Paying overseas contractors

[Phil Steinmeyer]

I'm talking to some freelancers located overseas (Eastern Europe, Southeast Asia, etc). If I decide to work with one or more of these contractors, how does one typically pay them? I'm interested in both the mechanics (PayPal, Western Union, Fed Ex them a check, Wire Transfer), and the surrounding details (does one usually pay up front, weekly, etc.)

Any other gotchas or tips in dealing with contractors in 2nd world countries are also welcome.

[svero]

I think wire transfers to bank accounts are one of the only cost effective reasonable ways to do it. Paypal is ok, but its not really available in the areas you mention. I had my paypal account canceled when I tried to access it from se asia and they even went as far as warning me not to use a proxy server. I've tried to sign up to a number of similar services like egold etc... and they all sucked and were riddled with problems. Western Union is very hard to use. The last time I tried to use them the paperwork was nightmarish and the fees are high. It may depend which country you're sending to, but they wanted me to get a photocopy of the recipients passport and a signed letter and all kinds of nonsense. Sending a check is often not so great, because the contractor in the other country will have to wait, sometimes as long as several months, to clear their deposit.

As for payment schedules it's really up to you and them to work out what's mutually ok. I've done it with people in hungary and other countries and in my case I did a 1/2 up front 1/2 on delivery payment via wire transfer.

[kerchen]

I second svero's recommendation to avoid using Western Union. A while back I transferred some money to a South American contractor using WU and while I didn't have to go through any paperwork hassles (I was only transferring a few hundred dollars), the fees for the transfer were unreasonable (IMO). As far as working out a payment schedule, do whatever is comfortable for both you and the contractor and spell out the details in a written, signed agreement. Having a signed agreement probably won't do you much good from a legal standpoint (filing a lawsuit in another country is probably not worth the hassle), but it can go a long way towards helping to settle disputes before they get ugly.

[Sharkbait]

I've had no trouble at all using Western Union (within Europe) although the fee is substantial.. at about 15 euros per transfer. Because of this, it is better to lump all payments into one transaction to reduce transfer costs.

As for agrements, I second (third :) ?) kerchen and svero.. there's little that can be reasonably done in case of a dispute, but a signed piece of paper will at least show that the work is done as 'work for hire' and that it is legally owned by you, as the commisioner of the work.

[Mark Currie]

I've used Western Union to send money to Serbia.

I work with a contractor that I trust. About a year or so ago, ATM machines using the Visa network were installed in this contractor's home city. I sent him an ATM card, and I began filling the ATM card so that he could withdrawal money with much less fees. It seemed to work, then one time he tried to withdrawal about $50 and it didn’t work--however the ATM card still had the $50 deducted. After that debacle, we went back to using Western Union. I've never had any issues with Western Union, except for high fees.

[Duke]

My friend is doing contract work (web programming) and his clients are from the 1st world ( :) ).
He opened an EURO account in the local bank, and also opened an account with www.2checkout.com.
His clients pay to his 2checkout account, and 2checkout wires him the money to his bank account.
I believe this cuts down the costs of wire transfer, because 2checkout charges less than if the client would wire money directly to my frirend's bank account (I'm not sure, but I think if he waits 'till there's over $1000 for transfer, he gets it with no wire charge).

[gpetersz]

wire-transfer is the best ,but how cost effective it is depends on your location and the recipient's location. Sometimes I experienced that from Mississippi State to Hungary the cost was $30 for $150 what is horrible, even WU would had been better. While from Germany to Hungary it was some 5 euros.
From Alaska to Hungary for $120 it was $20 with WU.
PayPal does not work for many countries (for example Hungary is a member of EU for a year now, and it still doesn't wrk).

PayPal is the cheapest but les usable (for cheaper contractors in Eeastern Europe or South-East Asia).
Wire-transfer works in many countries, but the cost changes drastically (if I understood right it depends of the number of banks the money travels through).
WU works in 190 countries (nearly all countries covered) but charges very much. For example $1000 (from the US to Hungary) costs $53. (what is not that bad if you compare it to the $150 / $30 pair...)

There are other online proccessors similar to PayPal, but I don't even trust PayPal, so I don't trust anybody else. (it is MY personal opinion)

[Emmanuel]

If your contractors are also doing games for themselves, talk them into setting up a Plimus (or Regnow, or whoever) vendor account and move funds to them, it won't cost you anything.

Otherwise, do a wire transfer (which can be expensive, depending where to and where from you're wiring), or Western Union. I've used both without problems.

Best regards,
Emmanuel

[electronicStar]

The problem with western union.
The problem with western union is not so much the fees (although they are high: 15€ for a 70€ transfer). The problem is when you have to change currency (which happen in 99% of the WU transactions).
The prroblem is that WU considers itself as a bank establishment (sorry if my english is not so good here) , well that enables them to set their own exchange rates and of course they are far less favorable than the market rates.
If you transfer from euros to dollars or from dollars to an asian currency you'll lose some money there. You have to be careful and send more than you have to.

[gpetersz]

Well, yes and no.
I actually went to a bank (where the nearest WU office were placed) and
the bank offered me that I should receive the money (on paper) in the original currency (US dollars) and they change it for me at once (without even seeing the dollars) with their rate (what was significantly better then WU's).
Yes, if you change currency that sucks (it sucks when you wire transfer as well, the changing made automatically, only not when you have an account with the same currency as the sender's), it sucks less if you change it somewhere else than at the WU.
:p