10 Best Ways to Pay Independent Contractors

by Doc Kane
Updated: February 16, 2022

Peer-to-Peer Apps, Money Transfer Apps, Credit Cards… when it comes to paying freelancers, and consultants, what are the best (and newest) ways to do that?

Options for paying independent contractors have grown in recent years, and more and more unique opportunities to cover payroll have come to the fore that go far beyond the convenience simply sending a check, or facilitating direct deposit. Independent contractors and consultants themselves are far more savvy as well, and simply won’t work with some companies who rely solely on traditional methods.

So, if you have a need to pay independent contractors on a regular basis, or even randomly, here are my suggestions for the ten best ways to pay independent contractors right now.

1. Money Transfer Apps

For years now, remote workers such as myself have been relying on money transfer apps to get paid for the contracting and consulting work that we do on behalf of clients while not sitting in a local office. My personal go to apps have been Wise, Remitly, and Xoom.

In my experience, firms tend to choose an app based on the structure of their payroll system, and whether it’s easy to integrate, log, and track contractor billing with a particular app, and that’s why I tend to have a few at my disposal. Google, Payoneer, and Transferwise (now Wise) are used by millions, and have been around for years, so I find them reliable. They’re also easy to install and set up as a consultant.

2. Peer to Peer Payment Networks

Peer-to peer payment networks such as Payoneer, Google Pay, Venmo, and Square Cash typically allow you to send money to independent contractors immediately without having to use a bank account or credit card. This is an often cheaper method of payment because it is typically free if the contractor has the app on their mobile device, but there are occasionally associated fees.

I’ve personally used Payoneer, and Google Pay, and have enjoyed using each of them. Payoneer was more than a little difficult to set up here in Japan, but after maybe two weeks or so, I was good to go. Google Pay, on the other hand, was dead-simple.


3. Direct Bank  Deposit

Direct deposits are wonderful, and a convenient method of paying an independent contractor. It’s familiar, reliable, and because it allows them to access their funds directly through a bank account or debit card, it works like a charm when the talent you hire has a local bank account.

But what if they don’t? What if you’re working as a fully distributed team, or you’re running in a hybrid work environment with people living in Chicago for a few months, but flying to Austin for a few weeks to be onsite? Or, what if you’re working with an independent contractor who is overseas like me here in Japan, or like many of the folks I used to work with when I lived in Chicago, but had proofreaders and editors in Ireland, The Philippines and elsewhere? Not so easy. Direct deposit also takes several days to arrive in a contractors account, and given the speed with which international money transfer apps work (instantly in most cases), you may find yourself hard-pressed to convince an independent contractor to accept even a direct deposit these days.

If you’re not responsible for paying freelancers yourself, and have to work through an accountant to pay independent contractors, you might want to work hard and developing a relationship with that person that allows them to see that things like transfer fees, and learning how to integrate new tools into accounting software are miniscule things to be concerned about when it comes to getting the best talent.

4. Checks and Payroll Checks

Payroll checks can be costly because they typically include associated fees for processing them with the payroll department of the company which leads to higher administrative costs and the check only guarantees payment to the independent contractor rather than instant access. Checks are generally seen as the most secure form of payment, but they are often difficult to track for both independent contractors and companies.

5. Wire Transfers

A wire transfer is often seen as the most secure payment method in order to pay an individual or business because it can be guaranteed upon arrival with a confirmation number, but this method of payment requires more time and effort in comparison to others such as direct deposit. Wire transfers are also costly from a fees standpoint, and are quite time intensive. Years ago prior to the arrival of multiple money transfer platforms like Xoom, I had to send money to my freelancer’s bank account independent contractors via wire transfer. Since it was the only way to do it, I was forced to go into the bank to handle all the paperwork. Getting tired of having to do that every few weeks, I asked the bank if they could at least keep my signature on file, so I didn’t have to do that part of the transaction in person any longer as everything else could be done via fax (yes, fax). They agreed, but even that took some wrangling at the management level.

These days, none of that is necessary with the advent of peer-to-peer apps (P2P apps), and money transfer apps. That said, if you’re forced to go the money transfer route, be sure to ask if they’ll allow you to set thigns up so you can have your signature on file to save time.

6. Credit Cards

There are many reasons to pay vendors and independent contractors with a credit card. Above all, though, is consumer protection. Using a credit card to pay a new vendor, particularly one you’re not likely to use a second time is a highly recommended course of action in my book. More so, if you yourself are a solopreneur, or growing SME. The last thing you want to be on the hook for is payment to a web designer living in Guatemala who never completes the website despite having paid him a few thousand bucks via American Express like me. Thankfully, I was able to recall the payment with AX and have the money back in my account rather immediately.

If your payment terms with an outside vendor allow you to submit payment upon completion of work, and if this is a long-term releationship you’ve already had, or will be establishing with as part of a hybrid work environment, or semi-distributed team, than then using a money transfer app, or peer to peer payment app are easy, secure solutions.

7. Pre-paid Debit Cards

Pre-paid debit cards provide security and familiarity but they can also take several days before coming through to the contractor’s account. They’re a great option if you’re running a mainly cash-in-cash-out accounting system.

7. PayPal

PayPal has been around forever, and many people have already done the initial work of setting up an account. I think I had my first PayPal account way back in the late 90’s as an early eBay user. That said, I don’t use it at all any more for a number of reasons. First, if you ask around to enough consultants and e-commerce merchants who have used PayPal in the past, nearly all of them will have tales to tell of having money withheld, or withdrawn without their consent. PayPal is currently in the middle of a class-action suit for this very reason. So, while convenient, as an employer, you’re likely to have problems finding independent contractors and solo consultants who will accept payment via Paypal, so it’s best to have other, more friendly options in my opinion.


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About Me

Howdy, all, I'm Doc. I live in the beautiful port city of Kobe, JAPAN with my wife Reiko. Together we co-founded the Japanese literature translation firm, Maplopo. Nihon Hustle grew out of my desire to help others interested in working with, or starting, a business Japan—or anywhere else in the world!

We all wear different hats and my job is to help you find the one that fits you best. Thanks for reading, and go get 'em!