Reviewing payroll solutions for freelancers can feel overwhelming. After all, paying freelancers isn't a one-size-fits-all process. What works for a graphic designer might not work for a software developer, and missing a payment could mean losing a great freelancer. Choosing the right payroll service goes beyond just sending money—it's about making things easy for everyone.

In this article, we'll explain everything about paying freelancers: from payment methods to challenges in freelance payroll and how Branch can help.

What’s the Difference Between Freelancers and Gig Workers?

Freelancers and gig workers are both independent contractors, meaning they are self-employed and handle their own work arrangements, health insurance, and income taxes. They cannot be classified as W-2 employees. However, freelancers and gig workers operate in different ways. 

A freelancer typically refers to a professional who offers specialized services like writing, design, programming, or consulting. They often work on longer projects, build lasting relationships with clients, and have more control over their work, prices, and schedules. 

On the other hand, the term gig worker more often refers to someone who works for a platform like Instacart, Uber, or others. They work directly with the platform’s customers and often take on multiple gigs for income. Gig workers usually earn money faster, but their income can be less predictable and their jobs are more standardized.

Ways to Pay Freelancers

1. Cash

‍Many service providers like house cleaners, repair workers, and local photographers prefer cash because they get their money instantly. Still, even though it is not technically illegal to pay freelancers in cash, it’s somewhat of a risky business practice. For one, paying independent contractors in cash means you’re without an audit trail or a record of your payments. Choosing this method also makes it harder for freelancers to verify their income, which may mean they run into complications or extra hurdles come tax time.

2. Paper checks

‍Many freelancers are still paid by paper checks in the mail, yet this traditional method comes with several drawbacks. For one, it can take a long time for a check to be issued and mailed. Checks can also be lost or misplaced in the mail. You’ll also have to deal with fielding questions from freelancers on when a check has been issued or sent. All of this creates delays and hassles that your freelancers may not want to put up with. Plus, it takes more time and effort on your end that could be saved for focusing on overall business growth.‍

3. Direct deposit/ACH

‍Many companies use this method because it's safe and works well for regular payments. The money is usually available in 1-3 business days, making it a reliable option. However, to stay competitive in the hopes of attracting and retaining top freelancers, you may want to opt for a faster method. ‍

4. Fast, digital payments

‍For many businesses, fast digital payments are becoming the best way to pay freelancers—and everyone else on their payroll. Here’s why:

• Speed and convenience. With fast digital payments, freelancers receive their payment quickly. This improves their cash flow and boosts freelancer satisfaction. Your business might even benefit from faster project completion as a byproduct of knowing they'll get paid immediately after work.
• Security. Digital payments eliminate the risk of misplaced checks, and reputable payment platforms offer robust security measures to protect both parties from fraud. 
• Clear and transparent. Clear transaction records streamline accounting for both freelancers and businesses, providing transparency and simplicity. You’re able to see when funds are deposited to your freelancer’s accounts, eliminating stress for everyone involved.
• Fee-free options. Choosing a payments platform that allows you to pay freelancers without fees can be a major win for your organization—and your bottom line.
  

Top Payment Challenges in Freelance Work

Managing freelancer payments is more complex than full-time employees, where you can just run payroll according to schedule. Whether you're hiring freelancers or working as one, here are the key payment challenges you need to know about.

Challenges for employers

Managing freelancer payments creates unique hurdles for businesses. Processing multiple checks or invoices through multiple methods or payroll systems complicates payroll management. Companies often struggle with time tracking and work hours, managing invoices, and maintaining accurate bookkeeping.

Tax compliance adds another layer of complexity. Companies must properly classify workers according to IRS categories and collect necessary tax forms and ID, such as social security information. Unlike full-time employees, freelancers have no standard payroll tax withholding. This requires careful documentation and different tax filing procedures and has its own set of hassles.

Challenges for freelancers

Unpredictable payment schedules make financial planning tough. Spending hours tracking payments from multiple clients and following up on late paychecks can be frustrating and time-consuming. Freelancers often deal with payment delays and inconsistent income without regular payroll processing.

Managing taxes is another major challenge. Self-employment taxes require careful planning and quarterly payments. Without employer tax withholdings, freelancers must set aside money and keep detailed records for federal and state taxes and filing. Those operating as LLCs need separate systems for business and personal finances.

Choosing the Best Payment Method for Freelancers and Your Business

Smooth payments are the foundation of strong freelance relationships. Branch offers a payment solution that simplifies freelancer compensation by providing:

• Fast access to earnings. Branch offers the ability to start paying freelancers on day one. Push payments as soon as the job is complete—nights, weekends, and holidays too.
• A free digital bank account and Mastercard debit card with fee-free options. No overdraft fees, late fees, or minimum balance requirements. 
• Financial wellness tools like cashback rewards, a savings goal feature, personalized spending insights, and more. 

Choosing the best way to pay freelancers can help eliminate payroll headaches for you and help your business stay compliant.

Learn more about how Branch can help you pay 1099 workers and W-2 workers with one seamless platform.

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