How to Pay Your Team and Avoid Fees (Legally)

Courtney Elmer  0:11  

Today on the AntiFragile Entrepreneurship™ podcast, we are bringing you another installment in our summer series of systems. This is Episode 87 which is where we talk about team pay. And today's episode is going to be pretty straightforward because I've got three quick tips to share with you on how to pay your team and avoid fees, or at the very least reduce the fees you have to pay, which can be a little bit tricky to do. 

And to be clear, we're not recommending anything remotely shady here today, but we're just sharing the best options out there for when it comes to how to distribute team pay quickly, easily, and legally on time. And without the hefty fees that many of the payment platforms like to charge. 

Courtney Elmer  0:48  

We had a student in our mastermind ask us this question recently because she is about to embark on making her first hire. And she wants to make sure she has all of her ducks in a row before she distributes her team pay. And so in the program, of course, we go through the interview process and how to interview potential team members and the onboarding process and all of those things. And she brought up this great question. She said, okay, and this may sound silly, but how do I actually distribute team pay? 

And I believe that there are no silly questions out there. If you were asking it, it is an important question and it warrants an answer. And chances are if you're listening, and you've made your first hire, or you've got a couple of people on your team, maybe you've got different payment methods for all of them right now. But how is the best way to send team pay? 

Courtney Elmer  1:27  

Some of them invoice you, some of them you pay this way. Some of them you pay that way. Or maybe you're preparing to hire you're preparing to start outsourcing. And this has been a question that's crossed your mind too. So we get it. This is important. And this is a question worth answering. And I wanted to answer it right here on the show as part of our summer series of quick tips. 

Now, many of the payment platforms out there charge fees. We know that's how they make their money totally warranted. In some cases those fees are warranted. In other cases, you might actually be jeopardizing yourself, if you were using the payment platforms incorrectly, hoping that they don't notice you're paying your freelancers with the friends and family option on PayPal, and seeing how long you can get away with it. So figuring out what the best team pay distribution method is key here.

Courtney Elmer  2:15  

I'm guilty of that too. Because at first, I never thought about the potential repercussions. But when you know better, you do better. Right. So today, here are the three best options that we have found when it comes to team pay. To be clear, we're not talking about payment processing where you process payments for your programs, products, or services to receive money. We're talking about payment platforms that allow you to send money digitally, and pay the people who work for you the modern way of cutting a check. So number one direct deposit. This usually avoids fees all around you have to check with your bank on this one. 

Courtney Elmer  2:49  

This may not work internationally, it is best for employees who are for, where a long-term working relationship is expected. And what I mean by it may not work internationally is it may not work if your bank is based in one country and their bank is based in another so, with this option, you have to check with your bank first. 

But many banks these days offer a direct deposit option or a bill pay option online or you can set your service provider up you can set that contractor up within your banking system and essentially cut a check to them each and every month or each and every two weeks or however frequently you pay them whether it's weekly, bi-weekly, monthly, whatever it is, and have it go out. Now in doing that, you still need to get an invoice from them, especially if they are a contractor. If they're an employee, and they're set up as a W-4. That's a different story. 

Courtney Elmer  3:39  

If they're a contractor, make sure you get an invoice, and you can still direct deposit them, but you'll want to receive an invoice for your records. The number two option that we recommend is called Zelle, this is also through your bank. Zelle is an app that doesn't charge a fee to send or receive money. Now, we recommend confirming with your bank or with your credit union that there are no additional fees, but typically not Zelle runs on that message that you shouldn't have to pay fees in paying your people. So this is an app that you set up through your bank provider. It does require a business checking account. 

To my knowledge, a business savings account won't work because it has to be a transaction account. Zelle is similar to how a debit card might work. It's linked to an account to process transactions. Zelle is great for contractors. It's also great for employees, as it's a safe and secure fee-free way to pay your people and get them paid on time. The third option, and the one that we default to most often, and we've tried many, but the one we keep coming back to is PayPal. 

Courtney Elmer  4:47  

Now PayPal does charge a very small fee. But as I said, we have looked into so many platforms, and PayPal is by far more secure than sending money via something like Cash app, or Venmo, or Facebook, please don't Facebook message money or Venmo money to your employees or contractors.

PayPal does charge a small fee. But think about it this way, a small fee now is a big legal bill saved later if ever you were to get caught for gaming the system, something to think about. So you have a choice by default, fees get charged to the person who was rendering the service in PayPal. So if you're a service provider, let's say you're a copywriter and you serve multiple clients, and you as the service provider should make sure to build fees into your prices, so that you absorb those for your clients so that your clients don't feel like they're being nickel and dimed. That said, you as the business owner, as the payor have the option to absorb these fees if you choose. I have seen people lose their you know what over fees. I get that they can add up but again, it is $5 or $20 or $40. 

Courtney Elmer  6:09  

Really now, it's like sales tax. You pay it whether you like it or not, unless you're privileged to live somewhere they don't charge sales tax. But if you're one of the unlucky ones like me, you're paying for it. So here's the breakdown on PayPal's fees: they charge 49 cents plus 2.89% of the total invoice amount. So we recommend this when you're paying contractors, those 1099 employees. And here's what we recommend, how the process should unfold. Have the contractor invoice you through PayPal, they can submit an invoice to you through PayPal, you need that invoice for your records. When they do this, it will automatically charge the fee to them. Some of our freelancers and service providers absorb this, and we just pay that invoice outright. Other times we absorb it. This is how we distribute our team pay.

Courtney Elmer  7:00  

For example, if we're paying our contractors who work only for us, they work remotely, but they work only for us and our team, we still use PayPal, and we choose to absorb those fees. You want to be upfront about this when hiring whether you're hiring a freelancer or you're hiring a contractor or you're hiring an employee have this spelled out in your agreement, so that everybody knows who's paying the fees and who's responsible for it. And you both agree to those terms. 

So if they're absorbing the fees, then you simply pay the amount on their invoice. If you are absorbing the fees, on the invoice when you open it up, there's a tip calculator right there on every single invoice. So when you go to pay the invoice, simply enter the 2.89% into this box, and it will add that amount onto the invoice. And so that way when PayPal charges the service provider that fee, you've already included that in the invoice to cover that fee that will come out. And so you pay that amount. This is a great way to send team pay. 

Courtney Elmer  8:01  

Now if you want to also absorb that 49 cent PayPal fee, then just calculate this into the tip. I haven't run those exact numbers probably around 2.9% or 2.91. And it will cover that as well. And again, some of our freelancers and service providers have that fee built into their service. So they absorb it and we don't pay for it. They just invoice via PayPal, we pay the invoice for our team members who work exclusively for us. Even if they're contracted, we treat them like an employee and we absorb those fees just as a courtesy. So you get to decide what works for you. 

Obviously, if you can go with a direct deposit option or an option like Zelle for team pat, you can avoid fees altogether. So you get to choose those are the three options that we have found are the easiest, most straightforward way to pay your people, pay them on time, pay them legally and make sure that you have all of the documentation you need for your records. And that is short and simple today, and hopefully helpful to you too.

Courtney Elmer  8:57  

If you have any further questions about team pay, don't be afraid to hit me up on Instagram. You can find me there at TheEffortlessLife.co. Now next week, we are talking about six reasons you should revamp your morning ritual. We're going to shift gears a bit here and start talking about how you are setting up systems for yourself as the leader of your company.

See, when most people think business systems, they think business systems, operation sale systems, and all of those things that we talked about here on the show. But here is the effortless life, what we really care about is helping you take the best possible care of the visionary leader behind the business because guess what a business on its own, even with the best systems in the world is simply a business on its own without you. 

Courtney Elmer  9:51  

So we want to make sure that you have some solid systems in place for yourself to help you take better care of that human behind the business. Your business requires in order for you and your business to thrive. Because, you know, while the focus is on business systems here on the show, I'll be the first to tell you systems aren't the holy grail of business. 

And it is so important to understand this because, without you, the business doesn't run. So we'd like to take some time to dive deep into personal systems here to support you, human running the business so that by extension, your business can grow and thrive, where you are optimizing yourself for peak performance and next week's episode is dedicated to helping you do that. So I'll see you right back here next week on the AntiFragile Entrepreneurship™ podcast and until then, go live your EffortLESS Life®.