Article
8 min read
Author
Gabriele Culot
Published
February 21, 2024
Last Update
July 02, 2024
Table of Contents
Digital payment platforms
Bank transfers
Other payment methods available in North America
The complexities of contractor relations: The example of the US
Contractor-related FAQs
What functionalities should I look for in a payroll software solution?
Supercharge your contractor management with Deel
Navigating the intricacies of payroll processing systems and contractor payments in North America can be challenging for many business owners. With a diverse workforce that includes full-time employees, part-time staff, and independent contractors, understanding the differences in pay rates, tax obligations, and employment laws is paramount.
Moreover, with digital nomadism and unconventional work setups on the rise, ensuring legal compliance and working relationships that are adaptable and easy to manage is a way to build the foundations for the success of your business. Not all payment methods are global; some that work seamlessly in Canada may not be available in France, so understanding the landscape of international payment options is essential.
This guide dives deep into the mechanisms of paying contractors efficiently and compliantly, giving you an overview of the options available when paying your self-employed workforce based in North America.
A digital payment platform is an online or electronic system that facilitates money transfers between individuals, businesses, or entities through digital channels.
These platforms leverage technology to enable secure and convenient financial transactions, replacing traditional forms of payment such as cash or checks. Users can make payments, receive funds, and manage their financial transactions electronically, contributing to the efficiency and convenience of modern financial interactions.
Here’s a breakdown of some of the most prominent platforms available in North America.
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One of the most widely recognized digital payment platforms, (PayPal)(https://www.paypal.com/it/home) offers easy-to-use payment solutions across borders. It supports multiple currencies and provides options for direct deposit, making it an excellent choice for businesses and contractors.
Primarily popular in the United States for its social payment features, Venmo is a mobile-first platform that enables quick and informal transactions between individuals. Its integration with PayPal extends its utility to small businesses looking for a convenient method of payment.
Developed by Square, Cash App offers a robust platform for sending and receiving funds, investing in stocks, and buying cryptocurrency. It's known for its simplicity and efficiency.
Stripe is an advanced payment platform designed for online businesses, providing a suite of tools for managing online transactions, including billing and subscription services. It's known for its developer-friendly approach and global reach.
Beyond its reputation for point-of-sale solutions, Square offers invoicing and payment services ideal for small businesses and individual contractors. It stands out for its comprehensive approach to business financial services.
Specializing in international money transfers with transparent fees, Wise is ideal for businesses and contractors working across borders. It supports multi-currency accounts, making receiving and managing payments in different currencies easier.
CoDi® stands for Cobro Digital (Digital Charge), an initiative by Banco de México (Mexico's Central Bank) aimed at promoting financial inclusion and electronic payments. It uses QR codes and NFC to facilitate transfers and payments between individuals and businesses.
Direct bank transfers are a fundamental method for processing contractor payments across North America, appreciated for their dependability and straightforward process. Within this region, each country has its own systems to facilitate these transactions, which can vary in terms of speed, cost, and accessibility.
ACH is an electronic network used in the United States to conduct financial transactions, including direct deposits and payments.
EFT is the Canadian equivalent of the ACH system in the U.S., enabling domestic bank transfers within the country.
SPEI stands for the Sistema de Pagos Electrónicos Interbancarios. It is a system designed by Banco de México (Mexico's Central Bank) to facilitate real-time electronic money transfers.
Wire transfers offer a real-time settlement solution for both domestic and international transactions in North America.
Interac e-Transfer is a popular Canadian network used for sending money between domestic bank accounts.
Zelle is a digital payments network that allows customers of participating banks and credit unions in the US to send money to one another.
Beyond the options mentioned above, more traditional methods like cash, credit card payments, and checks continue to play a role in the North American contractor payment landscape. However, it’s essential to weigh their practicality against the backdrop of modern business transactions.
While small businesses or individual contractors who prefer traditional banking relationships and straightforward transactions might find these methods align with their operational style, these traditional methods may not mesh well with modern compliance requirements, increasing the risk your business may be exposed to.
Moreover, the evolving digital economy and the push toward electronic payments suggest that the relevance of cash and checks may continue to wane in favor of more secure, efficient, and traceable payment solutions.
Unlike regular employees, whose taxes are often handled through payroll services by their employer, independent contractors are considered non-employees. Thus, they are required to manage and pay their due taxes to the Internal Revenue Service (IRS). This distinction brings to light several key aspects to be mindful of:
Learn more about how to hire and pay independent contractors in the US.
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When we came to understand the importance that Deel places on individual country laws and making sure that contracts are structured in the right way, Deel really stood out. And even though some of your competitors have payments, it wasn’t with the same ease at which we could do it with Deel.
—Sudarshan Sivaraman,
Head of Customer Success & Sales, Turing
A contractor agreement is a written contract outlining the working relationship between contractor and client or employer. A comprehensive contractor agreement should include the following information.
Creating a contractor agreement is crucial for several reasons.
Misclassification occurs when an employer incorrectly classifies an employee as a contractor. This distinction is crucial because it affects tax obligations, employee benefits eligibility, and labor law compliance.
While the best tool for each business’s needs will differ, some factors are crucial for everyone to consider when selecting payment options. These include:
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Deel for us is dealing with the entire complexity of our HR, contracts, and payments in a very efficient and fast manner
—Daniel Aksioutine,
COO, DivBrands
Yes, employers in North America can hire contractors from other countries. This is increasingly common with the rise of remote work and global collaboration. However, it's essential to be mindful of the legal, tax, and payment implications involved in international hiring.
Are you a US employer looking to broaden your talent pool and access new hiring grounds?
Discover how to easily hire contractors all over the world in our guide.
Hiring a contractor abroad can be greatly beneficial, but requires careful consideration. When hiring an international contractor, keep the following things in mind.
Don’t have time to learn all about international hiring? Do you have more urgent matters to think about? Let us take care of the practicalities so you can focus on finding the right people for the job.
In the current landscape of business relations, the adherence to employment laws, the clarity of contractor agreements, and the effective management of contractor pay significantly affect the operational success of businesses in North America. Whether dealing with direct deposit methods, navigating the complexities of payroll taxes, or understanding the functionalities of digital payment platforms, the goal remains the same: to foster seamless, compliant, and mutually beneficial relationships between businesses and their diverse workforce.
By integrating a solid understanding of tax forms, regulatory requirements, and the nuances of labor laws into their payroll systems, business owners can avoid common pitfalls like a misclassified workforce, ensuring compliance and fostering a productive, efficient, and compliant working environment.
Deel offers solutions to all your contractor management needs. Cut the time you spend on contractor administration, the risk of misclassification, and the complexity of using multiple platforms and systems. From easy contract creation to seamless payments, we can handle it all.
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