Looking for a cost-effective way to pay your remote employees? We have been helping remote employers keep track of work done by their employees and contractors so they can pay them correctly. We talked to our customers about the best ways to pay remote employees, and in this post we share what we learned.

Paying your remote workers on time and accurately builds a positive reputation and helps you attract better employees.

Remote employees and virtual assistants may charge by the hour or on a monthly retainer basis. If you pay a fixed salary or retainer, you can skip Step 2 as it deals with hourly payments.

Step 1: Negotiate payment

How much you pay your remote employees depends on the type of work and their location. If the remote employee is in the US, expect to pay between $20 to $80 per hour depending on experience level and the tasks performed. If the employee is in a lower-cost location such as India or the Philippines, expect to pay between $5-30 per hour depending on the work.

Factors to consider

Is this a one-time project, like the creation of a logo or brochure?
Are you hiring someone for the long term?
What is the job that needs to get done?
Does your remote employee have their own equipment or do you need to provide it?
What references can the worker provide?
What other projects like yours has this remote worker completed? Can you see examples?

When hiring hourly employees, add a clause in their contract that you will use time tracking software. Make it clear that you will use the timesheet from the software for paying the employee.

Step 2: Keep track of hours with hourly remote workers

You need to keep track of hours worked each month to pay hourly employees correctly. An automatic online time tracking software is the most efficient and practical way to do this.

The software records how long each employee works and generates an automatic timesheet. You can generate payroll or calculate the amount owed to each employee by entering the hourly pay rate in the software.

Step 3: Handle remote employee billing

A remote contractor will bill you at the end of the pay period. You verify the billed amount and work description to make sure you are paying the correct amount. It's straightforward for employees on a retainer — the only thing you need to verify is the work done in the month.

What hourly invoices should include

Worker's name, contact information, and the date
Number of hours worked and the tasks performed
Hourly rate charged
Total amount owed
Payment terms (e.g., 14 days from receipt of invoice)

You should verify the invoice from hourly contractors against the timesheet from your time tracking software. In case of a discrepancy, the software data should prevail as it's more accurate.

Sometimes a new remote worker may require partial payment upfront before starting work. This is common. After that advance, you'll pay your remote workers based on timesheets or the invoices they submit.

Step 4: Pay your remote employees

You can use online payment platforms to pay your remote workers easily and at low cost. Two of the most popular platforms are PayPal and Wise.

PayPal

PayPal is one of the oldest and most trusted online payment platforms. It works in most parts of the world and supports multiple currencies, so you can pay remote workers in almost any country. You can pay through your bank account or credit card.

Fees: PayPal charges the receiver a percentage of the transaction value. This percentage can add up on larger payments. The remote worker may also lose money on currency conversion, as PayPal's exchange rates are typically less favorable than bank rates.

Drawbacks: PayPal sometimes puts holds on accounts without warning, which can be frustrating for employees. The combination of transaction fees and unfavorable exchange rates means either the remote employee gets less than what you paid, or you pay extra to cover the fees.

Best for: PayPal is a good choice because it's easy to use and works in most countries, even if it's not the cheapest option.

Wise

Wise (formerly TransferWise) is the least expensive way to pay remote workers internationally. Its biggest advantage is its low fees and near-real exchange rates.

How it works:

Both you and your employee set up a free account, connect a bank account, and verify your identity
You log in and initiate the payment
Wise transfers money to your employee's bank account at the mid-market exchange rate

Wise has a bank account in every country it operates in. When you send money, you transfer from your account to Wise's local account. Wise then sends the equivalent from its account in the receiving country to the employee's account. Since the money never actually crosses borders, it's faster and cheaper.

Fees: Wise charges a small flat fee plus a percentage of the amount sent. It still works out cheaper than PayPal for international transfers because of the better exchange rate.

Drawback: Wise is not available in every country. But if both parties are in supported countries, it's the better option over PayPal for international payments.

How to pay remote workers in India

India is one of the largest suppliers of remote workers for US businesses. India has specific foreign exchange laws that control payments to employees and businesses in the country.

Payment options

Online payment platforms — PayPal, Payoneer, or Wise allow for easy and secure transfers. This is usually the fastest and cheapest mode. Wise offers better currency conversion rates, so many professionals in India prefer it over PayPal and bank transfers.
Wire transfer — Transfer money from your bank to the remote worker's bank in India. You'll need the employee's bank details and SWIFT code. Wire transfers are expensive (starting around $40 per transfer) and take 3-4 days to arrive.

It's good practice to inform employees when you initiate payment and check with them in 1-2 days to make sure they received the money.

Paying contractors vs. employees in India

If you hire contractors in India, establish clear payment terms and timelines in the contract. Contractors typically invoice you and you pay via one of the methods above. Make sure to obtain receipts for record-keeping.

If you hire employees in India (rather than contractors), you may be required to make payroll deductions including income tax, Employees' Provident Fund (EPF), professional tax (varies by state), and health insurance contributions. Consult with a local payroll provider or accountant to ensure compliance with Indian labor laws.

Paying local vs. international remote workers

Many US businesses have remote employees both in the US and abroad.

Local (US) remote workers — Pay via direct deposit, bank transfer, or PayPal. Make sure you're compliant with federal and state laws. Local payments are simpler but may limit your talent pool.

International remote workers — Use Wise or PayPal. International payments provide access to a wider talent pool and potentially lower labor costs, but introduce challenges like managing currency exchange rates and complying with international tax laws.

When should you pay remote workers?

Establish a clear payment schedule in your contract. The contract should specify:

Hourly workers — The hourly pay rate in your currency and how many hours the worker is allowed to bill per week or month. For international payments, it makes sense to pay monthly to minimize transaction fees. For US-based remote workers, bi-weekly is standard.
Output-based workers — Clearly specify the deliverables and how you will measure them. For example, if paying an SEO specialist by backlinks added, define which backlinks you'll accept as valid.

Make sure the remote worker invoices you correctly before you pay. This is important for accounting, as your accountant will need to reconcile payments against invoices. Pay the worker within 1-2 days of receiving a valid invoice.

Do remote workers get tax-free pay?

No. Remote workers are still required to pay the same taxes as traditional employees, including federal and state income taxes, Social Security taxes, and Medicare taxes. However, remote workers may be eligible for deductions related to their work-from-home setup, such as home office expenses and internet and phone bills.

It's important for remote workers to stay informed about their tax obligations and consult with a tax professional to ensure compliance.

Recap

Once fair pay rates are established and work is performed as expected, pay your remote employees their due. Automate the process by using reliable and affordable time tracking software. Use Wise or PayPal depending on your employee's location — Wise for international payments and PayPal when Wise is not available.

How to pay your remote workers on your virtual team