Paying Independent Contractors in Mexico

TransferWise
03.25.20
3 minute read

Payments to Mexico can be quite expensive due to the fees associated with currency conversion from dollars to Mexican Pesos. On average, you lose 3 - 7% of the transfer value on fees using traditional banks. The overall cost includes, Swift fee, exchange rate mark-up and receiving fee on the recipient side. This means that transferring $2000 to Mexican Pesos can cost around $40 - $70.

Let’s see how you could reduce these fees.

1. Money Transfer Services

The good news is that there are Money transfer Services that could save you over 40% on international transfer fees. Here are some of them.

TransferWise for Business

TransferWise supports transfers to 45+ currencies including Mexican pesos. You can take advantage of the real exchange rate without any mark-up.

Cost$13.66 (0.68%) conversion fee
Speed0 - 2 working days
Convenience
  • If you’re paying multiple contractors, you can use a dedicated tool for running payroll - TransferWise Batch Payment. Instead of making several payments separately, you can send multiple payments in one go.
  • You can make business payments via the app.
  • Can be integrated to accounting software called Xero to help ease tax reconciliation.
  • Pros:

    • Real Exchange rate
    • High Transfer limit - up to $1,000,000
    • Low transfer cost
    • Recipients don’t need a TransferWise account to receive payments
    • Instant transfer for some currencies
    • Accepts Payments through debit and credit card, ACH direct debit and Wire transfer
    • Bank-level security.

    Cons:

    • Business and personal accounts need to get verified first
    • No Cash Pick-ups
    • Recipient cannot track the status of the transfers

    OFX

    OFX doesn’t charge transfer fees however, they make money by adding a mark-up on their exchange rate which can vary according to the transfer amount and your transaction history with them. It’s usually higher for smaller amounts and vice versa.

    Cost$8 - $50 (0.4 - 2.5% exchange rate mark-up)³
    Speed0 - 1 working day
    Convenience
    • You can make payments on the app.
    • Can be integrated to accounting software
    • Can set up recurring payments
    • Batch payments tool

    Pros:

    • No transfer fees
    • No transfer limit
    • Operates 24 hours a day, 7 days a week

    Cons:

    • Exchange rate mark-up
    • Doesn’t offer same-day delivery
    • Minimum transfer is $2,000

    TorFx

    Just like OFX, TorFX doesn’t charge transfer fees but makes money from exchange rate mark-ups.

    Cost$10 - $ 40 (0.5%-2%)
    Speed1 - 2 working days
    Convenience
    • You can make payments on the app.
    • Recurring payments at a competitive rate

    Pros:

    • No transfer fees
    • Can make transfers both online and over phone
    • Operates 24 hours a day, 7 days a week
    • Can be cheaper for large transfers (above $10,000)

    Cons:

    • Exchange rate mark-up
    • Can be slow at times
    • Expensive for smaller amounts (below $10,000)

    The fees shown above are the estimated cost of a $2000 transfer to MXN. Fees may vary according to the provider's exchange rate set for you.

    2. Payroll services

    Bigger companies often employ payroll software for larger volumes but this usually comes with monthly subscriptions and cost per employee. But this reduces errors and eases tax reconciliation. However, not that many support global payroll. But here's one good example.

    BitWage

    In order to run Payroll using BitWage, the employees need to be invited to set up a receiving account so even though the service is cost effective for companies, the challenge comes from convincing employees to use BitWage to receive their wages. Unfortunately, as it can be quite expensive for them due to 1% charge per deposit, or $15.99 per month for the Premium Invoicing service, they tend to use other services that charge no fee for receiving payments.

    Cost1% fee on local currency wage distribution (for standard subscription) $7.99 or $15.99 monthly subscription charge for premium account.⁴
    Speed0 - 1 working day
    Convenience
    • Transactions can be tracked on the app.
    • Payments in 3 distribution types including digital currencies.
    • Provides receiving accounts to contractors

    Pros:

    • Helps manage employee salary and sends necessary form to fill out
    • Less expensive for employers

    Cons:

    • Best suited for workers who prefer to be paid in Bitcurrency.
    • Employees need to use the service too in order to receive payments

    3. Banks

    Stanford Federal Credit Union

    They’re one of the banks that offers real-exchange rates. They partnered with TransferWise to execute international payments and the fees are relatively the same. However, there’s a maintaining balance depending on the type of account you have and an opening deposit of $100.

    Cost$13.67
    Speed0 - 2 working day
    Convenience
    • Transactions can be tracked on the app.
    • Recurring payments
    • Mass Payment

    Pros:

    • Real Exchange rate
    • Low transfer cost
    • Instant transfer for some currencies

    Cons:

    • Requires maintaining balance and opening deposit
    • No Cash Pick-ups
    • Recipient cannot track the status of the transfers

    Sources:

    1. Payoneer about - fees
    2. Payoneer blog post
    3. OFX FAQ
    4. Bitwage price page
    5. CrozDesk
    6. TorFx FAQ

    This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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