Income Artist

A Guide To Paying Filipino Freelancers From The US

Author: Jimmy Barron
Published:February 24, 2023
4 mins 59 secs

Globally, when people think of the Philippines, they conjure white sandy beaches, crystal clear ocean, palm trees and a balmy climate.

While this country has an abundance of natural beauty, it is also a country of industrious and well-educated people.

A wealth of skilled human resources has led to the Philippines becoming the 6th fastest-growing freelance market in the world, with employers rating Filipino freelancers highly on one Upwork – one of the largest freelancing internet sites.

Upwork users rate Filipino freelancers as 4.7 out of 5 – a clear indication of their ability and reliability.

This article aims to give an overview of what steps to take when paying Filipino freelancers.

Paying Across International Borders

Though reputable in their work, paying over international borders can be tricky as payment methods must be chosen that work both for the employer and the freelancer.

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To assist with this, some websites will assist employers in finding out which is the cheapest way to pay Filipinos from the USA.

Legalities and compliances in the country of both the employer and the freelancer also need to be carefully considered.

In addition, employers and freelancers must anticipate variable and fluctuating exchange rates and transfer fees. 

If a freelancer is undertaking piecework – such as article writing, researching, or validating an address, it is acceptable to pay using simple transfer technology.

If freelancers are in long-term projects, the process becomes more complex due to other factors – such as attendance, sick leave, travel, and out-of-pocket expenses – adding complexity to an international payroll.

In these cases, it can be easier to insist that the freelancer register as a contracting company, submitting an invoice for payment, and not be classified as an employee.

“Know Your Client” Checks & Tax

“Know Your Client” (KYC) checks is a critical step – freelancers must be positively identified before considering paying them for work undertaken.

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All countries now have stringent money laundering legislation and anti-terrorist funding legislation – as an employer, you must ensure that your freelancers are positively identified.

The Government of the Philippines has a facility whereby the identity of a Filipino can be verified.

In addition, employers must adhere to any tax laws at home and in the country of residence of the freelancer.

Payment Terms And Legal Jurisdiction

The payment terms – including the currency – must be unambiguous. Again, this is easy to achieve for piecework, but longer, more complex projects may require specific milestones before payment.

To avoid any disputes, legal jurisdiction must be established and be part of any negotiations before the freelancer/contractor starts working. Follow these best practices for paying a Filipino freelancer:

Positive Identification Is Imperative

all Filipinos have a national identification card, called a PhilID.

There are three significant statutory deductions that employers must deduct and forward to the relevant authorities. These are: 

  • Social Security. This is social insurance against old age, maternity, illness and disability.
  • PhilHealth. The health insurance program is run by Philippine Health Insurance Corporation, and provides healthcare to Filipinos. 
  • Home Development Mutual Fund. This fund provides short-term housing loans to Filipino workers – commonly known as Pag-IBIG. 

Ensure that there is a clear consensus on the non-disclosure of confidential information and ownership of intellectual property.

The parties should have a signed agreement regarding what information may be disclosed and where the intellectual property rights lie.

Process all payments in a manner conducive to the employer and Filipino freelancers.

Payment Methods Available 

First, it is important to understand what payment methods are available to pay Filipino freelancers. Each method has its quirks, time delays and costs.

It is wise to investigate the various techniques and agree with the freelancer on the process they wish to use. The following list gives an overview of different methods of payment available. 

Credit And Debit Cards

This method is possible, but there are likely to be high charges involved. These charges depend on the bank used and the type of credit or debit card the freelancer holds.

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The freelancer should inquire at their bank what additional costs there will be before selecting this form of transfer.

In addition, this type of transfer has a 3-5 day delay between funds being deposited and received.

Wire Transfers

Wire transfers are a widely-used method of sending money from the USA to the Philippines.

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They are safe, secure, convenient and reliable – but can often be slow and attract additional fees.

Most bank transfers will take 1-2 days to process, and there are likely be outgoing fees, currency exchange fees and incoming fees.

Wire transfers must use a SWIFT/BIC code to ensure that the transaction goes to the correct bank and account.

Again, before choosing this method, the costs that will be associated with a wire transfer should be investigated.

Cross Border Digital Remittance Service

Many services will ensure that an international transfer is secure and safe. These remittance services are high-speed, with at most a one day delay.

However, most services will complete the transaction within only a few minutes. To find the best international remittance service for sending money from the USA to the Philippines, compare services to understand which will cost the least and transfer in a timeframe that is acceptable for the employer. 

Concluding Summary

Paying for freelance work from the Philippines depends to a large extent on the nature of the work undertaken by the freelancer.

If the project is large and involves months or years of work, clearly understanding the statutory payroll requirements in the Philippines is essential.

In this case, it may be simpler to insist that the freelancer sets up a Sole Proprietorship – the most straightforward business organization in the Philippines.

The freelancer will submit an invoice on an agreed basis, and the American company will pay that invoice.

In this way, all the legal requirements for the Philippines rest with the freelancers. For simple piecework, any payment method will work; agreeing on a fast, secure plan that attracts the lowest fees is best.