What is the best way to pay several contractors on one project?

There are six ways to pay several contractors on one project: the lead receives the client's payment and transfers each part by hand, the client pays each contractor directly, a contractor-management or payroll platform, a freelance marketplace's milestone payments, an accounts-payable or bill-pay tool, and an onchain payment router. The criterion that separates them is whether the contractors' money passes through the lead's account before it reaches them, because that single fact decides who invoices whom, whose income the full payment is and who carries the gap when the client pays late.

No method wins on every criterion. The right one depends on four things you can answer today: whether your client will accept more than one invoice, whether your contractors are paid fixed fees or shares of the project, how many of them are abroad, and how much of a late payment you are able to carry from your own funds.

The rules on tax and invoicing differ from one country to the next, so the points on those subjects are general information, not legal or tax advice.

What are the ways to pay several contractors on one project?

Several contractors on one project can be paid in two structures: the money goes to the lead first and is paid out from there, or each person receives a share without the money stopping at the lead. Manual transfers, a contractor-management platform and a bill-pay tool belong to the first structure; direct client invoices, marketplace milestones and an onchain payment router belong to the second.

In the first structure the lead is the client's only supplier: it sends one invoice, receives the full amount and owes each contractor a fee under a separate agreement. In the second structure each person is paid their own part, by the client, by a marketplace that holds and releases a funded milestone, or by a router that sends each agreed share to its recipient in the same transaction as the client's payment.

The table sets the six methods against the three criteria that follow from that structure.

Who holds the money, and for how long?

In three of the six methods the lead holds the contractors' money, for as long as it takes to approve and send the payouts. In the other three the lead never holds it: a marketplace or nobody at all stands between the client's payment and each contractor.

Holding other people's money is how many agencies run, and it carries consequences. The money is mixed with the lead's own cash unless a separate account is kept for it. If the lead's account is frozen, overdrawn or subject to a claim from a creditor, the contractors' fees are caught in it.

A marketplace that holds a funded milestone gives the contractor the knowledge that the money exists before the work starts; in exchange, release depends on the client's approval under that marketplace's rules and dispute process. With direct invoices and with a payment router, nothing is set aside, so a contractor is paid when the client pays and not before.

When is each contractor paid relative to the client's payment?

A contractor is paid at the same moment as the client's payment only when the client pays that contractor directly or through a router; in every method where the lead receives first, the contractor is paid later by the lead's processing time plus the transfer time. On a marketplace the order is reversed: the client funds first and the contractor is paid on approval.

A lead who pays by hand waits for the client's payment to clear, then creates one transfer per contractor. A platform or a bill-pay tool reduces that to an approval, but payouts often run on a schedule, so the delay becomes the wait for the next run. Transfer time comes on top, and a domestic transfer and a cross-border one sent on the same day rarely arrive together.

The lead-receives structure hides one more timing choice: whether contractors are paid when the client pays or on their own terms. A contractor on net 30 from their own invoice may be due before the client has paid the lead at all. That is a decision about who finances the project, and it belongs in the agreement.

Whose income is the full payment?

When the lead receives the whole amount and pays out, the whole amount is generally the lead's turnover and the contractors' fees are the lead's costs; when each party receives its own share under its own invoice, each party's income is its own share. The profit can be identical in both cases while the thresholds and reporting duties differ.

• Turnover-based thresholds. Many countries set thresholds on turnover, not on profit, for obligations such as registering for a sales or value-added tax or staying within a simplified small-business regime. A lead who receives $40,000 and keeps $12,000 may count $40,000 towards such a threshold. Whether a pass-through arrangement can be treated differently depends on the country and on how the contracts are written.
• Sales tax or VAT on the invoices. If the lead invoices the full amount, the lead's own tax status applies to the full amount, and the contractors' invoices to the lead carry theirs. With direct invoices, each contractor's status applies to their own part, which may change what the client can recover.
• Reporting what you paid. A lead who pays contractors may have to report those payments. In the United States, the Internal Revenue Service's instructions for Form 1099-NEC require a business to file the form for each person it paid at least $2,000 for services in the course of its trade or business, a threshold that applies for tax years beginning after 2025 and may be adjusted for inflation from 2027; payments to corporations are generally exempt. Other countries have their own rules, or none.

On the worked project, $40,000 lands in the lead's account under manual transfers, a contractor platform or a bill-pay tool, and $12,000 under direct invoices, marketplace milestones or a router, for the same $12,000 of earnings.

Receiving only your own share does not settle the tax question by itself: the treatment depends on the contracts behind the payment and on the law of the country where each party is taxed.

What does each method cost and change when contractors are abroad?

Cross-border contractors change the comparison because a bank transfer abroad adds a currency conversion, possible intermediary bank charges and extra days, and the methods differ in who bears them and how visible they are.

With manual transfers the lead pays the sending costs, and a contractor may still receive less than the amount invoiced if a bank on the route deducts a charge. Decide in the agreement whether the fee is the amount sent or the amount received.

The second table describes costs in kind, because the figures depend on the provider, the route and the currencies.

A contractor-management or payroll platform earns its fee when the difficulty is international administration. It does not change the structure: the lead still receives the client's money first and still carries a late client.

What does the lead owe if the client pays late?

If the lead is the contractors' customer, the lead owes them their fees on the agreed date whether or not the client has paid, unless the agreement ties their payment to the client's. If each contractor is paid by the client, by a marketplace or through a router, the lead owes them nothing from its own funds, and a late client is late for everyone at once.

Late payment weighs most on a lead with a thin cash reserve. In the worked example the contractors' part of the final payment is $16,800. A lead who promised to pay at delivery and whose client pays 30 days late finances $16,800 for 30 days, on a project where the lead's own share of that final payment is $7,200.

A clause that makes the contractor's payment conditional on the client's is often called "pay when paid" or "pay if paid". The first is usually read as fixing the timing, the second as shifting the risk of non-payment to the contractor. Whether such a clause is enforceable, and in which sectors, varies by country and sometimes by state, and some laws restrict it outright in particular industries.

How do deposits and milestones work with several people?

A deposit or a milestone on a team project has to be divided by a rule written down before it arrives: either every payment is split in the same proportions as the whole project, or each payment is assigned to named people for named work.

The proportional rule is the simpler one. Each incoming payment is split by the same percentages as the project, so a 40% deposit gives everyone 40% of their fee. It works with every method. Its weakness is that it pays people who have not started yet.

The assigned rule follows the work: the designer who works first is paid mostly from the deposit, the developer who finishes mostly from the final payment. It needs a schedule in the agreement: for each payment, who receives how much.

Two points apply whichever rule you choose.

• What happens to the deposit if the project stops. State whether deposit money already paid to a contractor is kept for work done, and how work in progress is valued.
• Changes of scope. A change order raises the project price. Say whether the extra amount is shared in the same proportions or goes to the person doing the extra work.

What does a $40,000 project look like under each method?

On a $40,000 project with a lead and four contractors, a deposit and a final payment, the six methods produce between two and twenty money movements, and the contractors' money sits with the lead for anything from zero to several days at each stage. The timings are illustrative and will differ with your banks and tools.

The project is priced at $40,000. The shares are 30% for the lead ($12,000), 25% for the designer ($10,000), 25% for the developer ($10,000), 12% for the copywriter ($4,800) and 8% for the illustrator ($3,200). The four contractors together receive $28,000. The client pays a 40% deposit of $16,000 on day 0 and the remaining 60%, $24,000, on day 60, which is 15 days after delivery on day 45. Every payment is split in the project's proportions, so the contractors' part is $11,200 of the deposit and $16,800 of the final payment.

For the illustration, a lead paying by hand sends the transfers 2 days after receiving, a bill-pay tool pays on a run 3 days after, and a contractor platform pays on a run 5 days after. On the marketplace, each milestone is funded when its work starts (day 0 and day 20) and released on approval (day 20 and day 45).

The client's workload ranges from two payments to ten. The marketplace is the only method in which contractors are paid before day 60, because the client funded in advance, and the only one in which the deposit reaches nobody on day 0. The days the money spends with the lead are short when everything goes well: the real exposure is the $16,800 the lead has committed to if day 60 becomes day 90.

What does the client have to do differently?

The client's effort is the constraint that eliminates methods before any other criterion is weighed. Manual transfers, a contractor platform and a bill-pay tool change nothing for the client, who pays one supplier on one invoice; the other three ask the client to do something new.

Direct invoices ask the most of a corporate client: each contractor may have to be registered as a supplier, with bank details verified and sometimes a purchase order per person. A client with a formal procurement process will often decline; a small business owner usually minds much less.

A marketplace asks the client to hire and pay through the marketplace, to fund milestones in advance and to accept its fees and terms. If the team was introduced to the client through a marketplace, check its terms before moving the payment elsewhere: some restrict taking a relationship off the platform.

An onchain payment router asks the client to pay onchain, once. A client whose finance team pays only by bank transfer or card cannot use it.

What should the agreement between the lead and each contractor say?

The agreement between the lead and each contractor should fix five things whatever the payment method: the fee or share and what it is a share of, the event that triggers payment, what happens when the client pays late or not at all, who bears transfer and conversion costs, and who owns the work until it is paid for.

• The amount and its basis. A fixed fee, or a percentage of a defined figure: the project price before tax, after tax, before or after expenses and tool fees.
• The trigger. A date, the contractor's own invoice terms, the client's payment, or the approval of a milestone. If it is the client's payment, say within how many days of receipt the lead pays out.
• Late and partial payment. If the client pays half, say whether everyone receives half of their part or whether someone is paid first. If the client never pays, say who pursues the debt and who bears the loss.
• Costs and currency. The currency of the fee, who pays transfer fees, and whether the fee is the amount sent or the amount received.
• Scope changes and ownership. How extra work is priced and shared, and when rights in the contractor's work pass to the lead or the client.

Add two points when the contractors are paid directly by the client or through a router. First, a short document that lists everyone's share for the project and is signed by all of them, since no invoice from the lead exists to show it. Second, a statement of who is responsible to the client for delivery. Being paid separately does not by itself mean each person contracted separately with the client.

No payment method resolves the status of the people you pay. Whether someone is a contractor or an employee depends on how the work is done and controlled, under the law of the country concerned. Paying through a platform or on an invoice does not decide it.

Where does an onchain payment router fit, and where does it not?

An onchain payment router fits a project where the parties are paid agreed percentages, the client can pay onchain, and the team wants every person paid at the same moment without the money stopping at the lead. It does not fit a client who pays only by bank transfer or card, a project that needs funds held until work is approved, or a team that needs payroll administration.

Shaka is one such router. Each party's share is set as a percentage of the deal, and each recipient can sign their share before the client pays; signing costs the parties nothing. The client pays once, through a payment link, and every party receives their share at the same moment, in one transaction. Shaka routes the payment and never holds the funds. Because the destinations are fixed and signed before the payment, the money cannot be redirected at the last minute. The payment is final, every party can see that the others were paid, and the record of who was paid what stays available onchain. A deal has at most 20 recipients. The person who creates a deal can turn on a referral option and earn 1% of the deal amount, paid by Shaka the same day.

The limits are as plain as the mechanism. A router is not an escrow service: it holds nothing, so it cannot keep a milestone back until the client approves the work. It is not a payroll tool: it collects no tax forms and issues no invoices, so each party still documents their own income. Fees that are hourly or unknown until the end have to be turned into shares before the client pays. And every recipient needs to be able to receive an onchain payment and to handle the conversion to their own currency if they want one.

How do you choose between the methods?

Choose by elimination: start with what the client will accept, then ask who should carry a late payment, then pick the tool that fits the administration you actually have. The table gives the method that usually fits each situation.

If two methods remain after the client's constraints, let the late-payment question decide. A lead with the reserves to pay contractors on fixed dates offers them something valuable and can charge a margin for it, as an agency does. A lead without those reserves is better served by a method in which each contractor is paid out of the client's payment itself, with the shares written down and signed before the work begins.