this exposure. If you are placing someone in a revenue-generating or senior representative role abroad, that is the moment to take tax advice. For ordinary contractor work, you keep decision-making at home and there is nothing to manage.

4. Sort out payments, because the hidden costs add up

You have found the talent, set up a clear relationship, and signed a solid contract. Now you have to actually pay them, reliably and without quietly overpaying in fees.

This is where money leaks. The headline transfer fee is rarely the real cost. The real cost is usually the FX markup, the gap between the true mid-market exchange rate and the rate you are actually given, and it is invisible because it never shows up as a line item.

The real cost of paying via PayPal, on a $3,000 invoice:

That is roughly 8% of the invoice gone. A traditional bank wire is not much better once you add the FX spread (around 3%) to a flat fee that can run $50 or more per transfer, and every payment is a manual instruction. Multiply either across ten or twenty contractors paid monthly and it becomes a meaningful, recurring drain, and a quiet source of friction with contractors who notice the shortfall.

Here is how the main options compare. These are all-in monthly costs for paying 20 contractors $3,000 each ($60,000 total), including the FX markup each method hides in its exchange rate.

Skydo's cost here is $200 subscription (the tier for 10 to 50 contractors) plus $300 FX (0.5% on $60,000), shown upfront with no hidden markup. Note the pattern: some options that look cheap on fees cost the most once you account for the FX buried in the rate. But cost is only half the story. What none of these table rows show is what happens to your contractor after the money lands, which is the next point.

For a deeper comparison of methods and fees, see our guide on how to pay remote workers in India.

5. Don't forget the receiver's side: compliance paperwork

Here is the thing many payment tools overlook, and it's the part that quietly lands on your contractor.

When money crosses a border into India, the contractor needs a Foreign Inward Remittance Certificate (FIRC, sometimes issued as a FIRA, Foreign Inward Remittance Advice) to report the income and reconcile GST on the export of services. It is not optional paperwork. It is what lets them file cleanly and treat the money as proper export income rather than an unexplained credit in their bank statement.

The question is how much work it takes, and who does it. With a bank wire, the contractor's bank can issue a FIRC, but it is neither automatic nor free: they have to request it, submit transaction details, pay a per-certificate fee (HDFC, for example, charges around ₹200 plus GST each), and wait. PayPal has improved here and now offers a free weekly digital FIRA from a business account. Money transfer apps depend on how you pay: if you send a batch transfer and your contractor simply receives the money in their normal bank account, they typically get only a no-objection certificate and still have to obtain the actual FIRC from their bank; they get an automatic certificate only if they open and hold their own receiving account on the platform, an extra step with its own fee. Payroll and contractor platforms are built for the payer's side, collecting tax forms, onboarding, US reporting, and route the payment through an underlying transfer rail, so they do not issue the contractor's FIRC at all. It falls back to the contractor and their bank.

This matters because it shapes how your contractor experiences working with you. A contractor who has to chase their bank, open another account, or pay per certificate feels the friction even when your payment arrived on time. One whose paperwork just appears, automatically and free, does not. The tools that get this right are built with the receiver in mind, not just the payer.

You usually do not need an EOR for a contractor

A quick note, because most guides on this topic are written by EOR providers and steer you toward one. An Employer of Record exists to employ people for you in another country, with payroll, statutory benefits, and tax withholding. That is the right tool when you are hiring an employee and need a legal employer abroad.

For a contractor, you do not need an EOR. You can engage and pay them directly. What you need is a clear relationship, the right tax form, a solid contract, and a clean way to pay. Reaching for an EOR you do not need adds cost and complexity to a relationship that is meant to be simple.

Skydo: the simpler way to pay international contractors

Once the relationship, documentation, and contract are handled, paying your contractors should be the easy part. That is what Skydo is built for.

What it costs. A flat monthly fee based on team size: $50 for 1 to 10 contractors, $100 for 10 to 50, and $200 for 50 to 200, plus a 0.5% FX markup per transaction. You only pay in the months you actually send payouts, so nothing sits idle.

Compliance for both sides. Skydo is RBI-authorized as a Payment Aggregator and FEMA-compliant. Every payment you send is documented and audit-ready, and every recipient in India automatically receives an FIRA per payout, so your contractors are not chasing their bank for documentation at tax time.

No manual reconciliation. Skydo syncs with QuickBooks, mapping payments and tagging vendors automatically.

Fast to start. KYC, recipient verification, and your first batch payout can be done in minutes.

Try Skydo Payouts and send your first bulk payout to your contractors.