Hiring a remote professional from Latin America brings real benefits: skilled work, reliability, and lower costs. But payment and legal setup differ from hiring a US employee. This guide walks you through the essentials so you avoid mistakes and build a professional, trustworthy relationship from day one.
Classify the relationship correctly
Before you pay anyone, confirm whether you are hiring a contractor or an employee. This is not RemoteVetted's call—it depends on how the work is structured and your state's rules. A contractor typically:
- Works on a fixed scope or hourly rate for defined tasks.
- Controls how and when they work (within reason).
- Provides their own equipment and software.
- Has other clients or their own business.
An employee relationship involves more control: you set hours, provide tools, and expect exclusive availability.
Talk to an accountant or employment lawyer in your state. The IRS and state labor boards take classification seriously. Misclassification can trigger back taxes and penalties.
Create a contractor agreement
Your agreement does not need to be fancy, but it must exist and both of you must sign it. At minimum, include:
- Job description and scope of work. What tasks will they do? What does "done" look like?
- Rate and payment terms. Hourly or flat fee? When do you pay (weekly, biweekly, monthly)?
- Hours and availability. If they work 20 hours a week, 9 a.m.–1 p.m. EST, say so.
- Term and termination. How long is the engagement? Can either of you end it, and with how much notice?
- Confidentiality and intellectual property. Own work product or theirs?
- Independent contractor status. Confirm they are not an employee; they pay their own taxes.
Many US business owners use a simple one-page agreement or a template from a legal doc service. The goal is clarity and protection for both of you, not a legal novel.
Collect a W-8BEN, not a W-9
A W-9 is for US citizens and residents. A remote professional in Latin America fills out a W-8BEN (Certificate of Foreign Status of Beneficial Owner) instead. This form tells the IRS they are a non-US person and you should not withhold US income tax.
Steps:
- Ask them to complete IRS Form W-8BEN. You can download it from irs.gov for free. It takes 10 minutes.
- Review it for completeness. Name, address, country, tax ID (if required by their country), and signature are key.
- Keep a signed copy on file. Store it with your contractor records. It is valid for three years.
- Do not share it publicly. It contains their tax information.
If they have a US tax ID (ITIN), they may provide that. Otherwise, their country tax ID or passport number usually works. When in doubt, ask them or confirm with your accountant.
A W-8BEN is your proof that you did your homework and did not withhold US tax from a foreign contractor—keep it filed and current.
Choose a payment method
Your options have different speeds, costs, and ease:
International bank transfer (ACH or wire)
- Pros: Direct to their bank account; professional and traceable.
- Cons: Fees ($15–50 per transfer); slow (3–7 days); requires their full banking details.
- Best for: Monthly or larger payments where fees justify the transfer.
Wise (formerly TransferWise)
- Pros: Low fees (1–2%); fast (1–2 days); real exchange rates; contractor gets paid in their local currency.
- Cons: Requires both of you to set up accounts; requires their bank details.
- Best for: Regular payments; contractors comfortable with digital platforms.
Payoneer
- Pros: Low fees (2–3%); many Latin American professionals already have accounts; contractor can withdraw locally.
- Cons: Slightly higher fees than Wise; contractor must have a Payoneer account.
- Best for: Contractors who already use Payoneer; smaller, frequent payments.
Contractor payment platforms (ADP, Guidepoint, Deel, Rippling)
- Pros: Automated, compliant, handles some tax reporting; good for multiple contractors.
- Cons: Higher fees (3–5%); monthly minimums sometimes apply; setup takes time.
- Best for: US businesses hiring multiple remote contractors regularly.
Pay in USD. Converting currency is their responsibility, not yours. If you pay in USD, they manage their own conversion to local currency through their bank or platform.
Set up invoices and a fixed pay schedule
Professionals and clarity go together. Require a simple invoice for each payment period:
- Invoice number (001, 002, etc.).
- Invoice date.
- Payment period (e.g., "January 1–31, 2025").
- Hours worked or deliverables (if hourly, "80 hours at $15/hour"; if flat, "Monthly retainer for customer service").
- Total amount due in USD.
- Your company name and address.
- Their name and address.
- Their bank or payment details (or Payoneer email, etc.).
They can email you a simple text or PDF invoice, or you can create a template they fill in. Pay on a fixed day every month or period: the 15th, the last Friday, etc. Consistency matters. It shows professionalism and builds trust.
First-payment checklist
Before you send the first payment:
- Signed contractor agreement on file.
- Signed W-8BEN form received, reviewed, and stored.
- Your accountant or lawyer has confirmed contractor classification is correct.
- Payment method tested (if new platform, send a small test first).
- Contractor's payment details (bank account, Payoneer ID, etc.) verified in writing.
- Invoice received and reviewed for accuracy.
- Payment amount and schedule confirmed in writing (email is fine).
- You have documented their job title, hourly rate or flat fee, and start date.
- A record of the contract, forms, and payment details stored in one place (folder, shared drive, or accounting software).
Keep good records
Save every invoice, agreement, W-8BEN, and payment confirmation. If your accountant asks, you need to show you paid them and why. If there is ever a dispute, records protect you both. A simple spreadsheet (contractor name, rate, hours, amount paid, date, payment method) takes five minutes to maintain and is worth its weight in gold.
The bottom line
Payment setup is a one-time task that prevents headaches later. A signed agreement, a W-8BEN, a clear payment method, and a fixed schedule are the backbone of a professional remote relationship. Take time to get it right the first month, and the rest flows. If you are uncertain about tax or employment law, ask an accountant or lawyer in your state—that conversation usually costs less than a single mistake.