How to pay independent contractors in the UK
If you’re hoping to hire professionals who are experts in their field, but you want to save money and be able to access talent from around the world, a great place to start is the United Kingdom. With so many people taking the self-employed, freelance route, there’s no better time than now to connect with pros who can help you achieve your business goals.
Hiring independent contractors from the UK is one thing; paying them is another step to consider. That’s why we’ve created a short guide below to help you along.
How to pay an international invoice
1. Negotiate currency exchange rates
Talk to your remote employees to find out if they would be willing to accept payment in your domestic currency. For example, if you’re a business in the United States and you need to pay a company in China, you may find that many businesses are happy to be paid in dollars.
2. Find a money transfer provider that works for you
Paying for an international invoice to an independent contractor in the UK doesn’t have to be complicated or expensive. With the right provider, you can transfer your money easily online, and at a better rate. We’ll compare two popular options for making an international money transfer later in this article.
3. Mitigate your currency risk
Currency risk is the risk that a business or individual’s financial performance or position will be impacted by fluctuations in the exchange rate. Depending on the provider you choose, you can access tools to help mitigate risk like forward contracts to protect against any unfavourable currency movements. This will help with offering consistent pricing if you need to pay independent contractors in the UK regularly. Whilst a Forward Contract can be an excellent tool in your risk management strategy, there are certain risks associated with this product. You can find more information here.
How to transfer money to independent contractors in the UK
When it’s time to pay your independent contractors, you might immediately think that using your bank is the way to move money across borders. But there’s a better way: using an online money transfer service. Here’s how two popular options stack up:
Transferring with a bank
The problem with banks is that, when it comes to moving money internationally, they typically charge high margins and fees that can really cause your bottom line to take a hit, especially if you hired independent contractors from the UK in an effort to save some money.
Your contractor might end up with less money than they deserve when everything is said and done, or you might be forced to cover the cost of all of those fees to keep your contractor happy.
Transferring with an international money transfer service
When you use an online money transfer service like OFX, you can avoid all of those bank margins and fees, and that means you can save money and pay your contractor what they deserve.
With OFX, you can transfer your money anytime because we’re open 24/7. On top of that, you can rest assured that the transfers will occur swiftly and securely. And you can submit every transfer online or through the mobile app, so you don’t even have to leave the office.
|Fixed fees||Exchange rates margins||Support|
|OFX||Low to no fixed fees, depending on where you’re sending from.||A small margin that’s typically lower than the banks’ margins.||Available 24/7 over the phone to provide helpful human support for all currency-related enquiries.|
|Standard bank||Hefty fixed fees, sometimes around $30, just to make a transfer.||Many banks can charge up to a 5% margin on the interbank rate, depending on how much you’re transferring.||Banks operate within certain hours of the day, so you can’t always get the support you may need.|
What your business should look for in a global money transfer provider
Although there are multiple money transfer services to choose from, there are several reasons why OFX stands out against the rest, any what your business should be looking for:
Sending money internationally can sometimes take quite a while, but no one wants to leave their independent contractors waiting for their pay after a project has been completed. That’s why OFX makes it a point to move money quickly, without sacrificing security. Most transfers will only take anywhere from one to five days, with many of the major currencies taking anywhere from a same-day transfer, to 2 days*.
An online provider like OFX don’t charge the margins and fees that banks typically tack onto your transfer. You can also use handy currency charts that can help you strategically plan transfers so you can save money when having your currency converted into the British pound (GBP). Beyond that, we also offer Forward Exchange Contracts and Limit Orders to help you further protect yourself against exchange rate fluctuations.
When hiring independent contractors from the UK, these tools can be especially helpful because of the volatility that the GBP has been experiencing since Brexit negotiations started. And with the October 31, 2019 deadline ahead, more volatility is expected.
OFX’s Forward Exchange Contracts let you lock in a preferred exchange rate for 12 months. Even if you aren’t ready to pay your overseas contractor just yet, but you want to lock in a favourable exchange rate, you can do it with a forward contract. And, again, if you want to avoid Brexit volatility, you can lock in a great rate today that will last a year and enable you to provide consistent payments to your independent contractors, regardless of the outcome.
Limit Orders are another way to protect yourself against currency fluctuations. With a limit order, you set a target rate that you want to take advantage of. Then, the currency specialists at OFX watch the market for you while you go about your business. We’ll contact you once your target rate has been triggered so you can submit your transfer, or roll it into a Forward Exchange Contract.
At OFX, we pride ourselves on going above and beyond when it comes to customer service. That’s why we have supportive staff available to address your questions and concerns 24/7 over the phone or via email.
Legal and tax requirements for paying independent contractors in the UK
If your business isn’t located or operating within the United Kingdom, and you’re hiring freelancers who are operating strictly as independent contractors (not employees), you may not be responsible for covering any taxes or benefits on their behalf. Instead, the contractor might need to set money aside from their pay in order to cover taxes according to local UK tax laws.
The best places to find independent contractors in the UK
The internet has connected people from all over the world, making it easier to find independent contractors from the UK who would be the perfect fit for your needs. Here are a few of the top places to start your search:
- Freelance UK
- Freelancers in the UK
Hiring and paying independent contractors from the UK is easier than ever
With the right resources and tools, including a money transfer provider like OFX, you can make the most of hiring contractors from abroad, and you can grow your business with the help of skillful individuals from the United Kingdom.
*Delivery times are indicative and measured in business days from the time your funds are received by OFX.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.