The real fees of paying contractors
Paying contractors involves multiple fee layers that add up quickly. Understanding these costs helps you choose the right payment methods and optimize your spending without sacrificing control or audit quality.
Fee types breakdown
Contractor payment fees typically fall into three categories:
| Fee Type | Typical Range | Who Pays |
|---|---|---|
| Platform fee | $0–$5 per transfer | Sender or recipient |
| FX spread | 0.3%–3% of amount | Sender (hidden in rate) |
| Receiving fee | $0–$15 per deposit | Recipient |
Understanding FX spreads
Foreign exchange spreads are often the largest hidden cost. When you pay a contractor in a different currency, the payment provider converts your funds at a rate that includes their markup.
For example, if the mid-market rate is 1.20 USD/EUR but your provider offers 1.17, you're paying a 2.5% spread. On a $10,000 payment, that's $250 in hidden fees.
Batch timing strategy
Consolidating payments can significantly reduce per-transaction costs:
- Weekly batches: Reduce fixed fees by 75% compared to daily payments
- Monthly cycles: Best for retainer-based contractors with predictable schedules
- Milestone-based: Align payments with deliverables to reduce unnecessary transfers
Provider mix optimization
Different payment providers excel in different regions and scenarios:
| Provider | Best For | Typical Cost |
|---|---|---|
| Wise | Europe, Asia, large amounts | 0.4%–0.8% + $0.50 |
| PayPal | Small amounts, quick setup | 2.9% + $0.30 |
| Payoneer | Emerging markets, batch | 1%–2% + $1–$3 |
| Bank wire | Very large amounts (>$50k) | $15–$50 flat |
Cost reduction tactics
Practical ways to lower payment costs without adding complexity:
- Match provider to region: Use Wise for Europe, Payoneer for Asia/LatAm, PayPal for small US payments
- Batch similar currencies: Process all EUR payments together to minimize FX conversions
- Set minimum thresholds: Accumulate smaller amounts before transferring
- Negotiate contractor preferences: Some contractors prefer specific providers with lower receiving fees
- Track and compare: Monitor actual costs per provider and route to optimize over time
EOR fee comparison
For context, here's how direct payment fees compare to EOR costs:
| Model | Monthly Cost (per person) | Annual Cost (10 contractors) |
|---|---|---|
| Direct payment (Wise) | ~$5–$15 | $600–$1,800 |
| EOR platform | $299–$599 | $35,880–$71,880 |
| Savings with direct | $294–$584 | $34,080–$70,080 |
Cost calculator
Want to model your specific scenario? Kontrable includes a built-in cost calculator that compares direct payment fees across providers and payment frequencies, helping you optimize your contractor payment strategy.
Frequently asked questions
Who typically pays the fees—sender or recipient?
It depends on the provider and your agreement. Wise and bank wires typically charge the sender. PayPal often splits fees. Payoneer may charge the recipient. Clarify this in your contractor agreements to avoid confusion.
Are FX fees negotiable?
For high-volume accounts, some providers offer better FX rates. Wise Business and Payoneer have volume tiers. PayPal's rates are generally fixed. Always compare the actual exchange rate offered against the mid-market rate.
How do I track total payment costs?
Export transaction reports from each provider monthly. Sum platform fees, calculate FX spreads (compare rates to mid-market), and add any receiving fees reported by contractors. Kontrable can centralize this tracking across providers.
Should I pass fees to contractors?
It's common for companies to absorb sending fees and contractors to absorb receiving fees. Be transparent about this in your agreements. Some companies gross up payments to cover contractor receiving fees as a goodwill gesture.
What's the cheapest way to pay contractors?
For most scenarios, Wise offers the lowest total cost due to transparent FX rates and low platform fees. For very large amounts (>$50k), bank wires may be cheaper. For small US-based payments, PayPal's simplicity may offset slightly higher fees.