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Let's say I hire some remote contractors. Some are based in the US, and some are international.

I want to pay the contractors on a bi-weekly basis.

What is the best service to use for paying my contractors? My understanding is that paypal has a large fee when you pay more than $1K. What is the best alternative?

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Do your contractors accept Bitcoin? – todofixthis Oct 16 '12 at 16:51

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As a Canadian contractor who has worked with many international companies, here are some notes on the financial side of things (not legal or automated)...

  1. PayPal was almost always the best option. Fees were expensive (doesn't the receiver pay the fees?) but usually better than the alternatives. PayPal is actually quite reasonable... it's only expensive if companies are paying via credit card.

  2. Other common services like Western Union, Moneybookers, etc. usually high send fees, often depending on location as well. They are also a pain to go pick up, but payment is available same day.

  3. Checks were the cheapest way, but also the slowest. You have to factor in transit time (sometimes up to a few weeks), or you can pay for express. The other factor is how fast checks clear. In some cases, I had to wait up to a 6 weeks for a check to clear. This is very tough to take.

  4. For countries with good connections (US-Canada, for example) try and find a bank-based solution. The company I worked with for several months was in the states, and they could not pay non-US contractors with wire transfers (essentially payroll). However, I found that my bank also has a US branch which I was able to set up, and now I can get paid directly to my US account, and then transfer to my Canadian account for free / instant. The other HUGE benefit here is the exchange rate. Even with PayPal, I now transfer to my US bank instead, and exchange it at the bank where the exchange rate is noticably higher. (Note: this is NOT simply a USD currency account in Canada - it's an actual US-located account)

My bottom line: if you can avoid any middle-man services, you will save a lot of money!

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up vote 5 down vote

You don't payroll contractors, contractors are usually paid as contractors 1099. The best way to pay them is by check, international ones by wire or paypal (paypal is cheaper than wire usually).

Make sure that all your contractors have signed the right agreements and that you are reporting amounts paid to the irs.

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"Payroll" is the wrong word, sorry. International wire is waay too expensive. Paypal might still be too expensive. Is there a better way? – Joseph Turian Nov 10 '10 at 2:39
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Paypal is expensive? paypal.com/cgi-bin/webscr?cmd=_display-fees-outside – TimJ♦ Nov 10 '10 at 2:46
Paypal is reasonable if you consider the alternatives. I have worked with a few offshore developers that actually form companies in the USA with US bank accounts. This benefits them by simplifying the procedure for their clients such as us, and also makes it convenient for them to spend some of that income marketing their services in the USA. Another option is to use a service such as Odesk which will handle all the payment paper-work but then your contractors will pay a % fee to Odesk. The ugly truth is that you can expect a percentage of shrink due to expenses from moving around money. – Frank Nov 10 '10 at 3:44
These expenses, although they add up, are fully justified. Think, if you setup an e-commerce store you will likely be paying around 2-3% of your gross volume to merchant banks for payment processing. The fees are split between visa, mc, amex, etc interchange rates and the profit for the banks. Banks use the profits from such fees to continue and provide these services, to handle disputes, and hire staff. Unfortunately there is no hard way around it. Someone has to pay. The good news is that if you are hiring developers offshore the transaction fees are usually absorbed and low compared – Frank Nov 10 '10 at 3:46
to the signifigant savings over labor costs, insurance, medicare, unemployment and other benefits an in house employee requires. Not to mention that using contractors affords you the ability to quickly shrink or expand your workforce. The drawback is that you cannot find employees (contractors) that are as passionate about working with you and have less of a vested role in the applications they create. This provides a burden. My personal approach is to use offshore contractors in a satellite office. This takes a significant to setup and manage, but yields lower expense employees, who are – Frank Nov 10 '10 at 3:48
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up vote 2 down vote

You can ask your contractors to get a free paypal account that accepts credit cards. You can pay them their actual salary (using your card) and let them worry about the fees. An alternative way is to to hire them through odesk. It gives you more control and guarantees your work upto a certain limit. Again, Odesk will charge your contractors 10% percentage of their wages.

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up vote 2 down vote

We are dealing with contractors in countries with strict currency importation laws because of runaway inflation (cough, Argentina).

I recently learned about ATMCash and it appears to be exactly what we needed. For 10 bucks you send the freelancer an ATM card then load it up. The limit is $2,500/mo and the best part is that they only charge $5 per transaction regardless of the amount. They can withdrawal their funds from just about any ATM. It appeals to me also because I think the plastic in their hands makes the relationship that much more tangible.

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up vote 1 down vote

You can use Ikobo, Moneybookers, Wire transfer (for larger amounts). You can't really get that much cheaper than paypal unless you have a local bank account in that country.

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