The best ways to pay contractors: Comparing methods, costs, and when to use each

There's no single "best" way to pay contractors. The right method depends on where your contractors are located, how much you're paying, how often you pay, and what proof you need. A $500 payment to a U.S. contractor has different requirements than a $5,000 payment to someone in Argentina.

This guide compares the main payment methods—ACH, Wise, PayPal, Payoneer, bank wires, and others—with real fees, speed, exchange rates, and proof of payment. You'll learn when to use each method and how to choose based on your specific situation.

Comparing payment methods for a $1,000 international payment

Here's how the main payment methods stack up for a typical $1,000 payment to an international contractor:

Wise: Fee is $4-10 (0.4-1% plus real mid-market exchange rate). Speed: 1-2 days. Exchange rate: Real mid-market rate with minimal markup. Proof: Receipt with tracking number.

PayPal: Fee is $29.30 (2.9% + $0.30). Speed: Instant. Exchange rate: 3-4% markup above mid-market. Proof: Receipt and email confirmation.

Payoneer: Fee is $20-30 (2-3%). Speed: 1-2 days. Exchange rate: 2-3% markup. Proof: Receipt with tracking number.

Bank wire: Fee is $25-50 flat. Speed: 2-5 days. Exchange rate: 3-5% markup. Proof: Receipt only.

ACH (U.S. only): Fee is free to $3. Speed: 2-3 days. Exchange rate: N/A (domestic USD). Proof: Receipt.

Key takeaway: Wise is cheapest for international payments. PayPal is fastest but most expensive. ACH is best for U.S. contractors. Bank wires are expensive and slow—avoid them unless the contractor can't accept other methods.

When to use each payment method

Wise is best for international contractors. Use Wise when you're paying in a different currency, want low fees, and can wait 1-2 days for delivery. Wise supports 50+ currencies with real mid-market exchange rates and minimal markup. It's ideal for regular payments to contractors in Europe, Latin America, Asia, or Africa. For most international payments, Wise is the most cost-effective choice.

ACH transfers are best for U.S. contractors. Use ACH when paying U.S. contractors in USD. ACH is free or costs $1-3, making it the cheapest option for domestic payments. It takes 2-3 days to complete, so use it when you don't need instant payment. It's ideal for regular monthly payments or larger amounts where even 1-2% in fees would be expensive.

PayPal is best for small, urgent payments or contractors who prefer PayPal. Use PayPal when you need instant transfer, the contractor prefers PayPal, or the payment is small enough that 2.9% fees are acceptable. PayPal is good for U.S. contractors needing quick payment or one-off payments under $500 where speed justifies the cost.

Payoneer is best for batch payments to multiple contractors. Use Payoneer when you're paying 10+ contractors at once. Payoneer offers mass payout features and is popular with freelancers globally, especially in emerging markets. For batch payments, Payoneer's per-payout fees are lower than processing individual payments through other methods.

Bank wires are a last resort only. Use bank wires only when the contractor can't accept other methods or compliance requirements mandate wires. Bank wires cost $25-50, take 2-5 days, and offer no advantage over other methods for most situations. Avoid them unless absolutely necessary.

Credit/debit card payments work for some contractors but have high fees (2.5-4%). Use cards only when the contractor explicitly requests payment via card and the cost is acceptable for your situation.

Understanding proof of payment

Every payment needs proof. You need evidence that you sent the payment, the contractor received it, and what the payment was for. This proof is essential for audits, tax filing, and dispute resolution.

What counts as proof:

A transaction receipt from your payment provider (Wise, PayPal, Payoneer, your bank) showing date, amount, recipient details, and a reference number. This is your primary proof that you initiated the payment.

Contractor confirmation via email or message confirming they received the payment. This proves the payment reached the contractor successfully.

Invoice reference linking the payment to a specific invoice. This shows what the payment was for and connects it to the original work delivered.

Your bank statement showing the debit from your account. This corroborates that the payment was made.

Save all of these together. If you're audited, you'll need to prove every payment was a legitimate business expense to a properly classified contractor. Missing proof can result in disallowed deductions and questioned tax returns. Organize your records so you can quickly retrieve proof for any payment.

Batch vs individual payments: The time and cost tradeoff

How you pay depends on how many contractors you have and how often you pay them.

Individual (ad-hoc) payments work when you're paying contractors one at a time as invoices come in. This is typical for 1-10 contractors with irregular payment schedules. You use Wise or PayPal for individual payments as needed. The advantage is simplicity—no coordination required. The disadvantage is that it becomes time-consuming if you have many contractors.

Batch payments mean collecting invoices, approving them all at once, and sending payments in a batch. This works well for 10+ contractors with regular payment schedules (weekly, bi-weekly, monthly). You collect invoices on set dates, review them together, and send payments through a batch-capable service like Payoneer or Wise. This reduces per-payment fees and saves hours of administrative time.

Example: You have 20 contractors. Instead of paying each one individually (20 separate transactions with processing overhead), you collect all invoices on the 1st and 15th of each month, approve them in bulk, and send batch payments. This reduces transaction fees and saves hours of admin time per month.

Practical decision checklist

Use this checklist to choose the right payment method for each situation:

Is the contractor in the U.S.? Use ACH (free or $1-3) or PayPal (instant but 2.9% + $0.30).

Is the contractor international? Use Wise (0.4-1% with real exchange rates).

Is the payment urgent? Use PayPal (instant) or Payoneer (same-day) even if fees are higher.

Is the payment large ($5,000+)? Use ACH or bank transfer to avoid paying percentage-based fees.

Are you paying 10+ contractors? Use Payoneer or Wise batch features to reduce per-payment fees and save processing time.

Do you need contractor confirmation of receipt? Use a payment method that provides tracking and ask contractors to confirm. Record confirmations systematically.

How often do you pay this contractor? If regular monthly payments, optimize for low fees. If one-time payment, optimize for convenience even if fees are higher.

Building your payment stack

Most businesses benefit from having multiple payment methods available:

Primary method: Wise for international payments (lowest fees, real exchange rates). ACH for U.S. payments (free or nearly free).

Secondary method: PayPal for urgent payments or contractors who prefer it.

Batch method: Payoneer when paying 10+ contractors at once.

Reserve method: Bank wire only for situations where other methods aren't accepted.

Having options lets you optimize for each situation: lowest fees for regular payments, speed for urgent payments, batch discounts for bulk payments.

Organizing and tracking payments

Regardless of payment method, maintain clear records:

Keep transaction receipts from your payment provider for every payment. These show that you sent the money and provide transaction IDs for reference.

Request and record contractor confirmations that they received the payment. This proves payment arrived.

Link each payment to the corresponding invoice. This shows what the payment was for and connects it to completed work.

Maintain a payment log tracking: date, contractor name, amount, payment method, transaction ID, and confirmation status. This creates an audit trail.

Store all documentation securely for at least 7 years. If audited, you'll need to provide complete proof of every payment.

The bottom line

For most businesses, the optimal payment stack is: Wise for international contractors (lowest fees, real exchange rates), ACH for U.S. contractors (free or nearly free), and PayPal for urgent or small payments (instant but expensive). Avoid bank wires unless absolutely necessary—they're slow and expensive.

If you're paying 10+ contractors regularly, use batch payment features to reduce fees and administrative overhead.

Always keep complete proof of payment: transaction receipts, contractor confirmations, and invoice references. This protects you in audits and disputes.

The right payment method saves you money and time. Choose based on contractor location, payment size, urgency, and volume. Don't default to expensive methods like bank wires or high-fee options when cheaper alternatives like Wise or ACH are available.

Test different methods with a few payments. Find what works best for your specific contractor base and payment patterns. The small investment in choosing good methods pays dividends in fees saved and administrative time reduced.