Top 13 Freelancer Payment Methods and their Pros and Cons

How Do Freelancers Get Paid?

Here are the most common ways freelancers get paid for their work. Further in this article we’ll explain each method and its pros and cons in more detail: 

  1. Wire transfers: Direct bank-to-bank transfers, suitable for high-value and urgent payments, but often involve high fees for both sender and recipient.
  2. ACH payments: Also known as direct deposits, these are low-cost, secure domestic transfers that take 2-3 days to process.
  3. Credit cards: Immediate payments that provide high security and separate company bank details from transactions, but require freelancers to have merchant accounts and involve high transaction fees.
  4. Checks: Traditional paper checks are low-cost but slow and insecure, with bank account details exposed.
  5. eChecks: Digital versions of paper checks, processed quickly and securely with low fees, requiring setup with a payment processor.
  6. PayPal: Fast, secure payments with currency conversion, but variable fees and the requirement for freelancers to have a PayPal account.
  7. Payoneer: Allows payments in local currencies and is suitable for international transactions, though it has fees for bank transfers and does not provide 1099 forms.
  8. Automates invoice processing and supports multiple payment methods, but involves platform usage fees and setup complexity.
  9. Wise: Offers competitive exchange rates and fast payments without requiring recipients to have a Wise account, but limited to payments in 70 countries.
  10. Tipalti: Automates accounts payable processes and supports multiple payment methods with account validation, but has variable fees and does not produce 1099 forms.
  11. Venmo: Popular in the U.S. for quick, secure payments and easy transfers to bank accounts, but limited to U.S. users and may have transfer limits.
  12. Freelance Management Systems (FMS): Centralized platforms like Fiverr Enterprise offer various payment options and additional functionalities like onboarding and budget management, but involve platform fees and setup effort.
  13. Freelance Services Marketplaces: Platforms like Upwork and Fiverr handle payments and tax compliance, automate recruitment and onboarding, but have high marketplace fees and may not be suitable for long-term freelancers who prefer direct contracts.

This article is part of our guide on how to pay contractors.

What Are Common Ways to Compensate Freelancers?

Before we explain payment methods in more detail, let’s review the primary freelancer compensation models:

  • Hourly rate: Freelancers charge an amount for each hour worked. This method is suitable for projects where the time required is uncertain or for ongoing work. Clients can track hours using tools like Time Doctor or Toggl to ensure accurate billing.
  • Project-based fee: Freelancers quote a fixed price for completing an entire project. This method is suitable for well-defined projects with clear deliverables. It provides both parties with a clear understanding of the cost upfront, helping avoid budget overruns.
  • Per-word: Commonly used in writing and editing, freelancers are paid based on the number of words they produce. This ensures that payment is directly linked to the amount of work delivered, making it easy to scale costs with the length of the project.
  • Commission: Often used in sales and marketing, freelancers earn a percentage of the revenue they generate. This performance-based method incentivizes freelancers to achieve higher results, aligning their earnings with the success they bring to the client.
  • Retainer fee: Clients pay freelancers a set amount regularly (e.g., monthly) to retain their services. This is suitable for ongoing work where the freelancer provides consistent support or consulting services. It offers financial stability for the freelancer and ensures availability for the client.
  • Milestone payments: Projects are broken down into phases or milestones, with payments made upon the completion of each phase. This helps manage cash flow for the client and ensures that the freelancer is compensated for progress made.
  • Revenue share: Freelancers receive a portion of the profits from a project or business venture. This long-term arrangement can be highly rewarding if the project succeeds, but it carries risk if the venture does not perform as expected.

Understanding the differences between freelancer payment methods

Here are the twelve common methods of paying non-payroll workers that can be divided to 3 categories: 

  • Bank transfers, like wire transfers, ACH, checks etc.
  • Payment Systems, like PayPal, Payoneer, Wise etc.
  • Freelance Management Systems (FMS) and freelance marketplaces

1. Wire transfer

When choosing which freelancer payment method is ideal, wire transfers are often the most common option when paying international contractors. Wire transfers allow you to pay all contractors with a bank account.

However, wire transfers can be costly for both your company as well as the contractor, as most banks apply fees to both recipients and senders. 

These payments are secure since they require owner validation, but their high costs make them a less desirable option unless speed is truly crucial. For payments that are routine or have a low amount, wire transfers are probably not your ideal option.


  • Secure due to owner validation: Wire transfers require the sender to validate the transaction, ensuring that the payment is authorized and reducing the risk of fraud.
  • Suitable for high-value and urgent payments: Wire transfers are processed quickly, making them ideal for large, time-sensitive transactions.
  • Universally accepted by banks worldwide: Almost all banks can process wire transfers, making it a reliable method for international payments.


  • High transaction fees for both sender and recipient: Both the company and the contractor may incur significant fees, often around $15 to $50 per transaction.
  • Slow processing time for international transfers: While domestic transfers can be fast, international transfers can take several days to process.
  • Not cost-effective for routine or low-value payments: The high fees make wire transfers impractical for frequent or smaller payments.

2. ACH payments 

Also known as “direct deposits,” ACH payments are transferred directly into the freelancer’s bank account. This payment option is only relevant for companies and independent contractors within the same country, as you must have a domestic bank account. 

Freelancers often prefer ACH payments because it only takes two to three days for the money to appear in their account once the payment is issued, and they don’t need to bear any fees. For paying companies, the average internal cost of processing ACH payments is $0.29.

According to Merchant Maverick, typical fees are:

ACH payments are more secure than paper-based payments, but they are still vulnerable because there is no owner validation. Contractors often provide bank account information via email, but companies rarely have processes in place to verify that he or she indeed owns the account, as required by law according to Know Your Customer (KYC)


  • Low processing cost for businesses: The average cost for processing ACH payments is around $0.29.
  • No fees for freelancers: Freelancers receive the full payment amount without incurring any charges.
  • Fast processing time (2-3 days): ACH payments typically take only a few business days to clear, ensuring timely payment.


  • Only available for domestic payments: ACH payments require both parties to have domestic bank accounts, limiting their use to within the same country.
  • Potential security risks due to lack of owner validation: Without proper validation, there’s a risk of payments being directed to incorrect accounts.
  • Relies on proper account verification processes, which may be lacking: Many companies do not have effective processes to verify account ownership, increasing the risk of fraud.

3. Credit cards

In order to pay a contractor with a credit card, they must already have a merchant account open with your bank, or use a compatible third-party merchant service, such as Square. Most independent contractors and freelancers are not set up to accept credit card payments, so this option is seldomly used. 

Moreover, the contractor may be responsible for fees of up to 3% of the payment total. Still, credit card payments do offer some benefits to both parties.

For one, payment is immediate, which helps you stay in your contractors’ good graces. Another major advantage is their security. Credit cards enable you to keep your company’s bank account information separate from your freelancer transactions. Additionally, many credit card companies offer zero fraud liability for their customers. 


  • Immediate payment processing: Payments are processed instantly, ensuring that freelancers receive funds without delay.
  • High security with zero fraud liability: Credit card companies often offer fraud protection, protecting both parties against unauthorized transactions.
  • Keeps company bank details separate from transactions: Using a credit card protects the company’s bank account details from being exposed during transactions.


  • Not widely accepted by freelancers: Many freelancers do not have the necessary merchant accounts to accept credit card payments.
  • High transaction fees (up to 3%): Credit card transactions can incur fees of up to 3% of the payment amount, which can be costly for the freelancer.
  • Requires freelancers to have a merchant account: Freelancers need to set up a merchant account or use third-party services like Square, which can be cumbersome.

4. Checks

Old-fashioned paper checks are probably your cheapest option for paying non-payroll workers, but they are difficult to monitor and few contractors opt for them.

Lack of speed is one of the biggest deterrents for most contractors. After your company issues the check, he or she needs to wait for it to arrive in the mail, then deposit it into their account. Whether they deposit it through their banking app or in-person at the bank, it could be a few more days before the money appears in their account. In the event that the check bounces, the contractor will face an even greater delay in getting paid, which can harm their experience with your company and lead them to quit.

Checks are also not the most secure freelancer payment method. The issuing party’s bank account information is printed right on the check, which can have serious repercussions if the check gets into the wrong hands. 


  • Low-cost payment method: Issuing checks can be one of the cheapest ways to pay freelancers, especially for small businesses.
  • Easy to issue and track on the business end: Companies can easily record and track issued checks, maintaining clear payment records.


  • Slow delivery and processing time: Checks need to be mailed and manually deposited, leading to delays in payment.
  • Security risks with exposed bank account information: The recipient’s bank account details are printed on the check, posing a risk if the check is lost or stolen.
  • Inconvenient for freelancers: Freelancers must physically deposit the check, which can be time-consuming and delay access to funds.

5. eCheck

An electronic check is the digital version of a paper check. It uses ACH to direct the funds from your company’s account into the freelancer or contractor’s account through a payment processor. 

eChecks are a great freelancer payment method because they are fast, have low processing costs, and they are secure. Processing fees can be as low as $0.10 per transaction, and freelancers can receive eCheck payments on the same day they are sent.  

They also help companies avoid errors and fraud because they are handled by fewer people. Merchant service providers also cross-check eCheck files against account databases that record incidences of fraud.

For businesses that maintain routine work with contractors, eChecks can be a cost-effective choice. 


  • Fast and secure with low processing costs: eChecks can be processed quickly and cost as little as $0.10 per transaction.
  • Same-day payment receipt possible: Freelancers can receive funds on the same day the payment is issued.
  • Reduced risk of errors and fraud: eChecks involve fewer manual steps, reducing the chance of errors and fraud.


  • Requires setup with a payment processor: Companies need to set up an eCheck processing service, which can involve initial setup costs and integration.
  • Not universally accepted by all freelancers: Some freelancers may not be familiar with or equipped to accept eChecks.

6. Paypal

Paypal is the world’s largest online payment system, with more than 300 million customers around the world. It’s a popular freelancer payment method because it issues payments fast, it handles currency conversions, and it’s secure. 

PayPal includes seller and fraud protection and it ensures employer records are kept private. It also enables mass payments through PayPal payouts.

Their rates are mostly lower than Payoneer, but less predictable as they vary significantly based on freelancer’s location, credit or debit card, Paypal account or bank account.

However, your contractor must have an active account in order to receive funds through Paypal. And, although it’s written in some places, Paypal does not produce a 1099-K form at the end of the year. 


  • Fast payment processing: Payments through PayPal are usually instant or processed within a few hours.
  • Handles currency conversions: PayPal automatically converts currencies, making it easy to pay international freelancers.
  • Secure with seller and fraud protection: PayPal offers security features to protect against fraud and unauthorized transactions.


  • Requires freelancers to have a PayPal account: Freelancers must set up a PayPal account to receive payments.
  • Variable fees depending on location and payment method: PayPal fees can vary widely, from 2.9% plus a fixed fee for domestic transactions to higher rates for international payments.
  • No 1099-K form production for tax purposes: PayPal does not provide 1099-K forms, complicating tax reporting for freelancers.

7. Payoneer

Payoneer is a financial services platform for online money transfers. The Payoneer Billing Service allows you to pay other Payoneer customers with ease. One of the greatest advantages of the platform is that it will pay your contractors and freelancers in their local currency (it operates in 200 countries and 150 different currencies). This makes it a good choice for companies that work with a globally dispersed non-payroll workforce. 

If the contractor has a Payoneer account, you can transfer their payment to them directly. If they don’t have an account, Payoneer will send a payment to their bank account via a bank transfer. According to the company’s website, there is a fee of up to 2% when sending payments from your Payoneer balance to bank accounts. 

Payoneer is fast and secure — contractors can receive the payment within one to three days, and all payments are validated. However, you should take into consideration that Payoneer doesn’t have a tax agreement with the IRS and they will not be able to produce 1099 for your freelancers. 


  • Supports payments in local currencies: Payoneer can send payments in over 150 currencies, simplifying international transactions.
  • Fast and secure transactions: Payments are processed quickly, typically within 1-3 days, and include security validations.
  • Good for globally dispersed workforce: Payoneer’s wide reach makes it suitable for organizations working with international freelancers.


  • Fees up to 2% for bank transfers from Payoneer balance: Sending money to a bank account can incur fees of up to 2%.
  • No IRS tax agreement for 1099 production: Payoneer does not generate 1099 forms, requiring businesses to handle tax reporting separately.


Another solution businesses can use to pay freelancers and independent contractors is This is a platform that uses AI to extract key information from invoices (such as the freelancer’s name, date, amount due, and payment method), and automatically route it for approval. 

The main benefits of are increased efficiency, less manual data input, and the ability to centralize payment information in one place. Ultimately, freelancers and contractors can get paid via  ACH, virtual cards, and international wire transfers.


  • Increases efficiency and reduces manual data entry: automates invoice processing, reducing the need for manual data input.
  • Centralizes payment information: All payment-related data is stored in one platform, improving organization and tracking.
  • Supports multiple payment methods (ACH, virtual cards, wire transfers): Offers flexibility in payment options to suit different needs.


  • Costs associated with platform usage: Using involves subscription fees and possibly transaction fees, depending on the plan.
  • Requires integration and setup: Initial setup and integration with existing accounting systems can be time-consuming and complex.

9. Wise

Formerly called Transferwise, Wise is an online payment app that allows individuals and businesses to send quick and secure payments. According to its website, businesses can send payments to freelancers in more than 70 countries with better exchange rates than banks and PayPal. Half of all payments sent through the platform arrive within one hour, and recipients don’t need a Wise account to get paid. All payments go directly into their bank account. 


  • Better exchange rates than banks and PayPal: Wise offers competitive exchange rates, reducing costs for international payments.
  • Fast payments, often within one hour: A significant portion of payments are processed within an hour, ensuring quick access to funds.
  • No need for recipients to have a Wise account: Freelancers can receive payments directly into their bank accounts without needing a Wise account.


  • Limited to payments in 70 countries: Wise’s coverage is limited compared to some other global payment solutions.
  • Fees may apply for certain transactions: While generally low, fees can vary based on the payment amount and destination.

10. Tipalti

Tipalti is a global payable automation solution. It offers a similar service to Payoneer and PayPal, but they can also automate additional processes in the accounts payable (AP) process from onboarding to invoice processing and reconciliation.

Tipalti’s rates also vary significantly based on different parameters, so it may be cheaper for some use cases and very expensive for others.

Like PayPal and Payoneer, they check the validity of the account owner before issuing payments and do not produce 1099 forms for your freelancers at the end of the year.


  • Automates AP processes beyond payments: Tipalti can handle invoice processing, approvals, and reconciliation, simplifying the AP workflow.
  • Validates account ownership: Ensures that payments are made to the correct account holders, reducing fraud risk.
  • Supports multiple payment methods: Offers flexibility with various payment options to meet different needs.


  • Variable fees based on transaction parameters: Fees can change depending on factors like payment method and currency, making costs unpredictable.
  • No 1099 form production: Like Payoneer, Tipalti does not generate 1099 forms, requiring separate tax reporting efforts.

11. Venmo

Venmo is one of the most popular social payment platforms in the U.S. Since its inception, the Venmo platform has added additional capabilities, including the ability to receive direct deposit payments from employers. It’s an attractive freelancer payment method because freelancers can quickly and securely receive payments to their Venmo accounts and easily transfer the money to their synced bank accounts.

Freelancers can also set up Venmo business profiles, which allow clients to issue payments the same way individual Venmo users pay each other over the app. 


  • Quick and secure payments: Payments are processed instantly, providing immediate funds to freelancers.
  • Easy transfer to bank accounts: Freelancers can easily move funds from Venmo to their bank accounts.
  • Business profiles for freelancers: Allows freelancers to set up professional profiles and receive payments directly through Venmo.


  • Limited to U.S. users: Venmo is primarily used in the United States, limiting its applicability for international freelancers.
  • Not as professional as other payment methods: Venmo’s social payment features may not convey a professional image for business transactions.
  • May have transfer limits: Venmo imposes limits on the amount of money that can be transferred, which could be restrictive.

12. Freelance Management Systems

Freelance Management System (FMS), like Fiverr Enterprise, utilize almost all of the payment methods mentioned above so they can offer you the best of both worlds. An FMS simplifies the payment process because your company will only need to work on one platform, while your freelancers and contractors can choose whatever payment method is preferable to them.


  • Simplifies payment process with multiple methods: An FMS offers various payment options, making it easy to accommodate different preferences.
  • Centralized platform for all transactions: Simplifies management by consolidating all payment activities in one place.
  • Offers additional functionalities like onboarding and budget management: FMS platforms can handle recruitment, compliance, and financial planning.


  • Platform usage fees: There are costs associated with using an FMS, including subscription and transaction fees.
  • May require significant setup and integration: Initial implementation can be complex, requiring time and resources.

13. Freelance Services Marketplaces

Freelance services marketplaces like Fiverr, Upwork, Total and many other can be a great solution sometimes as they will provide you a full solution when it comes to both payments and tax compliance. The problem is that their marketplaces fee can be quite high if you’re looking for a talent to something more than a one time gig. Their rates also impact that type of talents that works with them, as freelancers who had enough experience and built a good enough client base will prefer to work directly with companies and not through marketplaces.

Additionally, these types of solutions can automate many other functionalities when working with contractors and freelancers, like recruitment, onboarding, and budget management. Most FMSs fall under the 1099-K definition so they can handle all tax compliance requirements, including issuing your contractors and freelancers 1099s and collecting tax documentation like W8/9.


  • Full payment and tax compliance solutions: Marketplaces handle payments and ensure compliance with tax regulations.
  • Automates recruitment, onboarding, and budget management: Provides a mulit-faceted solution for managing freelancers.
  • Handles 1099 and tax documentation: Simplifies tax reporting by generating necessary forms and collecting documentation.


  • High marketplace fees: Fees can be substantial, reducing the overall earnings for freelancers and increasing costs for organizations.
  • Limited to freelancers who use the platform: Only freelancers registered on the marketplace can be hired, limiting the talent pool.
  • Not suitable for long-term, experienced freelancers who prefer direct contracts: Experienced freelancers may avoid marketplaces due to the fees and prefer direct client relationships.

How to decide which payment methods to support?

Before agreeing on a payment method with your freelancers or contractors, you’ll want to consider the following factors.  

  1. Transfer fee: Transfer fees can vary significantly from one freelancer payment method to another. Additionally, who bears responsibility for those fees can change—sometimes it’s the company, sometimes it’s the contractor, and sometimes it’s both. That’s why it’s important to understand what the transfer fees are before sending a payment. Certain payment options, such as wire transfers, commonly have expensive transfer fees. In some situations—such as it’s essential the payment is received immediately or the sum of money is quite large—makes these fees worth it. But in most other situations, other payment methods with lower fees make more sense.
  2. Tax compliance: Because freelancers and independent contractors pay their own taxes, tax compliance works a little bit differently than it does for regular employees. Before the work begins, each contractor should provide you with a W-8 or W-9, which you’ll want to keep in a centralized place. At the end of each calendar year, you will provide a 1099 form to each non-payroll worker, which they will use to file their taxes. Making sure all of the information on these forms is accurate, in addition to monitoring the nature of your relationship with the contractor, is essential to avoiding the penalties and back taxes that occur from misclassification
  3. Contractor location: In the era of dispersed work, companies are increasingly hiring non-payroll talent around the world. If you work with a contractor who is located abroad, they are likely to request payment in their currency. In this scenario, you may be responsible for paying for the currency exchange, which you’ll want to keep in mind when agreeing on a payment method.
  4. Number of contractors: Managing freelancer payments for just one or two workers may not add too much extra work to your day, but once you start working with more, payroll can become laborious and complex. In addition to considering how to pay independent contractors, you also want to prepare for the administrative work that goes with paying them. Do you have the necessary processes and systems for managing tax forms, monitoring project milestones, approving invoices, and issuing payments?

Go for speed, security, and convenience

Different freelancer payment methods offer different advantages and disadvantages. Your contractors have certain priorities — such as receiving their payments fast and owing the least possible fees — while security, compliance, and trust are paramount to your business. You should always remember that the payment method is only part of the payment terms that you need to agree on with your contractors, but usually carry the highest fees.

There are various payment solutions and accounting software that can help you streamline contractor invoices and simplify bookkeeping, but they are limited in the types of payment methods they support. 

Fiverr Enterprise, a freelance management system (FMS), supports all of the payment methods mentioned above, which gives you complete flexibility in deciding how to pay independent contractors.

With the ability to accommodate all of your contractors’ payment preferences and a secure and reliable platform to manage payments, you can check all of your boxes and keep working moving forward.