What's the Best Way to Pay Freelancers?

Key Takeaway

Fast digital payments are the optimal solution for paying freelancers. They offer speed, security, and transparency, while eliminating traditional payment delays. In our experience, businesses that use digital payment platforms have happier (and more loyal) freelancers and streamlined payroll processes.

Quick Navigation

• Freelancers vs Gig Workers
• 4 Payment Methods Compared
• Payment Challenges
• Choosing the Best Payment Method
• Frequently Asked Questions

Key Terms

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. 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. 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.

👩‍💻 Freelancers

• Specialized services: Writing, design, programming, consulting
• Project duration: Longer projects with deeper relationships
• Control level: High control over work, prices, and schedules
• Income pattern: More stable, but requires finding clients

🚗 Gig Workers

• Platform-based: Work through Instacart, Uber, delivery apps
• Task duration: Short, standardized tasks
• Control level: Limited control, platform sets rates
• Income pattern: Faster earning, but less predictable

What Are the 4 Ways to Pay Freelancers?

Businesses have four main options to pay freelancers. Each method has distinct advantages and drawbacks that affect both payment speed and administrative complexity.

1. Cash Payments

Many service providers, like house cleaners, repair workers, and local photographers, prefer cash because they get their money instantly.

Advantages

• Immediate payment
• No processing delays
• Preferred by some service workers

Disadvantages

• No audit trail — Risky for tax compliance
• Income verification issues — Complications at tax time
• Security risks — Cash handling vulnerabilities

Even though it is not technically illegal to pay freelancers in cash, it's somewhat risky. Paying independent contractors in cash means you won't have an audit trail or record of your payments.

2. Paper Checks

Many freelancers are still paid by paper checks in the mail. This traditional method comes with several drawbacks.

Advantages

• Familiar process
• Physical payment record
• Works without digital setup

Disadvantages

• Long processing time — Issuing and mailing delays
• Risk of loss — Checks can be misplaced in mail
• Administrative burden — Tracking and follow-up required
• Opportunity cost — Time better spent on business growth

All of this creates delays and hassles that your freelancers may not want to deal with. Plus, it takes more time and effort on your end that could be used for 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 one to three business days, making it a reliable option.

Advantages

• Secure and reliable
• Automated processing
• Lower cost than checks
• Bank-to-bank transfers

Disadvantages

• 1 - 3 day delay — Not competitive for top talent
• Banking requirements — All freelancers need bank accounts
• Processing windows — Limited by business days

You may want to opt for a faster method to stay competitive in attracting and retaining top freelancers.

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:

Advantages

• Speed and convenience — Immediate payment processing
• Enhanced security — Robust fraud protection measures
• Transparency — Clear transaction records for all parties
• Fee-free options — Pay freelancers without fees

Considerations

• Requires digital platform setup
• Technology learning curve for some users

With fast digital payments, freelancers receive their payment quickly. This improves their cash flow and boosts freelancer satisfaction. Your business might even benefit from projects being completed faster since they know they'll get paid immediately after the work is done.

What Are the 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:

• Complex payment systems — Processing multiple checks or invoices through different methods
• Time tracking difficulties — Managing work hours and project completion
• Invoice management — Handling multiple billing formats and schedules
• Tax compliance complexity — Proper worker classification and documentation
• Bookkeeping challenges — Maintaining accurate records across payment methods

Tax compliance adds another layer of complexity. Companies must properly classify workers according to IRS categories and collect necessary tax forms and ID. This requires careful documentation and different tax filing procedures.

👤 Challenges for Freelancers

Freelancers face their own set of payment-related difficulties:

• Unpredictable payment schedules — Makes financial planning difficult
• Payment tracking burden — Hours spent following up with multiple clients
• Late payment stress — Chasing overdue paychecks is time-consuming
• Inconsistent income — No regular payroll processing
• Tax management complexity — Self-employment taxes and quarterly payments
• Record keeping requirements — Detailed documentation for federal and state taxes

Managing taxes is another major challenge. Without employer tax withholdings, freelancers must set aside money and keep detailed records. Those operating as LLCs need separate systems for business and personal finances.

How to Choose the Best Payment Method for Freelancers and Your Business

Smooth payments are the foundation of strong freelance relationships. Payroll management is significantly easier with the right platform.

Why Branch Is the Optimal Solution for Freelancer Payments

Branch offers a payment solution that simplifies freelancer compensation, while addressing the challenges faced by both employers and freelancers.

⚡ Fast Access to Earnings

Start paying freelancers on day one. Push payments as soon as the job is complete—nights, weekends, and holidays too.

💳 Free Digital Banking

Free digital bank account and Mastercard debit card with fee-free options. No overdraft fees, late fees, or minimum balance requirements.

📊 Financial Wellness Tools

Cashback rewards, savings goal feature, personalized spending insights, and comprehensive financial management.

🔄 Unified Platform

Pay both 1099 workers and W-2 workers with one seamless platform, simplifying your entire payroll process.

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

Frequently Asked Questions About Paying Freelancers

What's the difference between freelancers and gig workers?

Freelancers offer specialized services like writing or design and have more control over pricing and schedules. Gig workers typically work for platforms like Uber or Instacart with more standardized tasks.

What are the best payment methods for freelancers?

Fast digital payments are the best option, offering speed, security, transparency, and fee-free options compared to cash, checks, or ACH transfers.

What challenges do businesses face when paying freelancers?

Businesses face complexities in managing multiple payment methods, tax compliance, worker classification, and maintaining accurate bookkeeping for freelancer payments.

Can you pay freelancers in cash?

While not illegal, paying freelancers in cash is risky because there's no audit trail and it makes income verification difficult for freelancers during tax time.