As a small business owner, you may need help from an
independent contractor at some point. Whether you're looking for a website designer or freelance accountant, it's important to have a secure, easy-to-use payment method to ensure your contractors are paid for their hard work.
Payment Methods for Freelancers and Contractors
We've rounded up five ways to help efficiently and securely settle any outstanding bills...all without giving you headache.
Paper Check
If you have a traditional or manual payroll system, you may feel most comfortable using traditional paper checks to pay your freelancers. I understand this, too - they're simple to write, inexpensive to buy and send, and easy to keep track of. BUT - checks tend to take longer to arrive than an electronic payment, which may be a major downside to some freelancers. Checks can also get lost in the mail or bounce due to insufficient funds. This tried-and-true method may be convenient for employers, but it isn't foolproof, and many freelancers today expect speedier payment for services rendered.
Direct Deposit
Direct deposits are commonly used with in-house employees who are part of your company's payroll - but did you know you can use this payment method with freelance workers, too? Similar to paying your permanent staff, sending a direct deposit makes the most sense when an independent contractor is on a renewable retainer or being paid regularly. If you work with a lot of freelancers on a regular basis, setting them up for direct deposits can help them get paid faster, while simultaneously streamlining your payroll and making it easier to track payments to all your freelancers in one accounting system.
Online Payment Systems
There are many reasons online payment sites and apps are so popular among consumers. Online payments tend to be user-friendly and secure, and they can make paying freelancers as simple as pressing a button. However, processing fees can impact enterprise accounts and take-home pay for independent contractors, which you may need to account for in your freelancer agreements. Some businesses also prefer to keep all payroll accounting in one system. If you opt for online payment, ask each independent contractor you work with about their payment preferences to ensure they will accept that form of online payment.
Wire Transfer
For larger sums of money, wire transfers can offer certain benefits, such as increased security and payment guarantees. However, depending on your bank and the amount in question, a wire transfer can be expensive to send. If you opt to use this payment method, be prepared to pay up to $50 or more for the service – and warn your independent contractor about any additional fees due at receipt. Due to the high fees, many businesses will only use wire transfers for amounts above $5,000 when security is a necessity, such as when transferring money overseas.
Freelance Job Sites
Managing contractors through specialized freelance job sites can make not only paying, but also hiring and communicating with freelancers, much easier. These sites are specially designed to help you find, manage, and pay freelance contributors through secure online platforms, and there are additional sites that specialize in helping you find specific kinds of independent contractors, based on the type of work you need.
At the end of the day, the
payment solutions you choose should suit both your needs as a business and the preferences of the contractors you work with. Weigh the convenience, cost, and technology required by different freelance payment methods to find the ones that works for you.
Small Business Insurance Solutions at AmTrust
AmTrust Financial offers a variety of small business insurance solutions. For more information about what we can offer for your business, please
contact us today.
This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.