From Payment Software to Checks: Choosing Contractor Payments

Maybe you’ve hired a contractor across the world or in another state and are now wondering how to pay them. As contract work is often unpredictable and diverse, it’s a common dilemma that many employers face.

This article will offer you a clear guide on the best way to pay contractors, whether you’re a startup or an established business. Ready to transform the way you pay? Let’s get started.

We'll also discuss how Wise could be a great business account for you when paying contractors abroad.

Looking to send and receive business payments at low cost?

Pay your contractor
with Wise Business >>

Wise Trustpilot Score: Great ⁹
No minimum balance required and no monthly fees
Save on cross-currency payments with the mid-market rate

Table of contents

Contractor Payments: Ways to Pay 1. Wise 2. Wire Transfers 3. ACH Payment 4. Online Payments (P2P Payments) 5. Credit Cards How much will you pay with Wise Business across currencies? 6. Checks 7. Payroll, Accounting, and Other Mass Payment Software 8. Freelancer Platforms Contractor Payments: Are you paying domestic or international contractors? International Payments Domestic Payments Wise Business for Domestic and International Contractor Payments Contractor Payments FAQ

Contractor Payments: Ways to Pay

When it comes to reimbursing your contractors, there are countless methods to choose from. You could pay contractors online, use traditional methods, or even go for a specialized platform – and all have their own pros and cons. Here’s a list of the most popular options:

1. Wise

Wise offers a competitive option for paying contractors because of its transparent fee structure and low-cost domestic and international transfer options. Unlike many traditional banks and payment services that inflate their exchange rates, Wise uses the mid-market rate.

You can also hold money in 40+ currencies so you can pay in your contractor’s preferred currency. There is even a convenient batch payment option if you’re paying more than one contractor at a time.

As for timing, you can send international transfers in 0 to 2 business days – sometimes even within minutes or hours for domestic transfers.

Pricing and Fees

Registering for a Wise account is completely free, and there are no monthly fees or minimum balances to worry about. Fees for sending money will vary by currency but start at 0.43%.

Looking to send and receive business payments at low cost?

Pay your contractor
with Wise Business >>

Wise Trustpilot Score: Great ⁹
No minimum balance required and no monthly fees
Save on cross-currency payments with the mid-market rate

Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information.

2. Wire Transfers

Wire transfers have long been one of the most common methods of paying contractors, thanks to their speed and security. Many financial institutions, like traditional banks and online banks, provide these services, requiring just the contractor’s bank details and an IBAN or SWIFT code for international transfers.

Pricing and Fees

Wire transfers are known to be quite costly but vary depending on whether you’re making a domestic or international transfer and what financial institution you’re with. Domestic wire transfers could cost anywhere between $15 to $30, while international transfers will be more costly at around $30 to $50.³ Bear in mind that international wires will also incur a currency conversion fee.

3. ACH Payment

ACH (Automated Clearing House) payments are quite similar to wire transfers in that they involve an online transfer of funds from one bank account to another. To initiate a payment, you’ll need the contractor’s bank account number and bank routing number. Lots of businesses use payroll services or online banking platforms to set up and schedule these payments.

Pricing and Fees

The biggest appeal of ACH payments compared to wire transfers is their affordability. Many banks even offer them for free, especially for domestic transactions. Otherwise, they typically cost up to $3 per transaction. International transactions will come with higher fees and foreign exchange rates.

See the Best Banks for Small Businesses >>

4. Online Payments (P2P Payments)

Paying contractors through PayPal, Venmo, and Zelle (peer-to-peer payment platforms) provides an easy way to send money directly to someone else through just an email address or phone number. In this case, both the sender and receiver need to have an account on the platform and a linked bank account or credit card.

Pricing and Fees

Costs associated with P2P payments will vary by platform. For example, PayPal charges a fee of 2% + 1 USD per transaction for PayPal Payouts and more for international transfers.⁵ Meanwhile, Venmo charges $0 when using your balance, bank, or debit card but doesn’t have international transfer capabilities.⁶

5. Credit Cards

Paying contractors with a credit card can have some advantages. Certain credit cards offer rewards, cash back, or points for each dollar spent, which can add up, especially if you make large payments. Several platforms like Stripe make it easy to pay by credit card online.

Pricing and Fees

With this method, however, there’s also a fee associated with every transaction. It’ll generally be a percentage of the amount you’re paying, potential fees from the credit card merchant, and, if you’re making an international payment, hefty conversion costs.

How much will you pay with Wise Business across currencies?

6. Checks

If the digital world is a little much for you and you’re looking for an old-fashioned method. Checks are still a viable method for paying contractors, especially for domestic transactions. As long as you have a checkbook on hand, you’ll simply need to write down the payment amount, the payee’s name, and the date, and add your signature to it. You can then mail the check to your contractor, and they can deposit it into their bank account.

However, checks can get lost in the mail and won’t have the same security and speed offered with digital transactions.

Pricing and Fees

Checks might seem outdated, but their primary advantage is that they’re free. Most banks provide free checkbooks, so you’ll simply have to pay the small fee for the stamps required for mailing.

7. Payroll, Accounting, and Other Mass Payment Software

Payment software offers a robust, integrated solution for paying contractors. They streamline the payment process, automate tax calculations, and maintain records for tracking and reporting purposes.

These software require detailed information about your contractors, including tax IDs and bank account numbers, but after inputting this information, they’ll take care of the rest.

Pricing and Fees

QuickBooks, for instance, has a specific plan for contractor payments that is priced at just $15/month. The plan includes 20 contractors, and it costs $2 for each additional contractor.⁷ Meanwhile, _ADP _offers tailored pricing based on your business size.

8. Freelancer Platforms

Freelancer platforms like Upwork and Fiverr have integrated payment systems, which means you won’t have to venture outside of them to deal with payments.

Although they’re known as job marketplaces, they facilitate the entire project lifecycle. Payments are typically made on a weekly, hourly basis or through an escrow system where you deposit funds, and the payment is released after work is done.

Pricing and Fees

Using one of these platforms can come with various charges. Fees will depend on which platform you choose, but they’ll usually involve a kind of service charge.

When you hire someone on Upwork, you’ll have to pay a 5% fee on all payments you make to freelancers, as well as a one-time contract initiation fee of $4.95 for Marketplace and Project Catalog contracts.⁸

Looking to send and receive business payments at low cost?

Pay your contractor
with Wise Business >>

Contractor Payments: Are you paying domestic or international contractors?

As we’ve uncovered, whether you’re paying domestic or international contractors will have a big impact on which payment method is most appropriate. It’ll have an influence on the fees you pay because of currency exchange rates and added fees and transaction timeframes.

International Payments

International payments require some extra consideration because of the associated costs and potential delays. As methods like sending checks and using wire transfers might be too costly or too slow, choosing online payment options is your best bet.

However, many platforms can come with high fees and marked-up conversion rates, which is why you’ll need to be wary of the one you choose. The smartest idea would be to choose a platform that deals specifically with international payments like Wise.

Domestic Payments

Dealing with domestic payments is much easier, as there’s a simplicity and straightforwardness that you won’t find with their international counterpart. Traditionally, checks and direct deposits are solid methods that will get the funds from A to B.

Alternatively, you could opt for ACH transfers to save time and potentially reduce costs or choose an electronic payment platform like Venmo for more immediate, less formal transfers.

Wise Business for Domestic and International Contractor Payments

Wise Business has earned its position high on the list of contractor payment options, providing a smooth, cost-effective solution for both domestic and international transfers. For domestic transactions, Wise Business operates like a traditional bank transfer but with reduced fees and faster processing times.

But where Wise stands out is in international transactions. With the ability to convert and hold 40+ currencies in one account, it simplifies the process of making payments to overseas contractors. You also get the mid-market exchange rate for conversions, where you’ll get much better value than with traditional providers.

And with full transparency – seeing the fees and rates upfront and transfer tracking – you’ll have the visibility needed to have that peace of mind you deserve as a business owner.

Some features Wise Business users love
Receive Payments like a local: Businesses can pay a one-time fee for accounts details in global currencies, such as USD, EUR, GBP, CAD, so they can receive money without any additional fees
Account Software Integration: QuickBooks, FreshBooks, Xero, Sage, and Wave
Batch Payment Tools: Pay up to 1,000 invoice in one instance
An International Account: Hold 40+ currencies at once
Transparency: Wise Business is trying to get rid of all your business account fees

Contractor Payments FAQ

Still have questions? From questions relating to credit cards to how paying contractors is different from paying employees, we’ll answer a few frequently asked questions right here.

How is paying an independent contractor vs. employee different?

Paying an independent contractor differs from paying an employee, mainly due to tax implications. When employers pay employees, the employer needs to withhold income, Social Security, and Medicare taxes, and contribute to workers’ compensation funds and unemployment insurance. On the other hand, independent contractors are considered self-employed and are responsible for handling their own taxes. This way, you simply pay them the agreed amount reflected through an invoice.

What’s the best way to pay contractors?

The best way to pay contractors depends on several factors, such as the location of your contractor, currency conversion rates, fees, and the way you and your contractor work together. Domestic contractors might prefer direct deposits or payment apps for their convenience and fast processing time, while international contractors might prefer platforms like Wise Business for better exchange rates and lower transfer fees.

Can you pay a contractor with a credit card?

It is possible to pay a contractor with a credit card, although not all contractors may be set up to accept these types of payments. The contractor may need to be set up with certain platforms to allow credit card payments, and the associated fees might not be in the contractor’s favor – which may drive up the total cost of the project.

---

Sources:

5 - PayPal - Merchant Fees
6 - Venmo - Fees
7 - QuickBooks - Contractor Payments
8 - Upwork - Client Marketplace
9 - Wise Trustpilot