Paying Contractors Through Paypal: Quick Guide

Paying independent contractors or getting paid as one can feel – tricky and frustrating. Many look to PayPal, an international payment provider, as a solution. But is it right for you?

We’ll explore how it can simplify transactions and potentially make your payment process more efficient and the fees associated with it right here in this article. We'll also discuss how Wise Business could be a great PayPal alternative for you.

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Making Payments to Contractors on PayPal

PayPal has a simple system for personal payments to friends and family, and lucky for businesses, an equally easy one to pay for goods and services. When you’re making payments to freelancers and independent contractors, you can do so either through an invoice that they’ve sent you or simply through an email address.

Payments Using Email

1. Go to the ‘Send & Request’ tab on your dashboard and choose ‘Pay for goods or services.’
2. Enter the contractor’s PayPal email address.
3. Input the payment amount.
4. Select the correct currency for the payment, and PayPal will show you the conversion rate, as well as the amount you send and the recipient receives upfront.
5. Confirm payment and send.

Payments Through Invoice

1. Select the invoice from your Dashboard or Activity feed.
2. Choose your payment method.
3. Click complete purchase.¹

There’s also a mass payout option with PayPal payouts if you need to send money to multiple recipients at the same time. This feature is just as seamless, as all you need is an email, mobile number, or PayPal ID for each recipient. You can also make payouts in 23 currencies, which comes in handy if your freelancers are located in different countries.²

Check how Wise Business compares with PayPal below:

Getting Paid as a Contractor on PayPal

As a contractor, accepting payments with PayPal is also convenient, with a straightforward process. There’s a range of ways to get paid, including through your own QR code that you can put just about anywhere, through the ‘Request’ feature, or using an invoice.

Payments Through ‘Request’

1. Go to ‘Send & Request’ and head over to ‘Request.’
2. Enter the email, mobile, or PayPal username and click ‘Next.’ Note that you can request multiple payments from up to 20 people.
3. Enter the payment amount and choose the right currency.
4. Type in any notes or details you want to add about the payment in the ‘What’s this for?’ box.
5. Click ‘Request Money.’

Payments Through Invoice

1. Go to ‘Send & Request’ and click ‘Request.’
2. Click ‘Send an invoice.’
3. Customize your invoice with your business info and logo, and fill in the ‘Bill to’ and ‘Items’ fields. You can choose whether you want to use Quantity, Hours, or Amounts only, as well as whether you want to add tax or a discount. Make sure you choose the correct currency you want to get paid in.
4. Once you’re happy with all the fields, click ‘Send’ in the top right-hand corner.

Payments through Wise Business

Request Payments by Link

Step 1: Create a Payment Link

Create a payment request link by simply putting your currency, amount and what it's for. You can also attach your invoice, due date, or any messages for your customers.

Step 2: Share the Link

You can share it by email, text or WhatsApp. Both Wise and non-Wise customers are able to pay you, no matter their location in 9+ currencies.

Step 3: Get Paid

Your money lands directly in your Wise account, in the currency you requested. We will notify you that it has arrived. Your payment request link expires in one month and you're able to track any paid, unpaid and requested payment links in your account.

Add Wise Account Details to Invoices

After paying a one-time fee of 31 USD, you can get Wise Business account details to get paid in 9+ currencies, including USD, EUR, GBP, AUD, and more. This means miss out on some fees, spend from your account, or complete cross-currency transfers at Wise's mid-market rate.

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PayPal Fees for Freelancers and Companies

Although the payment process is made simple, there are costs associated with using PayPal. Let’s take a look:

• Personal Transaction Fees– When sending and receiving personal transactions, PayPal only charges a 2.90% + $0.30 fee for domestic transactions through cards (all other methods are free). For international personal transactions, there’s a 5% + $0.99 - $4.99 USD charge, regardless of whether you’re using your PayPal balance, bank account, or card.³
• Merchant Transaction Fees – Merchant fees are slightly different, as they depend on the method of payment, but range between 2.99% - 3.49% and typically include a fixed fee of $0.30. When receiving, there’s also an additional percentage-based fee for international commercial transactions of 1.50% and a fixed fee based on the currency received.⁴ Sending through PayPal Payouts will incur a 2% fee, regardless of currency, as well as a maximum fee cap depending on the payment currency.⁵
• Currency Conversion – When paying for goods and services in a different currency than they’re sold at or sending money to a recipient in a different currency in which you pay, the currency conversion spread is typically 4%. However, the actual amount will be disclosed during the actual transaction.⁶

Learn More: US Company Paying Foreign Contractor: Taxes, Payments, and More

PayPal Protection

While businesses and freelancers have the option to use personal payments on PayPal, PayPal offers an impressive buyer and seller protection system when you use a merchant account. In instances where the item or service you pay for is different from the seller’s description or doesn’t arrive, you have 180 days to file a dispute.

That includes both tangible goods like clothing and intangible goods like digital services. However, there are several requirements that have to be fulfilled for your purchase to qualify, so be sure to brush up on those.

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