How To Pay Freelancers: 8 Payment Methods To Use

How To Pay Freelancers: 8 Payment Methods To Use

Remote work is here to stay. Small businesses and enterprises alike are beginning to realize that you don’t have to be physically present in an office to get results. In the ever-evolving quest to remain competitive through agility, freelancing is shaping up to be the agile talent-sourcing solution of the future.

“So what is the best way for me to pay for freelance work?”

It’s a question that’s probably popped into your mind on more than one occasion, and the answer isn’t as clear cut as you might think. Should you go with PayPal to handle your freelancer payments? Paper checks? Wire transfer? Maybe give Venmo a try?

All the aforementioned options are feasible, but there are other solutions worth your consideration, such as using Upwork’s marketplace, which comes with our Upwork Payment Protection.

In this article, we’ll tell you everything you need to know about freelance payment methods and, specifically, how to pay freelancers on Upwork so that you can worry less about bounced paper checks and more about getting great work done by our professionals.

And if you’re a professional doing freelance work outside of the Upwork marketplace, stick around because we’ll be covering information that’s as relevant to you as it is to your clients.

Worker classification: independent contractors vs. employees

Before we can dive into our list of freelancer payment methods, it’s important to clarify the difference between independent contractors and employees.

While it would be nice if there were a simple black and white answer to this question, the truth is the definition varies from court to court across the world.

As a result there are many tests to determine whether a worker is an independent contractor or an employee.

Common tests include: the economic realities test, the “ABC” test, the common law “right to control” test, the IRS 20-factor test, and the Restatement (Second) of Agency test, to name a few.

Generally speaking, the distinction has to do with the degree of control a client has over the person performing the work.

A freelancer or independent contractor has the freedom to decide when, where, and how they work, and are responsible for their own tools and equipment. They usually have a finite contract that terminates when the work is completed. In the United States, contractor taxes are handled via a 1099 form.

An employee has a required work schedule and location. They may be required to use the tools and methods prescribed by the employer and can be terminated at any time. In the United States employee taxes are handled with a W2 form.

The more control over a worker’s methods you have as a client, the greater the likelihood that a court might rule that they are an employee.

As you can see, there is a lot of gray area about worker classification depending on your location and the context of your working arrangement. Fortunately, Upwork has the legal experts you need to help you with worker classification. You can learn more from our free ebook: Your Guide to Nailing Worker Classification.

Paper checks

The traditional approach to sending payments to hired talent—sending checks—may be dated, but it is still effective. Sending a check will help you avoid any service fees that come with other payment options.

On the flipside, paper checks come with a number of disadvantages in the modern era. They take time to get to your hired talent and may even get lost during delivery.

What’s more, you have no way to secure your payments and guarantee work is performed. Inconvenience and security concerns are major reasons why forgo checks for electronic payment options.


PayPal is among the most common methods clients use to pay hired talent.

Opening an account is free, and their services make it easy to send invoices to freelancers. When you make a payment, the freelancer receives the funds immediately in their PayPal account.

Everything is done electronically, so you don’t have to worry about your check not arriving on time.

So why isn’t PayPal the go-to for every client and freelancer alike? Well for one, PayPal is the bare-bones option for payment transactions.

It doesn’t cost anything for you to send money via bank transfers or via your PayPal balance within the United States—however, if you’re using a debit or credit card to make a payment, you can expect to face a 2.9% transaction fee, as well as another fixed fee.

More importantly the overhead of sending one-off payments to a distributed team of remote freelancers is not to be understated. PayPal lacks the organizational tools, escrow accounts, security services, and other features that are useful for effectively tracking and paying your freelancers.

The more freelancers you work with, the more likely you will want to invest in a more comprehensive payment platform.

Direct Contracts

This is Upwork’s payment solution, but keep in mind that you can use Direct Contracts even when paying professionals that don’t have an Upwork account.

Direct Contracts lets you enjoy the benefits of our escrow services, simple contract management, faster payments, and dispute assistance, even when working with freelancers outside of Upwork’s marketplace.

Our escrow service ensures your money is protected and will only be released when the hired talent has completed your work. And if at any time you’re dissatisfied with your contract, you can cancel the contract, so long as you do so before you approve the payment. Once canceled, your funds will return to your original payment method within seven business days.

Every Direct Contract is managed via email so that we can provide you simple and easy-to-follow instructions through every step of the process. All relevant contract details, such as the contract’s name, description, price, your company name, and the freelancer’s name, are delivered directly to your inbox by us.

There are no fees associated with this service as a client, so you can rest easy knowing that you’ll only be paying the value of your contract.

Work marketplaces

By using work marketplaces, such as Upwork, you can securely and easily pay freelancers from around the world. There are more than a few work marketplaces to choose from, but for the purposes of this article, we’ll be using Upwork to illustrate what this method of payment looks like.

Setting up your account

You can sign up for Upwork with Google, Apple, or by entering in your work email. You’ll have to add a billing method to your account before you can hire any of the talent on our marketplace. To do so, head over to your Account Menu, select Settings, and then click on Billing Methods.

As a client, you have three billing methods available to you:

  1. Credit card or debit card: Visa, Discover, Mastercard, Diners Club, and American Express. We also accept pre-paid cards.
  2. A verified PayPal account.
  3. A bank account for qualifying clients within the United States.

To avoid any account disruption in the event of a transaction failure, consider adding more than one billing method to your account.

Paying for hourly contracts

You have three options when it comes to paying hourly contracts.

  1. Weekly billing: Every Monday, you will be invoiced for the previous week’s hours based on your hired talent’s Work Diaries. This is charged automatically to your default billing method.
  2. Recurring weekly billing: This is a set, recurring weekly payment that is invoiced every week on top of your hired talent’s submitted hours.
  3. Manual payment or bonus: This is an additional payment you can deliver to your freelancer. This may be to reimburse them for certain expenses, a completed milestone, to provide overtime pay, or simply to give them a bonus for all their hard work.

Paying fixed-price contracts

Fixed-price contracts can be paid all at once or by milestone, depending on which is preferable to you as the client.

By using escrow, you can rest easy knowing that your funds are sent to your hired professional only after your milestones are completed and approved.

Upwork Payment Protection

Upwork Payment Protection adds a level of security to payments for both hourly and fixed-price projects, allowing clients and freelancers to collaborate on projects with peace of mind.

For hourly projects...

Freelancers can opt to use the Work Diary time-tracking tool to automatically invoice for time worked. This enables you to quickly verify that the freelancer’s invoice only includes hours properly billed to your project. This feature underpins Payment Protection as proof of activity. See the Upwork Terms of Service and Hourly Escrow Instructions for full terms and conditions.

For fixed-price projects…

Work is submitted for your approval before funds are released from escrow. You can ask for changes to the work or request an escrow refund if necessary. See the Upwork Terms of Service and Fixed-Price Escrow Instructions for full terms and conditions.

Learn more in What is Upwork Payment Protection?, with two videos to help explain how it works.

Refunds and disputes

In the event that you need to request a refund, you’ll have 180 days from the date of payment to get your money back through Upwork. It should be noted, however, that your hired professional can then choose to issue the full refund, a partial refund, or no refund at all. They can also choose to proactively initiate a refund without your formal request.

If a freelancer approves your refund request, it will automatically be credited back to your billing method. If the freelancer does choose to decline your request, you can dispute the charges. For hourly projects, disputes must be filed by Friday after a billing week closes.


For any other frequently asked questions or concerns surrounding making payments on Upwork, please visit Upwork’s Help Center.

Credit cards

We mentioned in the last section that you could pay your hired talent via credit card, but you don’t have to use PayPal to do this.

In fact, your freelancer may already use their own online payment solution like Freshbooks or Quickbooks. So long as the hired talent is using a payment solution that allows for credit card payments, this method will be a viable option for you.

On their own, credit card payments are as basic as it gets. From the freelancer’s perspective, payments aren't secured before a project starts so they run the risk of not being paid. And from a client’s perspective, the burden of managing multiple payments falls squarely on them. Both freelancers and clients alike stand to benefit from handling credit card transactions through more comprehensive platforms such as Upwork’s direct contracts.

Electronic funds transfer

What if your freelancer doesn’t want to be paid via check or an online payment solution? In situations like this, you can reliably pay them through an electronic funds transfer (EFT).

This method is easy and doesn’t usually come with pesky service fees. Your payment simply travels from your bank account to the freelancer’s; no credit card processing services or third-party apps necessary.

Similar to check payments, there may be a 1–2 day delay before your freelancer receives their funds, but you can trust that it will arrive safely and without any bumps along the way.

There is a catch, of course.

If you’re sending funds from one bank to another, you or your freelancer’s bank will have to accommodate that transfer request, which is sometimes difficult and even costly.

So unless you or your company uses a robust payroll provider, a different payment method may be a better choice in the long-run.


If you’ve ever wondered how to pay freelancers who operate outside your country, you’re going like this payment method.

TransferWise is an online money transfer service based in London.

If you need freelance work from outside your country, this may be the solution for you as it makes sending international payments a simple process. Transferwise also does their best to save both you and your freelancers’ money on said international payments.

Like other online solutions, TransferWise makes it easy to send invoices and transfer money, even if you want to do so via email.

On the other hand, TransferWise lacks freelance-payment-specific features such as escrow accounts and payment protection. Like PayPal you may want to consider using it with a more comprehensive platform if you require automation or better security.


Perhaps the best way to think of Venmo is to consider it as an online wallet. With this online wallet, your hired freelancers can receive your payments directly from your Venmo account to theirs.

To get started, simply sign up with Facebook or your email. Then connect whichever bank accounts and or credit cards you want to use on the platform. Once you load money into your Venmo balance, you’ll be able to send payments to your freelancers.

Payments made via bank transfers within the United States and with well-known debit cards come with zero service fees. If you aren’t using a U.S. bank or a major credit card, you may have to pay up to a 3% service fee.

Venmo’s simplicity is a double-edged sword however, as you do not get the security and freelancer payment management benefits of more comprehensive payment methods.

Which payment method should you use?

At the end of the day, choosing which payment method to go with is a decision you have to make based on your needs and preferences.

Each method has its pros and cons, but if you’re looking for a secure and convenient payment method that integrates seamlessly with our talent management system, Upwork is absolutely a solution worth your consideration.


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Author Spotlight

How To Pay Freelancers: 8 Payment Methods To Use
Yoshitaka Shiotsu
Technical Copywriter & SEO Consultant

Yoshitaka Shiotsu is a project engineer turned technical copywriter and SEO consultant who regularly contributes to the Upwork Resource Center. He specializes in helping tech companies, startups, and entrepreneurs set themselves up as voices of authority within their target industries.

How To Pay Freelancers: 8 Payment Methods To Use
Technical Copywriter & SEO Consultant

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