Freelancer Payments Methods: What You Should Know

Published On : 01/09/2023

Freelancers are individuals who work on a project-by-project basis rather than being tied to a particular company or organization on a long-term basis. They are self-employed and are not committed to a particular employer long-term.

Freelancers typically work on a variety of different projects for different clients, and they may work in a wide range of fields, including writing, editing, graphic design, and web development. Freelancers are responsible for managing their own time, finding their own clients, and negotiating their own rates and contracts.

In the U.S., the IRS typically categorizes freelancers as self-employed individuals. This means that they are responsible for paying self-employment taxes, which are Social Security and Medicare taxes for individuals who are self-employed. Freelancers are also required to report their income and expenses on a tax return, and they may be eligible for certain tax deductions, such as deductions for business expenses.

5 Ways to Pay Freelancers

Here are 5 common options you can use to Stoke Talent:

Checks

Paying freelancers by check is a simple process. To pay a freelancer by check, you will need to have their name and mailing address. You can then write a check to the freelancer using their name, and mail the check to their address. However, a disadvantage of paying freelancers by check is that it can take several days for the check to be mailed and received, which can delay the payment process.

PayPal

To pay a freelancer using PayPal, you will need to have a PayPal account and the freelancer will need to have a PayPal account as well. To make a payment, you will need to log in to your PayPal account and go to the “Send Money” tab. From there, you will enter the freelancer’s email address and the amount you want to pay, and then complete the payment using your preferred payment method.

Payments can be made and received almost instantly, which can speed up the payment process and make it easier for freelancers to access the funds they have earned. PayPal is also widely used and accepted, which means that most freelancers will have a PayPal account and will be able to receive payments easily.

However, PayPal charges a fee for each transaction, which may be passed on to the freelancer or the person paying them. Some freelancers may not have a PayPal account or may not be comfortable using it

Credit Cards

To pay a freelancer using a credit card, you will need to have the freelancer’s name and credit card information. You can then make a payment using your own credit card, either online or by phone. Freelancers can accept credit cards using third-party service providers and applications, such as PayPal, QuickBooks, or Google Wallet. Some freelancers may also be able to process credit card payments themselves using a mobile card reader or other payment processing device.

Electronic Funds Transfer (EFT)

To pay freelancers via EFT (electronic funds transfer), also known as direct deposit, you will need to have the freelancer’s bank account information. You can then initiate the transfer from your own bank account, and the funds will be deposited directly into the freelancer’s account.

This payment method is typically used for regular or recurring payments, such as for ongoing projects or for payment of regular salary or wages. EFT payments are generally less expensive than other payment methods, as they do not typically involve any fees.

One disadvantage of paying freelancers via EFT is that it requires the freelancer to have a bank account. This may not be possible or convenient for some freelancers, especially if they are located in a different country or do not have access to traditional banking services.

Freelancer Platforms

A freelancer platform is a convenient and secure way to manage payments. The platform handles the payment process and holds the funds in escrow, which can provide peace of mind for both the freelancer and the person paying them.

To pay freelancers via a freelancer platform, you will need to create an account on the platform and add your payment information. Once you have found a freelancer you want to work with, you can use the platform to negotiate the terms of the project, agree on a price, and make the payment.

However, freelancer platforms typically charge a fee for their services, which may be passed on to the freelancer or the person paying them. Additionally, some freelancers may not be registered on a particular platform, which can limit your options for finding and hiring them.

Paying Freelancers: Approaches and Best Practices

There are four main types of payment terms that can be used when working with freelancers:

• Upfront: Under this payment term, the freelancer is paid a portion of the total project fee upfront, before the project begins. This can be useful for freelancers who need to cover initial expenses or who want to ensure that they will be paid for their work.
• Hourly: Under this payment term, the freelancer is paid an hourly rate for their work. This can be useful for projects that have an uncertain scope or duration, as the freelancer will be paid based on the number of hours they work.
• After a milestone: Under this payment term, the freelancer is paid after they reach a specific milestone in the project. This can be useful for large or complex projects, as it allows the person paying the freelancer to track progress and ensure that the work is being completed as expected.
• Upon the completion of a project: Under this payment term, the freelancer is paid in full after the project is completed and delivered. This is the most common payment term and can be useful for ensuring that the freelancer is paid for the full value of their work.

Here are some best practices for paying freelancers:

• Communicate clearly: Clearly communicate your expectations and payment terms before work begins. This will help avoid misunderstandings and disputes later on.
• Use a written agreement: Create a written agreement that outlines the scope of work, payment terms, and any other important details. This will provide a clear record of the terms and protect both you and the freelancer.
• Pay on time: Be sure to pay freelancers on time, as agreed upon in your written agreement. Late payments can damage your relationship and make it difficult to find quality freelancers in the future.
• Use a reliable payment method: Use a reliable and secure payment method, such as a bank transfer or a payment platform like PayPal. This will protect both you and the freelancer and ensure that the payment is received promptly.
• Provide feedback: Provide constructive feedback to freelancers on their work, and be open to their feedback on your processes and payment terms. This will help improve the quality of their work and make the collaboration more successful.
• Provide invoices: Invoices are important for freelancers because they provide a record of the work that has been done and the amount that is owed for that work. They help freelancers keep track of their income and expenses, and they provide a professional and organized way to request payment from clients.
• Collect tax documents: Tax documents are important to report income and expenses to the government. This information is used to calculate taxes and ensure that freelancers are paying their fair share. Without proper tax documents, freelancers may face penalties or fines from the government.
• Use NDAs: non-disclosure agreements protect confidential information. If a freelancer is working on a project that involves sensitive or proprietary information, an NDA can prevent them from sharing that information with others.

Conclusion

In conclusion, it is important for businesses and freelancers alike to understand the various payment methods available and choose the one that best suits their needs. While some methods may be more convenient or offer additional benefits, it is essential to consider factors such as fees, security, and speed when selecting a payment method. This helps ensure that freelancers receive timely and secure payment for their work.

Jessica Weisman-Pitts

Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.