How are contractors paid: 3 Methods and 12 Sites to Use

Contractors can be an integral part of a business, especially as the business grows. Contractors can provide an immense amount of support to your business across a variety of areas, and contractors can be a cost-effective way to ensure your business has the right resources.

However, paying contractors can be tricky depending on their preferences, location, your platform of choice, and more. To help you figure out the best way to pay contractors, we’ll look at some of the most common methods, such as Wise Business, to pay contractors and share some top tips when it comes to payments to contractors.

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What to consider when paying a contractor

Before going into the options available to pay an independent contractor, there are some essential factors to consider.

Establish Terms:

Contractors may prefer different wages, payment terms, and payment methods, so having that information beforehand will make it easier to pay contractors when the time comes.

Essentially, this means agreeing with contractors before they undertake work for you on how much they will be paid (e.g., per hour, per project) and what payment terms they would like. For example, some contractors may want to invoice every month, while others may prefer a weekly schedule, so knowing their terms beforehand can help you budget. In the worst cases, it can help you avoid conflict down the road.

Find out the contractor’s preferred payment terms and method:

Before working with an independent contractor, work with them to understand payment terms and their preferred payment method. For example, will they be paid once a month, every week, or every other week? And does the independent contractor prefer receiving compensation via bank transfer or other means? Establishing payment terms and methods upfront will help you identify the best payment solution that fits both your and the contractor’s needs.

Are they on a freelance platform?

Once you and the independent contractor have agreed on wages and payment schedule, you can then work with them to understand that payment method is best. If you are working with a contractor or subcontractor on specific platforms, you may need to pay them via the platform itself, which may incur additional fees that you should factor in.

However, if you have found contractors through other channels, they may prefer to be paid via bank transfer.

Where is your freelancer located?

Another factor to keep in mind is where your contractor is located, as how you pay them and when you pay them can vary depending on whether it’s a domestic or international payment.

Before working with contractors, it’s also important to ensure that the work they are providing meets expectations and any contractual obligations that have been discussed beforehand. You can also work with the contractor to ensure that invoices and receipts are documented and sent well ahead of time so that you can pay the contractor on time.

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How to pay contractors: Common Methods

There are a few different options available for independent contractor payments depending on whether they are located in the United States or outside the United States

1. Domestic payments in the United States

If you’re working with contractors in the United States, you can usually pay via bank transfer or direct deposit. However, you can also use options such as Wise Business, Zelle for Business, and other payment methods, depending on the independent contractor's preference.

2. International Contractor Payments

International contractor payments can often be tricky, but many solutions exist for sending money to contractors abroad. International business money transfer options include Wise Business, WorldRemit, and many others that charge in USD, and contractors receive payments in their local currency.

Business Money Transfer Service Examples

There are many excellent solutions out there if you’re considering making business payments to contractors. Using the right business money transfer solutions ensures contractors receive their compensation on time and in their local currency if preferred.

When evaluating business money transfer solutions, it is vital to consider the exchange rate being offered and any fees associated with the transfer. Ensuring contractors receive their compensation is important, but equally important is that you are using the most cost-effective solution to pay international contractors to keep your expenses down where possible.

1. Wise Business

With Wise Business, you can easily make payments to international contractors in local currencies. You can set up to 10 local currency accounts for your business and manage payments all in one place for a streamlined payment process. Wise Business also integrates with tools, such as Xero and Quickbooks, making bringing financial management into one easy solution easier.

Plus, Wise Business uses the mid-market rate for currency exchange, which means you always get the best rate possible when making foreign payments. You can also set up real-time rate alerts to monitor foreign currency exchange rates to manage international payments.

Wise Business is an excellent solution for money transfer and payment management if you want to gain financial insight into your business and have convenient options for making domestic and international payments.

The pros of paying international contractors via Wise Business

• High limits
  You could send as much as $1,000,000 in a single transaction with Wise. You can send even more with up to 6 million USD with a Wise account.
• Low cost
  Research has shown businesses can save up to 19x by sending international transfers through Wise Business rather than PayPal. And, depending on which bank you use, you may find similar savings over a regular international wire.
• Convenience
  Once you open your multi-currency account, you can pay your international contractors in 70+ countries.
• Your recipient doesn’t need a Wise account
  When you use a solution like PayPal, your recipient will need to sign up. Not so with Wise — it goes straight into their bank account.
• Secure
  Wise is regulated by the financial ruling bodies in each country it operates.
• Auto-conversions
  Choose the currency conversion rate you would hope to receive on your cross-currency transfer, and Wise will automatically convert it at the right moment to help you save.

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2. WorldFirst

WorldFirst offers a lot of value and convenience if you’re seeking a global payment solution.¹ WorldFirst is for cross-border businesses that work with contractors worldwide, with easy options for making international payments. In addition, businesses can set up an account for free without subscription fees.

With WorldFirst, you can have up to 10 local currency accounts if you would like to send and receive payments in different currencies. Additionally, WorldFirst includes marketplace payment options such as Amazon and AliExpress for contractors that may prefer alternative methods of payment.

3. OFX

Another business money transfer you can use to pay contractors their wages is OFX.² OFX can be used for international bank-to-bank transfers since it offers competitive exchange rates and low to no fees for payments. In addition, OFX enables fast payments for international transfers, ensuring contractors receive their compensation on time.

OFX also has options to track payments on its platform, making it easier to manage incoming and outgoing payments on one platform. Moreover, OFX has dedicated offerings for small and large businesses paying independent contractors overseas, with additional options for businesses looking to manage their financial performance, such as mitigating risk with currency exchange rates.

4. CurrencyFair

CurrencyFair has many features that can prove useful if you’re frequently paying independent contractors.³ For example, CurrencyFair lets you send money internationally quickly, with competitive exchange rates. There is also a range of options available for deposit, including bank transfer, to make it easier for contractors to get their compensation.

CurrencyFair also has additional features, such as the ability to set up rate alerts to better plan international payments, with real-time information on currency rates to get the best price possible.

However, CurrencyFair is limited in the currencies they are currently accepting, which might make it challenging depending on where your contractors are located and what currency you are trying to send. There are also multiple ways to monitor the exchange rate and get a better rate as you use the platform, but this may not always be feasible if contractors have fixed payment terms you must adhere to.

5. WorldRemit

WorldRemit has a range of solutions for international money transfers, making it ideal for businesses looking for flexible ways to pay contractors.⁴ WorldRemit has four different types of transfer options available for making international payments. The cost and speed of the transfer will vary based on the receiving country, the receiving method, and how it is paid for.

Payment methods on WorldRemit include Airtime Topup, wherein you can top up someone’s mobile phone credit, bank-to-bank transfer, cash pickup, and mobile money transfer. Each payment option has different speeds depending on the currency used and will incur different fees. For flexibility, you can set up payments using bank deposits, debit cards, or credit cards, but specific methods, such as credit cards, may incur additional fees.

Payroll Service Examples

Another option for paying independent contractors is to set up a payroll service. A payroll service could be more efficient for your business and its financial management if you work with multiple contractors and employees. Many payroll services also include additional functionalities to manage HR and benefits, which could be useful for mid-sized and large businesses looking to manage growth and increase efficiency across different business areas.

1. Wise Business for Payroll

Wise Business offers a number of solutions to help businesses streamline their efforts. For payroll, customers will find that Wise offers instant payments, batch payments, and an API that will help them automate their processes – all at no additional cost. These tools make paying contractors easy. Let’s learn more about them below.

Payouts are made simple with Wise batch payment process. For instance, businesses can pay up to 1000 invoices in one click. This means that your team can spend their time on other things besides paying bills.

Wise Business also offers the chance to automate recurring payments and to even automate with them the Wise API. After integrating, your team will be able to spend more time making your customers happy.

The Wise Business account also gives you access to low-cost transfers. The mid-market rate means you get transparency while sending your payments to contractors. This way, you won’t have to worry about any hidden fees.

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Payroll and API features come free with a US Wise Business account

2. OnPay

OnPay is a good payroll system if you want to combine payroll, benefits, and other HR functions in one system.⁶ OnPay can be used if you’re looking to streamline business payments to suppliers, independent contractors, ad employees while also managing other HR functions needed for your business.

3. Papaya Global

For businesses looking to manage global payments and payroll, Papaya Global has a lot of features to support.⁷ Papaya Global is an integrated payroll system for international payments, but it also offers tools for financial management. Businesses can use Papaya Global to monitor workforce spending, expenses, and other key financial processes alongside managing payroll(See Papaya Global Alternatives).

4. Gusto

Another payroll solution to consider is Gusto, as it offers a lot of support for businesses of different sizes.⁸ The Gusto platform includes full-service payroll for contractors, employees, suppliers, and other business payments. The platform also has features to manage employee benefits, time and attendance, hiring and onboarding, and other crucial HR processes. Gusto may be useful for businesses looking to combine HR and payroll functionality in one place.

App-specific Payments to Contractors

Alternatives are available if you’re seeking financial solutions outside of business money transfers and payroll. Many apps cater to independent contractors and freelancers and have specific functionalities wherein businesses can set up contracts and pay contractors. However, it is essential to check whether the apps have additional fees for processing freelancer payments for businesses, as that can end up being a significant cost.

1. Upwork

Upwork is one of the largest platforms for freelancers and businesses.⁹ On Upwork, you can set up a company account and open contracts with specific contractors, send and receive work, define payment terms, and make payments to freelancers using the Upwork app. You can also invite colleagues to a company account to make managing independent contractors on the platform easier.

Wise and Upwork also have a connection, which allows contractors to get paid and convert with Wise to save when making transfers from USD to another currency.

2. Fiverr

Another platform to consider for independent contractor management and payment is Fiverr.¹⁰ Fiverr offers a range of functionalities as a project-based platform, including finding independent contractors for specific types of work.

You can set up projects with independent contractors and pay upon completion, making it an effective solution if you’re looking for one-off project support. You can also create more consistent relationships with independent contractors on Fiverr by enabling team members to join and setting up budgets to manage projects more effectively.

3. Freelancer.com

Freelancer.com is also an app-based platform that businesses can use to find and pay independent contractors within the platform.¹¹ Freelancer.com makes it easy to find relevant freelancers and contractors depending on the work needed, and the platform can also facilitate payments to the freelancer. In addition, Freelancer.com offers flexible payment options, including milestones or hourly, as well as other features to make it easier to manage independent contractors.

Start making payments
with Wise Business >>

Trustpilot: 4.4/5 average rating¹²

Over 300k+ businesses customers use Wise globally

Learn more:

How to hire independent contractors abroad in 8 steps

Upwork vs Fiverr: Which One is Better For You in 2023?

Upwork vs Freelancer: Which Is Best For You? (2023)

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Sources:

1. https://www.worldfirst.com/uk/
2. https://www.ofx.com/en-ie/business/
3. https://www.currencyfair.com/business/
4. https://www.worldremit.com/en-us
5. https://onpay.com/
6. https://www.papayaglobal.com/payroll/
7. https://gusto.com/
8. https://www.upwork.com/resources/creating-company-account-on-upwork
9. https://business.fiverr.com/business
10. https://www.freelancer.com/info/how-it-works
11. https://www.trustpilot.com/review/wise.com