Did you know most banks secretly inflate exchange rates by 2-4% above real market rates on international transfers. For example if you send in $1,000 to your Filipino virtual assistant with a 3% markup, you’ve already lost $30 in payment fees before the actual transfer.
Add a typical $45 wire transfer fee and you’re down $75 per single payment. Employers grab whatever platform looks convenient without running actual numbers, then wonder why payroll expenses keep creeping upward each month.
In this blog we’ll talk about exactly what you’re paying at each step, show you the common mistakes businesses make when sending money overseas, and more.
Why Sending Money Internationally Costs More Than Domestic Payments
Your payment takes a winding route when crossing borders. Money moves from your account through several financial middlemen before landing in your Filipino VA’s bank.
Each institution along that chain grabs a small percentage as handling fees. Most banks will charge you twice by adding a flat wire transfer fee and a rate that is 2-4% above what you’d see on the foreign exchange market.
Say the real exchange rate gives you 56 pesos per dollar. Your bank offers 54.5 pesos instead and keeps that 1.5 peso difference as profit.
What US Companies Need to Know About Paying Filipino Contractors
The Internal Revenue Code Section 1441 states clearly that services performed outside United States borders don’t count as US-source income. That means no withholding obligations apply and you won’t pay self-employment taxes on payments to foreign contractors.
It is generally recommended that contractors fill out a Form W-8 BEN. This confirms their foreign status, and along with invoices that show work was performed in the Philippines.
Traditional Banks vs Fintech
Not all payment methods are created equal, and the difference between the cheapest and most expensive option can be staggering. Traditional banks and services like Western Union typically charge 4-7% in combined fees and exchange rate markups.
Fintech platforms have disrupted this space significantly. Wise, which operates as a licensed operator under both UK and Philippine regulations, charges 0.5-2% with no exchange rate markup.
They use the mid-market rate you’d see on Google, which is the real rate before any bank adds their profit margin.
When Payment Fees Difference Actually Add Up to Real Money
The cheapest option isn’t always the best option though. If you’re paying one person once a month, a 0.5% fee difference doesn’t matter much. If you’re running a team of ten people with bi-weekly payroll, those small percentages compound quickly.
What Your VA Pays to Receive Payments
Platforms claiming “zero fees” often markup exchange rates by 1-2% above mid-market rates, so compare their quoted rate against what forex shows before sending money.
Your contractor pays fees on their end that come straight out of what you sent. Philippine banks commonly charge 300-500 pesos per incoming wire transfer.
Traditional bank wires can cost your team member $6-10 just to receive funds, while digital wallets like GCash or Maya typically charge nothing or very little.
Bank wires take 3-5 business days normally, Wise processes most transfers in 1-2 business days, while Payoneer can move money almost instantly for additional payment fees.
Weekly payroll or varying payment amounts across team members might force you into awkward payment timing that doesn’t match your actual schedule.
The smartest way is to go with platforms such as ManagePH that handles everything not just payments including time tracking, PTO, invoicing.
What the Numbers Actually Look Like
Let’s make this concrete with real examples. Say you’re paying a Filipino virtual assistant $1,500 per month. Through a traditional US bank wire, you might pay a $45 flat fee plus a 3% exchange rate markup.
That’s $90 in total costs, and your VA receives about $1,410 after the receiving bank in the Philippines deducts their $15-20 incoming wire fee.
Using Wise with a 1.2% fee and mid-market rate, you pay $18 in fees. Your VA receives the full $1,482 if they’re using a digital wallet with no receiving fee, or $1,472 if their bank charges 500 pesos to receive.
With Payoneer at 2% assuming they offer a reasonable exchange rate, you’re at $30 in fees. Receiving is typically free or very low cost since many Filipino banks have partnerships with Payoneer.
Over a year, the difference between the bank wire and Wise is roughly $864 in your pocket or your VA’s pocket. Multiply that by the number of team members you have and the savings become substantial.
Regulatory Compliances
Philippine regulations require documentation for cross-border payments exceeding $500,000 daily for individuals or $1 million for companies. Regular payroll sits far below those thresholds, but knowing limits helps if you ever need to make a large one-time transfer.
The Anti-Money Laundering Act triggers automatic bank reporting for any single-day cross-border payment over 500,000 pesos, roughly $9,000 in today’s exchange rate. Nobody blocks your transaction and no one gets in trouble.
Banks simply file reports with BSP to monitor for suspicious patterns, and legitimate payment platforms handle this reporting automatically behind the scenes.
Digital payment providers must register as Operators of Payment Systems under BSP regulations before operating in the Philippines.
Choosing the Right Payment Method for Your Team
Traditional banks rarely make sense unless you have a compelling reason to absorb their inflated costs. Digital platforms have slashed both fees and transfer times dramatically over the past few years.
Your Filipino team members earn their pay through hard work. Receiving that money shouldn’t cost them a significant chunk or create anxiety about timing, they have bills to pay too.
Stop losing money on payment fees Try ManagePh For Free and See The Difference Yourself
Frequently Asked Questions
How much does it cost to send money to a virtual assistant in the Philippines?
Sending money to the Philippines costs between 0.5% to 7%, bank to bank wire transfers charge the most at 4-7% in payment fees while Fintech platforms like Wise would cost significantly less at 0.5-2%.
Do US companies need to withhold taxes when paying Filipino contractors?
No, US companies don’t need to withhold taxes when paying Filipino contractors for work performed outside the United States. Internal Revenue Code Section 1441 clearly states that services performed outside US borders don’t count as US-source income.
What hidden fees do Filipino VAs pay when receiving international payments?
Filipino VAs might pay fees that range from 300-500 pesos (approximately $6-10) per incoming wire transfer. Digital wallets like GCash and Maya usually charge nothing or very little to receive international transfers.