10 min read

How to Pay Independent Contractors in South America: A Complete Guide

Contractor management


Gabriele Culot


March 11, 2024

Last Update

July 03, 2024

Table of Contents

Employing international contractors in South America

Paying international contractors in South America

Legal and regulatory landscape

Compliance and documentation

Adapting to South America's business ecosystem

Supercharge your contractor management with Deel

Key takeaways
  1. South American region businesses have a diverse range of options when it comes to paying their contractors, each with specific features and limitations
  2. Ensuring contractor relations, including payment and classification, are legally compliant is vital to the success of any business
  3. Understanding the regulatory landscape demands staying informed on tax obligations, including self-employment tax and accurate contractor reporting practices

The economic landscape of South America is rapidly embracing the digital age, creating an interesting environment for international contractors and the gig economy at large. US companies increasingly rely on this talent pool, driven by remote work's ascent and the availability of diverse, skilled professionals across different time zones.

However, navigating the complexities of compliantly hiring contractors requires an understanding of local laws, employment laws, labor laws, and tax obligations specific to Latin American countries.

Employing international contractors in South America

Employing international contractors in South America presents unique challenges and opportunities. Companies must navigate the intricacies of currency conversion, varying exchange rates, and international payments, often making wire transfer and SWIFT payments common choices due to their reliability for larger transactions. However, the fees associated with these methods and potential delays due to time-consuming bank procedures can become a hassle.

To minimize these issues, many businesses turn to digital payment platforms such as PayPal, Wise, and even regional providers that offer more favorable exchange rates and lower transaction fees. These platforms support direct deposit into a contractor’s bank account, simplifying the money transfer process.

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Paying international contractors in South America

The payment ecosystem in Latin America includes traditional bank transfers, international payment platforms like PayPal, Wise, and Western Union, and, increasingly, local digital payment solutions. The choice of payment method impacts how smoothly transactions are processed and how compliantly and conveniently contractors are paid in their local currency.

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Global digital payment platforms


As a global leader in digital payments, PayPal facilitates online money transfers worldwide and is widely accessible in South America.

  • Well-established with a high level of trust and security
  • Supports payments and money transfers across a broad range of currencies
  • User-friendly interface for both personal and business accounts
  • Transaction fees can be high, especially for currency conversions and cross-border payments
  • Account limitation or suspension issues can sometimes occur without a clear explanation


Skrill specializes in low-cost international money transfers and offers a platform for both personal and business transactions.

  • Easy to send and receive international payments
  • Offers a prepaid card linked to the account for easy access to funds
  • Competitive exchange rates for currency conversion
  • Fees for transactions and inactivity can accumulate
  • Verification process can be lengthy and complicated


Targeting professionals and businesses, Payoneer offers cross-border payments and transactions in multiple currencies.

  • Provides receiving accounts in several major currencies, enabling easy international customer payments
  • Good integration with freelance marketplaces and global companies
  • Offers a debit card for direct access to funds
  • Fees for withdrawals and currency conversions
  • Customer service issues have been reported

Wise (formerly TransferWise)

Offering borderless accounts, Wise is well-suited for contractors and businesses dealing with multiple currencies.

  • Transparent fees and real exchange rates
  • Multi-currency account allows for receiving and holding funds in different currencies
  • Makes international payments simple and cost-effective
  • Not a direct payment solution, primarily for transfers
  • Account setup requires verification, which can take time


Although primarily known as a business and e-commerce-focused payment processor, Stripe's global infrastructure supports payments in several different countries, including many in South America.

  • Comprehensive API for integrating payment services directly into websites and apps
  • Supports a range of currencies and payment types, including credit cards and mobile payments
  • Provides tools for managing subscriptions, invoices, and online marketplaces
  • More complex to set up, aimed at developers and businesses rather than individual users
  • Fees can be heftier than some other options for certain transactions or payment types


While originally launched as a travel card, Revolut has expanded its offer to include international money transfers and currency exchange.

  • Offers bank accounts in multiple currencies with great exchange rates
  • Includes budgeting tools and allows for cryptocurrency exchange and stock trading
  • Free international money transfers at interbank rates with premium plans
  • Limited availability in some South American countries
  • Monthly limits on free currency exchanges and ATM withdrawals, with fees applied after that

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Local digital payment platforms


MercadoPago, an extension of the MercadoLibre e-commerce platform, offers a comprehensive digital wallet and payment service across several South American countries.

  • Broad acceptance in online and physical stores
  • User-friendly interface
  • Feature-rich, supporting bill payments, mobile top-ups, and QR code payments
  • Fees for certain transactions, such as withdrawing money
  • Mostly limited to countries where MercadoLibre operates


Pix is a recent payment innovation facilitated by the Central Bank of Brazil, enabling instant, 24/7 bank transfers.

  • Free for individuals to use for transferring money
  • Instantaneous transactions at any time
  • Wide adoption among Brazilian banks and businesses
  • Primarily available in Brazil
  • Requires a Brazilian bank account


PagSeguro provides a range of financial services, including a digital wallet and payment processing for businesses in Brazil.

  • Comprehensive merchant services
  • Offers POS devices and online payment solutions
  • Supports installment payments without interest
  • Fees for certain transactions, such as money withdrawal
  • Mainly targets the Brazilian market


Operating in multiple South American countries, PayU offers online payment solutions tailored for the regional market.

  • Supports a variety of local payment methods
  • Ideal for businesses looking to accept online payments
  • Offers fraud management services
  • Setup and transaction fees may apply
  • Tailored more towards merchants rather than individual contractors

Bank transfers

Several countries in South America have established their own real-time electronic funds transfer systems, facilitating direct bank transfers and money orders efficiently and securely.

  • Secure and direct transfers from bank to bank
  • Integrated within the local banking ecosystem
  • Often low-cost or free for individuals
  • Limited to domestic transactions within each respective country
  • Requires both sender and receiver to have local bank accounts

Crypto payments

With the rising adoption of cryptocurrencies, some contractors and businesses in South America are beginning to accept payments in Bitcoin, Ethereum, and other digital currencies.

  • Cross-border transactions without currency conversion
  • Potentially lower transaction fees compared to traditional banking
  • Enhanced privacy and security
  • High volatility of cryptocurrencies
  • Regulatory uncertainty in various countries
  • Not universally accepted

Other payment methods available in South America

Beyond the options mentioned above, more traditional methods like cash, credit card payments, and checks continue to play a role in the Latin American contractor payment landscape. However, it’s essential to weigh their practicality against the backdrop of modern business transactions. 

While small businesses or individual contractors who prefer traditional banking relationships and straightforward transactions might find these methods align with their operational style, these traditional methods may not mesh well with modern compliance requirements, increasing the risk your business may be exposed to.

Moreover, the evolving digital economy and the push toward electronic payments suggest that the relevance of cash and checks may continue to wane in favor of more secure, efficient, and traceable payment solutions.

The legal framework governing self-employed contractors and full-time employees in South America varies significantly across countries. Misclassifying employees as independent contractors is a crucial issue with severe implications, including penalties, back taxes, and potential legal action.

Companies must understand and adhere to local employment laws, which dictate everything from social security contributions to severance pay and health insurance obligations. Employers of record and global payroll providers can offer valuable assistance in managing these complexities, ensuring that companies can compliantly engage talent across borders.

What is misclassification?

Misclassification happens when an employer incorrectly classifies an employee as a contractor. This distinction is crucial because it affects tax obligations, employee benefits eligibility, and labor law compliance.

Why is it important to avoid misclassification?

  • Legal and financial consequences: Misclassification can lead to penalties, back taxes, and legal repercussions
  • Compliance with labor laws: Correct classification ensures adherence to applicable labor laws, including minimum wage, overtime, and employee benefits
  • Reputation: Proper classification practices uphold a business’s reputation and integrity in its professional relationships and with regulatory bodies
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Compliance and documentation

Compliance with local and international tax laws is paramount when engaging with foreign independent contractors. US companies, for example, must familiarize themselves with form W-8BEN, which independent contractors in South America can use to claim tax treaty benefits and ensure proper tax withholding.

Moreover, understanding labor laws in the contractor’s country is crucial to structuring the employment contract correctly, covering aspects such as social security contributions, income tax obligations, and employee benefits to avoid the pitfalls of misclassification.

The importance of an independent contractor agreement

Having a well-drafted contractor agreement is one of the first steps you should take when beginning a business relationship with self-employed workers in Africa. This document not only defines the scope of the work and the expectations from both parties but also provides a legal framework that can protect the interests of both the hiring company and the contractor. A comprehensive contractor agreement should include the following information:

  • Scope of work: Detailed breakdown of the services to be provided
  • Payment terms: Payment amounts, schedule, and method (e.g., direct deposit, upfront, milestone-based)
  • Duration: Start and end dates of the contract or project milestones
  • Confidentiality and intellectual property rules: Terms regarding the use of confidential information and ownership of work
  • Termination clause: Conditions under which the contractor agreement can be terminated

Download a ready-to-deploy contractor agreement template and skip ahead in the process of setting up compliant work relationships.

Download the template

Adapting to South America's business ecosystem

South America's dynamic and diverse business ecosystem requires employers to be flexible and informed. Leveraging local knowledge and expertise, either through hiring local legal counsel or partnering with an employer of record, can provide insights into the most effective payment methods, currency conversion best practices, and compliance strategies.

Engaging with the local labor market compliantly and efficiently not only enhances operational efficiency but also builds long-term relationships with talented independent contractors across South America.

Learn all you need to know about employers of record (EOR) in our comprehensive guide.

Download the guide

Supercharge your contractor management with Deel

In the current landscape of business relations, the adherence to employment laws, the clarity of contractor agreements, and the effective management of contractor pay significantly affect the operational success of businesses in South America. Whether dealing with direct deposit methods, navigating the complexities of payroll taxes, or understanding the functionalities of digital payment platforms, the goal remains the same: to foster seamless, compliant, and mutually beneficial relationships between businesses and their diverse workforce.

By integrating a solid understanding of tax forms, regulatory requirements, and the nuances of labor laws into their payroll systems, business owners can avoid common pitfalls like a misclassified workforce, ensuring compliance and fostering a productive, efficient, and compliant working environment.

Deel offers solutions to all your contractor management needs. Cut the time you spend on contractor onboarding, the risk of misclassification, and the complexity of using multiple platforms and systems. From easy contract creation to seamless payments, we can handle it all. 

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