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.\u00a0<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
They use the mid-market rate you’d see on Google, which is the real rate before any bank adds their profit margin.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Weekly payroll or varying payment amounts across team members might force you into awkward payment timing that doesn’t match your actual schedule. <\/p>\n\n\n\n