How does foreign exchange work for contractors?

Oyster will manage payments and foreign exchange rates so you don't have to.

Below are three possible scenarios for payment currencies and foreign exchange (also referred to as f/x).

Example: Foreign exchange rate calculations

In this example, you are a company in Europe hiring a contractor in Brazil.

Scenario

Customer payment currency

Contractor invoice currency

Contractor payment currency

1

EUR

EUR

EUR

2

EUR

EUR

Brazilian Real

3

EUR

Brazilian Real

Brazilian Real

Scenario 1: No foreign exchange is required. Oyster does not charge a fee for receiving or sending payment.

Scenario 2: Oyster will convert EUR into the local currency at a competitive exchange rate. FX fluctuations every month are borne by the contractor.

Scenario 3: Since the agreement is in local currency, the payment amount in local currency is fixed. The employer takes on the foreign exchange risk and their invoice each month will fluctuate due to foreign exchange swings. Oyster will convert the local currency into a EUR amount for each invoice at a competitive exchange rate.

 

Customer payment currency

This is the employer's payment currency to Oyster. It is often in USD, EUR, or GBP.

Contractor invoice currency

The contractor invoice currency is the payment terms written into the legal agreement between the employer and the contractor. This is likely to be in either USD or the local currency.

If the contractor wants to receive local currency, and the agreement is in USD, then the contractor is taking the foreign exchange risk; therefore, their payment will vary based on the exchange rate (see scenario #2).

If the agreement is in the local currency, then the employer is taking on the foreign exchange risk. The amount the employer has to pay each month will vary based on the exchange rate (see scenario #3).

Contractor payment currency

The payment currency is the ultimate currency that the contractor receives funds in. If the contractor has a USD account, they can receive funds in USD. If not, they can receive funds in the local currency. Some contractors prefer to receive funds in a major currency (USD, Euro, GBP).

 

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