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How to pay contractors in Japan

Freelancing is growing in popularity in Japan. In fact, as of 2018, the country boasted more than one million freelancers. More and more people are choosing to take this route to earn a living or make extra cash. And that means businesses from around the world can connect with talented people who are willing to work from remote and receive payments from abroad.

Before you take the steps towards hiring contractors in Japan, it’s wise to consider how you’ll pay them for the services that they provide. With the right strategy, you can avoid overspending, and you can ensure your contractors will get paid the fair rates that they deserve. In this guide, you’ll learn:

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 a contractor in Japan 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 virtual assistants or remote employees regularly.

A street in Japan at night

How to transfer money to contractors in Japan

Once you’ve decided that you want to hire contractors who are living and working in Japan, it’s time to think about the best method for paying them. Paying an international invoice can get expensive if you don’t take the right approach, here are two popular options for paying an invoice to a contractor in Japan.

Transferring using a bank

Banks are a very common method for this kind of transaction because it’s convenient, why look for another provider when you can just use your bank? Typically however, banks charge high margins and fees when you send money abroad.

When you account for the losses in the bank margins alone (which are often higher because of higher overhead costs, and to mitigate against risk), your contractor could end up with far less money than they invoiced you for.

International money transfer (IMT) providers

With an IMT provider like OFX, you can usually rest assured that you won’t be hit with the same margins and fees that banks charge. And you won’t need to sacrifice security or speed either.

How long does a money transfer take when you use OFX? At most, 3-5 days*, though some transfers might even be processed on the same-day, and most only take 1-2 days for major currency transfers. This means you can pay your invoices efficiently, and your contractors will receive payments when they need it. All in all, you can expect to save time and money when you shop around for an alternative provider.

Let's compare:

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

There are several money transfer providers to choose from, but they aren’t all created equal. When searching for the right one for your needs, consider the following:

Speed

Transferring money internationally to Japan shouldn’t take a long time. With OFX, transfers are fast, and you can submit them at any time of the day or night. You no longer have to wait for your bank to be open to initiate your transfer, and you can even do it all from your computer or from your mobile with the app.

Good rates

The fees and margins that you’ll incur when you submit an international money transfer can make a big difference to your bottom line. In fact, even though you’re hiring contractors in Japan to save money while accessing solid talent, if you’re going to get hit with high fees to pay them, it might actually make the process more expensive than it should be. Along with the margins, another area where you could save is in the currency management tools that a specialist service could offer your business.

OFX’s Forward Exchange Contracts, for example, let you lock in your preferred exchange rate and transfer using that rate at a later date. This way, you purchase the amount you need to pay your contractor for a year in advance and always offer them consistent pricing.

OFX’s Limit Orders also give you more control over exchange rate fluctuations. Just let us know what your target rate is. Then, we’ll contact you as soon as it’s triggered so you can make your transfer and save.

Human service

It can be hard to come by great customer service these days, but OFX is a company that prides itself on providing a local human service that you can access 24/7. Have questions or concerns about a transfer? Want to check in with us about your business's currency needs? We’re here to help, day or night. The same simply can't be said of other transfer providers and banks.

People in a restaurant at night

Because they aren’t your employees in your own country, Japanese contractors need to set aside money from their earnings in order to cover their taxes and follow the tax laws in Japan. This means that you might not have to withhold earnings for tax purposes. However, you will need to report your business expenses for taxes on your end.

The best places to find contractors in Japan

If you’re wondering how you can connect with the most talented contractors in Japan, we have some great news for you: there are a variety of online databases that help you find the workers you need, so it’s surprisingly easy to get started. A few examples include:

  • Upwork
  • Toptal
  • Freelancer
  • PeoplePerHour
  • Fiverr

Japanese contractors can help you grow your business

To save money, while adding talented workers to their teams, businesses around the world are opting to outsource certain tasks, from writing and design projects, to IT and customer service. And one of the top countries where you can find reliable, educated, and skilled contractors is Japan, so definitely take a look at what your options are the next time you’re thinking about hiring workers from abroad.

*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.