How to pay freelancers: 9 payment methods to use
The freelancer force has been booming in recent years and plays an important role in the development of different fields and industries. Instead of hiring full-time or part-time employees, many businesses tend to work with freelancers to have a great amount of flexibility. No matter you are a freelancer or a manager, you need to know the top payment methods to ensure your freelance-related work is smooth and successful. Considering different payment methods, you can choose the right methods that meet your requirements and expectations. Now let's discover them - nine ways to pay freelancers.
1. Checks
Checks are one of the easiest ways to pay freelancers. Checks don’t require people to pay fees for depositing a check into their bank account, so you can save deposit fees. This is the big advantage of using checks.
However, if you want to get the payments as soon as possible, checks seem not suitable for use. You may meet delays when waiting for the check to arrive in the mail and waiting for the check to clear in your bank account. Because checks are sent via post, it always takes a longer time to arrive.
2. PayPal
PayPal was one of the very first digital payment methods. PayPal is a faster option than a check because the entire transaction is carried out online. It’s free to open an account, and the money transfer can be conducted electronically as soon as the work is completed.
The big downside of PayPal is its high fees. Transaction fees for freelancers are now 2.9 percent of each individual payment, plus a fixed fee of $0.30. If the freelancers need to convert the currency, they’ll end up losing another 5 percent. In addition, PayPal is not available globally. So you have to check whether the freelancer’s country accepts PayPal payments or not to use this method.
3. Credit Card
A credit card is one of the fastest payment processing methods with relatively low fees. Using this method, you need to use some kind of app. It could be PayPal, Google Wallet, Wave, Square, or QuickBooks. The freelancers need to use a digital payment service to receive the funds. However, you have to share your credit card information with freelancers, as sensitive information needs to be secured. This can be risky in new freelancer relationships if the project scope is low and the credit line is high.
4. Electronic Funds Transfer (EFT)
Electronic Funds Transfer is one of the easiest payment methods. Doing this does not require any apps, credit card processing companies, or payment systems involved. You just do a direct transfer of funds from your bank account to the freelancer’s bank account.
One of the cons of this transaction is that usually takes 2-4 business days to move from one bank to the other. Furthermore, sometimes the bank can require transaction fees or needs to accommodate transfer requests. Those make it difficult or costly.
5. Accounting software
Many various accounting software solutions help you process payments, for instance, Google Wallet, Wave, Gusto Payroll, Due, QuickBooks, and FreshBooks. Each software has its own different features, pros, and cons.
In general, accounting software has built-in payment options with tax calculations. It helps you create payroll and invoicing automatically, send invoices and handle payments, track income and expenses, and support your payment collection process. Selecting and using reliable software saves a lot of time and effort. However, using accounting software requires you to pay an additional fee to purchase the software, as well as transaction fees.
6. Bank wire transfer
A bank wire transfer is a secure and reliable solution when the funds are transferred directly between bank accounts. It is available in all countries and fits all use cases. However, you can pay the high fees for wire transfers, from $5 to as much as $50 per transaction. They can also take four to five business days to clear. Furthermore, this method ensures the money is highly secure, so you should use a bank wire transfer when you have to send a large amount of money, at least $5,000.
7. Freelance platforms
The places where you find freelancers are ideal places to pay them. It seems a secure and reliable method for you and your freelancers. Upwork and Freelancer.com are two platforms that have a built-in onboarding and payment process. Sometimes, both parties (the payer and the payee) have to pay fees for using the service. Moreover, some freelance platforms require businesses to deposit funds to ensure the freelancer has a deposit upfront. In addition, freelancers can also meet restrictions on how and when they want to withdraw their money.
8. Payment gateway
If a freelancer has a built-in payment gateway on their website, the payment will be conducted there. Some popular online payment gateway brands are Stripe, Payline Data, 2Checkout, and WePay.
This method has quick payment processing and is perfectly suitable for the freelancer who is receiving a high volume of transactions per month. However, you have to enter card information into a random website.
9. Online payment solution
An online payment solution is an excellent method for international transactions when you are hiring freelancers overseas. This method offers automatic foreign currency exchange and speed at a few fees.
Many online payment programs, for example, Cash App, Google Pay, Payoneer, Skrill, Authorize.net, ProPay. To make transactions through an online payment solution, you need to open an account with a payment solution.
Conclusion
Choosing which payment method suits you and your freelancers is always a challenge. You can make decisions based on your needs and preferences as well as your freelancer's expectations. Each method has its pros and cons, you should consider and try to find the best right payment method to use.