Paying Independent Contractors: Delivering the Best Experience Possible
When you're paying independent contractors, you want their time to be spent on the work - not late payments, unexpected fees, and paperwork. Read our do's and don'ts for paying contractors.
Published on September 7, 2021
Do: Pay Independent Contractors on TimeIf a contractor requests payment in 30 days, they’re planning for that payment to arrive in their bank account within the next month. However, for reasons ranging from delayed sign-offs on invoices to paperwork not being completed on time, it’s easy to see how 30 days can turn into 45, 60, or more when a company hasn’t streamlined its payment process. Managing contractor payments on a single platform will help you leave these headaches in the past. Research from Harvard Business School found that 90% of companies see an advantage in maintaining a mix of freelance and full-time workers. That’s great news for contractors who often have the advantage in determining the companies they work with. It can be an advantage for your business, too— if you prioritize getting payments into their hands-on time. You probably have busy seasons and slower ones. None of that matters when it comes to getting paid, though. For software engineers, writers, and other independent contractors, there isn’t the same payment predictability. The workload of an independent contractor can vary season to season and even month to month. When the companies they work for don’t pay on time, this adds another layer of unpredictability — something most of us prefer to avoid at all costs. Don’t let this avoidable frustration cost you your best contract workers. The good news is payment predictability is simpler than you might think. Pilot makes it easy to set up your contractors’ payment details and schedule payments, so they’re not waiting around for that hard-earned money to hit their account. It provides transparency to contractors, too, so they know what to expect and when that payment will land in their bank account.
Don’t: Accidentally Subject Them to Unnecessary FeesYou pay close attention to the fees your business incurs, but contractors often end up on the receiving end of fees, too. Depending on the payment method you choose, getting that money into their bank account could cost them. While you don’t see it, they’re definitely taking notice. If you’ve ever withdrawn money from a foreign ATM, you were probably hit with at least two fees for the transaction, if not more. Now, imagine if you were charged these fees every time a company paid you for the work you completed. That’s what happens when independent contractors need to use e-wallets. Most e-wallets come with a transfer fee, sometimes in the case of sending the money to the contractor and again when they take the money out. This eats away at their hard-earned wages. For example, when you send a payment using PayPal and the contractor wants to retrieve the money instantly, they’ll be charged a 1.5% fee, up to $15 USD per transfer to their bank account. While this sounds like a small amount, it adds up over time. And if you’re paying contractors that live abroad, the fees can be even higher. We’ve seen rates as high as $50 to send money and $25 to receive the money. Thankfully, those fees don’t have to be a reality for your independent contractors. Using Pilot removes all of these challenges, replacing the fees and delays of e-wallets and steering clear of international wire fees. Think of it like payroll — but for independent contractors.
Do: Make Administrative Tasks SimpleWhen a new contractor starts working for your company, how many interactions does it take to get them set up and ready to go? Between reviewing and signing contracts, setting them up to receive payments, and briefing them on the actual work they’ll be doing, there’s often a lot of paperwork and people involved long before you receive finished work from your contractor and longer still before payment hits their bank. Any time you’re working with physical paperwork instead of doing things digitally, there are bound to be challenges.Pilot dramatically streamlines an outdated paperwork process, letting contractors fill out their W-9 and W-8 forms directly on the platform (with helpful guidance along the way), speeding things up significantly. And when the work actually begins, they can use Pilot to clearly mark the dates of work associated with each payment. They can also submit expense reports. On the employer side, custom workflows allow for invoicing and approvals that you can customize to how your company does business. Finally, contractors can see the status of a payment without sending an email to the project manager or picking up the phone. It all adds up to dramatic time savings for everyone involved: you won’t be responding to invoice follow-ups and investigating where the payment hold-ups are, and your independent contractors can devote more time to the work you hired them to do.
Don’t: Break Any Local Contractor LawsWe know you wouldn’t break the law on purpose. At the same time, how much do you know about local payment and IP, or intellectual property, laws? To avoid any legal mishaps getting in the way of working with — and, of course, paying — independent contractors, it’s best to leave the nuances of compliance to the pros. This is important if you’re paying international contractors, but it matters for ones within the same country, too. Tax forms, labor laws, and contract requirements vary by country and even by state within the U.S. It can feel daunting and time-consuming (if not near impossible) to figure all of this out, but it shouldn’t deter you from hiring a great contractor in a country other than your own. Another reason to get international compliance right: all signs point to an uptick in talented freelancers living abroad. According to an Upwork study released in September 2020, the number of full-time freelancers in the U.S. increased 8 percent from 2019. Another 58% of respondents who weren’t freelancing at the time of the survey said they’d consider it in the future. One of the big benefits of freelancing? You can do it from anywhere. In fact, Iceland, Mauritius, Dubai, and more all actively welcomed remote workers in 2020. Pilot makes compliance easy for everyone wherever talented independent contractors may roam. You’re even paired with a success manager to help with compliance in local markets and to create the best experience possible for contractors. Our in-house legal team and global network of lawyers keep contracts current. And we automatically collect and manage tax forms, so you don’t have to. That means you’ll spend less time working with lawyers and more time working with talented independent contractors.
A Great Experience for Contractors is a Great Experience for Your BusinessFinding the best independent contractor for the job isn’t easy. It takes time and effort, and there’s often a lot of competition for the best talent. But great contractors are well worth the search.If you can’t imagine your business without your team of contractors, you’ll want to do everything you can to make sure they stick around. Delivering the best possible experience is a big part of that — and it doesn’t have to be complicated for you to implement. When you work with Pilot, the process is simplified at every step. From set-up to paperwork to compliance to sending payments and more, we’ve figured out how to navigate all the challenges of paying independent contractors (and everything that comes before and after), so you don’t have to. Learn more and request a demo here.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
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