Agree on Payment Terms Before an Overseas Contractor Starts Work

Your new developer in Manila is ready to start on Monday. You’ve agreed on the work and an hourly rate or total project cost, and everyone’s excited. Then the first invoice arrives in pesos, a week earlier than you expected, and your contractor receives a lower amount than they were counting on because a bank charged a transfer or conversion fee (or both) along the way.

None of this is anyone’s fault. But it’s what happens when you don’t sort out payment terms from the start of the contract. Our guide walks through the terms you need to agree on with your overseas contractor before work begins, what each one means, and how to put your agreement in writing so every payment goes the way that both of you expect.

The short answer

Before an overseas contractor starts, agree on these six factors in writing: the rate, currency, payment schedule, who covers transfer fees, how they’ll be paid, and paperwork. Think of it like a restaurant menu that lists the price before you order. Nobody enjoys a surprise when the bill arrives, and the same goes for an invoice.

Why payment terms matter more internationally

Paying a contractor in your own country is usually one currency, one banking system, and one set of tax rules. Paying someone abroad adds an exchange rate, banks in separate countries, different holiday schedules that can cause delivery delays, and different tax forms.

Not to mention, two people potentially making different assumptions about all of the above. Agreeing on terms upfront gives you a shared plan and provides clarity. It also protects the working relationship, which matters if you hope to work with this contractor long term.

6 payment terms to agree on upfront

1. Contractor’s rate and what it covers. Say whether you’re paying by the hour, per project or milestone, and what’s included. If revisions, meetings, or software costs are extra, write that down now.
2. Currency. You can agree to pay in USD or another currency. However, you also need to agree on who carries exchange rate risk, or the price of converting one currency to another. When you agree to pay your contractor in their currency, then they get to receive a predictable amount, but your costs can shift. If you pay in USD, then your contractor will absorb this cost.
3. Payment schedule and invoicing. Agree when invoices will be sent and when they’re due. “Net 15” means payment is due 15 days after the invoice date. For project work, many businesses pay a deposit upfront and the rest at agreed-upon milestones. Ask for all invoices to include the contractor’s legal name, the period or milestone covered, that invoice’s amount, and the currency.
4. Who covers transfer fees. If you pay by international bank wire, your bank’s form will ask you to pick a charge code. OUR means you, the sender, cover all charges. SHA means charges are shared, and BEN means the recipient covers them all. With SHA or BEN, intermediary banks, or banks that pass the payment along on its route, can deduct additional fees, so your contractor receives less than what they invoiced. If you are using an international bank wire, agree on the charge code that you’ll use, or agree that the contractor will receive the full invoiced amount. Here’s what an international wire really costs, beyond the fee on your screen.
5. Payout method. When it comes to your contractor receiving their money, bank deposit is a common method, but in many countries contractors prefer a mobile wallet or another local option. Ask early, and agree how payout details will be shared and updated. Settle on one secure channel, and treat any surprise “new bank details” email with caution to avoid instances of fraud.
6. Tax paperwork. U.S. businesses generally collect Form W-8BEN from individual contractors based abroad before the first payment (Remitly’s article on the IRS requirements for paying foreign contractors helps explain that process). Other countries have their own rules, so check with an accountant depending on where you’re based. While you’re at it, agree what happens if the project is paused, cancelled, or runs late on either side.

Payment terms at a glance

Put your payment terms in a written contract

We recommend a written contract with every contractor you hire, whatever the size of the project. A contract records what you’ve both agreed on, including the rate, currency, payment schedule, and who covers transfer fees. That gives you and your contractor a clear reference if questions come up later.

What your contract should include depends on your business, the work, and the laws where you and your contractor are based. A lawyer can tell you what your specific project needs, so speak with one before work begins.

Once your contract is signed, keep it in one place with the contractor’s tax form and invoices. When an invoice arrives, anyone on your team can check it against the contract before paying it.

Consider sending your first payment on schedule, or a little early. That confirms the payout details are correct before larger payments follow.

Mistakes to avoid

• Leaving the currency unstated. “3,000” on an invoice means very different things in dollars and pesos.
• Forgetting about fees in transit. A shortfall from intermediary bank deductions can turn into an awkward top-up payment and another round of fees. Learn why overseas business payments get delayed too.
• Promising a payment date you can’t control. Agree when you’ll send, and allow for delivery time and public holidays in both countries.
• Collecting bank details over chat or email. Details get lost, go out of date or can be changed by a scammer. Use one agreed, secure route.
• Skipping the tax form. Collect it before the first payment, not at year-end.

Our guide to common international payment mistakes covers a few more.

How Remitly Business helps you stick to the payment terms you agreed

Clear terms work best when your payment tool makes them visible. With Remitly Business, you see the fee, the exchange rate, and the amount your contractor will receive before you confirm. That makes it straightforward to pay exactly what the invoice says, in their currency.

You can send to 175+ countries in 100+ currencies, from the bank account you already use, and track each payment as it moves. Receipts show your business name, which helps with your records.

If you don’t have a contractor’s current payout details, Send by Link lets you share a secure link so that they can enter their own bank/wallet/cash pickup information so that you don’t need to collect or store it.

Explore Remitly Business

Common questions

What payment terms should I agree with a contractor abroad? Agree on the rate, currency, payment schedule, fee coverage, payout method, and tax paperwork you need. Put these details in writing before the work starts.

Should I pay an overseas contractor in USD or their local currency? Either can work, but agree on the currency upfront so that both of you understand who carries the exchange rate risk, or the price of converting one currency to another. When you agree to pay your contractor in their currency, then they get to receive a predictable amount, but your costs can shift. If you pay in USD, then your contractor absorbs this cost.

Who pays the fees on an international payment to a contractor? It depends. With a bank wire, the charge code you pick (OUR, SHA or BEN) decides who covers the bank charges along the way.

Do I need a contract to hire a freelancer overseas? We recommend a written contract for every freelancer you hire, whatever the size of the project. What it should include depends on your business, the work, and the laws in each country, so speak with a lawyer about your specific situation.