To pay an independent contractor, collect a W-9 before the first payment, agree the rate and the pay date in writing, then send the money by bank transfer, a payroll tool like Gusto, or a transfer service like Wise. Pay in the currency they actually spend. Keep a record of every payment, because you'll need the yearly total for 1099 reporting.
That's the whole answer. The rest of this is the detail that decides whether paying people is a ten-minute job or a monthly headache... and what it costs you in fees.
One thing up front, because it matters later: I'm talking about a 4 to 10 person agency paying a handful of freelancers and subcontractors. Not an enterprise with a hundred people in forty countries. Different problem, different tools.
How do you pay an independent contractor?
Paying an independent contractor means sending money for finished work, with no payroll, no tax withheld and no benefits, against a rate and a date you both agreed. The contractor handles their own taxes. You handle the paperwork that proves who you paid and how much.
In the US, that paperwork starts with Form W-9. It's how a payer gets a contractor's correct taxpayer identification number, so the payer can report what they were paid. The IRS describes it as the form you use "to provide your correct Taxpayer Identification Number (TIN) to the person who is required to file an information return."
In practice, the sequence looks like this:
- Get a W-9 before the first payment. Not after. Chasing one in January, when the contractor's gone quiet, is miserable.
- Write down the rate, the pay date and what triggers payment. Per hour, per deliverable, per month. There's a contractor pay terms template if you don't have words for it yet.
- Pay on the date you said. Contractors remember late payments longer than clients do.
- Keep a record of every payment. Date, amount, currency, what it was for.
- Report it. For US contractors, the IRS says you report payments totaling $600 ($2,000 for payments made after December 31, 2025) or more during the calendar year, made in the course of business to a person who isn't an employee, for services. The form is due January 31, to the contractor and to the IRS.
I'm not your accountant, and the 1099 rules have exceptions I'm not going into. Treat this as the outline and ask yours about your own case.
How do independent contractors get paid?
Independent contractors get paid by invoicing you, or by working to a pay schedule you've agreed, and you send the full amount by bank transfer, a transfer service or a platform. Nothing is taken out for tax. They look after their own tax and set their own money aside.
That's the difference from an employee, and it's why the paperwork matters more than the payslip. Most contractors work one of three ways:
- Per invoice. They send an invoice when the work is done and you pay by the date on it.
- On a monthly cycle. Same amount or same hours-times-rate, on the same date each month. Common for people who work with you all year.
- Per milestone. A deposit up front, the rest on delivery or sign-off.
What contractors care about most is that the date holds. If you said the 15th, pay on the 15th. Late pay hits them harder than it hits you, because it's usually one of a few clients, not one of fifty.
What is the best way to pay contractors?
The best way to pay contractors is the one that matches where they live and how often you pay them. Bank transfer is simplest for a US contractor you pay monthly. A payroll tool suits you if you already run payroll there. A transfer service like Wise is usually cheaper for overseas contractors. A platform like Deel covers contracts and compliance, at a price.
Here's how the four options actually compare for a small agency.
Direct bank transfer (ACH or wire)
Cheapest for US-to-US. You pay from your business account and the contractor receives it in a day or two. The catch is that it's entirely manual: you enter the details, you remember the date, you keep the record. Fine for two contractors. By the time you're paying six people on three different schedules, it's a spreadsheet and a prayer.
Gusto (or another payroll tool you already use)
If you already run payroll through Gusto, paying US contractors there is easy and it keeps 1099 records in one place. One agency owner I spoke to uses Gusto "whenever we can" for exactly that reason: it's what he already had from payroll days. He called the fees on the international side "an annoyance" rather than a crisis. That's my read of most small agencies, too.
I'm not quoting Gusto's prices here. Their contractor plans and international terms have been changing, so check their pricing page before you decide.
Wise
Built for sending money across borders at a low, visible fee. Wise says on its business pricing page that sending money internationally starts from 0.23% (the fee varies by currency) and that it doesn't inflate the mid-market exchange rate. Contractors can often receive local currency in a local account, which they like.
The same owner uses Wise as his fallback when Gusto can't reach someone. That's the pattern I see most: the tool you already have for most people, Wise for the rest.
Deel
Deel is a contractor and employer-of-record platform, so it adds contracts, compliance and local-law help that the others don't. That's real value if you hire in countries where you don't want to work out the rules yourself. For a small agency paying established freelancers, it's often more than you need.
What it costs to fund your balance is published. Deel's help center lists card funding at 2.9% + $0.30 for US or EU cards, and 3.9% + $0.30 for cards issued elsewhere, with a wire at $5. On a $7,000 monthly contractor run, a US card at 2.9% + $0.30 is about $203 a month before the platform fee. Fund by wire and it's $5. Same platform, very different bill, depending on how you pay it. Deel's published page doesn't give a percentage for currency conversion, so I can't tell you that part.
How do you pay international contractors?
To pay an international contractor, send money in their local currency through a transfer service or a platform with local payout rails, rather than a bank wire. You'll pay a conversion fee plus any transfer fee, so compare the total cost to land a set amount, not the headline rate.
Three costs are worth separating, because people mix them up:
- The transfer fee. A flat amount or a percentage the provider charges to send.
- The exchange rate margin. The gap between the mid-market rate and the rate you get. This is where banks make their money and where it's hard to see.
- Funding costs. What it costs to put money into the account you pay from, such as a card surcharge. This is the one that surprised me most.
Airwallex publishes its numbers clearly. On its US pricing page it lists FX conversion at 0.5% above interbank rates for major currencies and 1% for the rest, SWIFT transfers at $15 to $25 each, and local USD transfers as free. Wise, as above, starts from 0.23%.
Fund any of this with a credit card and you'll add a card fee on top, plus whatever your card issuer charges for foreign currency. That's the line people miss. Pay from a bank balance instead and the funding cost mostly disappears.
If you want to run your own numbers, the contractor pay cost calculator compares the options for your actual headcount and run size.
What goes wrong when you pay contractors by country?
What goes wrong is rarely the money. It's reach: whether your tool can pay a bank account in that country, in that currency, with the details that country's banks need. Find out before you promise a contractor a start date.
I can't give you a country rulebook, and I'd be wary of anyone who offers one that fits on a page. What I can give you is what a real owner ran into. He told me the Philippines "seems to work" fine through his usual setup, but Colombia, Venezuela and India gave him trouble, and that's when he reached for Wise. He wasn't claiming those countries are impossible, just that his default tool didn't get him there.
A short checklist so it doesn't catch you out:
- Check the country and currency list on your provider before you agree terms, not after the first invoice arrives.
- Ask the contractor how they'd like to be paid. They know which of their own accounts and apps work best, and it's their money that's delayed if it fails.
- Send a small test payment to anyone new in a country you haven't paid before.
Tax treatment for non-US contractors is a different set of forms and rules from the W-9 and 1099 story above. I'm not covering it here. Ask an accountant who handles international payments.
Is it normal to pay a contractor 50% upfront?
Yes, it's common, especially for project work where the contractor carries costs or turns down other work to take yours. It's less normal for ongoing monthly contractors, who are usually paid on a cycle. A deposit is a negotiated term, not a rule, so put it in writing.
Half upfront makes sense when the contractor is new to you, the job is a fixed project, and they're committing a block of time. It's fair, and it filters out people who don't believe in their own timeline. For a regular freelancer you've worked with for a year, an upfront payment is more of a signal that something's changed in the relationship.
If you do pay a deposit, tie the second half to something specific, such as delivery or sign-off, and write it in the agreement. "Balance on completion" with no definition of "completion" is how you end up in a dispute in month three.
How do you pay contractors in QuickBooks Online?
QuickBooks Online is where most small agencies keep the record of contractor payments. You set the contractor up as a vendor, record each payment against them, and QuickBooks Online has features for tracking what each contractor was paid for 1099 reporting. Those are QuickBooks features, not something a payment tool does for you.
What I can't tell you is exactly which payment and 1099 options your plan includes, because Intuit changes what's in each plan and I'm not going to quote it from memory. Check Intuit's current pages for your plan before you rely on them.
The bit people mix up is the difference between paying and recording. The books are one job: who you paid, how much, and what for. Moving the money is another: getting it to a bank account, in the right currency, on the right day.
Handl does the second job and leaves the first where it is. It pays the run from your own Wise or Airwallex balance, and your books stay in QuickBooks. Handl doesn't file 1099s and isn't a replacement for the 1099 tracking in QuickBooks. If you're a US agency with US contractors, keep that side in QuickBooks and ask your accountant what they need from you.
Where does Handl fit in?
Handl's Pay Your Team is a pay-run tool for the contractors you already work with. It connects to your own Wise or Airwallex balance, drafts each contractor's statement from the hours you've already approved, and moves the money when a person on your side approves the run. Handl never holds the money.
What it is not: it's contractors only. No payroll, no super, no PAYG, no tax filing. It doesn't write contracts, classify workers or produce tax documents, and it won't produce a 1099. If you need any of that, you need a different tool alongside it, and an accountant.
What it does well is the monthly routine. The statement is drafted from approved hours at the contractor's rate, they check it and submit, you approve, and the transfer fee goes to Wise or Airwallex directly with Handl adding nothing to it. Expenses and adjustments land in project costs, so your margin per project stays right. Costs stay internal: this is about knowing what a job really cost you, not about adding anything to a client invoice.
Pay the run from a Wise or Airwallex balance: $5 per contractor paid, per month, free until 31 January 2027. A contractor you don't pay in a month costs nothing. See how Pay Your Team works, connect Wise or Airwallex, or run the cost calculator first.
One limit to know: Wise Business accounts in Australia, New Zealand, the US, Canada, Singapore and Malaysia can fund transfers through Handl. Anywhere else, use Airwallex.
The bottom line
Get the W-9 first, pick the tool by where your people live, and compare the cost to land the money rather than the sticker fee. If the monthly run is the annoying part, that's the bit worth moving into a pay run.