A tricky situation - Independent contractor payment issue

[mattwilliams]

I am director of a home tutoring company that sources tutors as contractors and pay them a set hourly rate for each hour of tuition they do.

They get to say whether or not they want to do sessions we offer them and have a whole lot of other freedom that is given to contractors.

The issue is this -

We wish to charge our clients electronically (credit, direct debit), and then pay the tutors from this money (using direct entry/credit).

We have found a payment gateway that can do this, though they seem to think it is illegal because our tutors are contractors.

Please help and advise the best way around this situation???

Thanks,

Matt

[GlobalWealth]

Maybe I am over simplifying, but this can be done through Paypal. The fees are a bit higher than a regular merchant account, but there is no contract and no equipment. You can sign up for Paypal's virtual terminal which lets you accept all credit cards or paypal payments. You can then use the account to either transfer money into your business checking account and then use your online payment function or you can send money directly through paypal.

Another option is to get a bank willing to allow this type of transaction. In a previous business, we accepted credit card payments and had a merchant account with Wachovia which also held our business checking account. We also used them for payroll services and they allowed contractor payments.

I am not sure why the payment "gateway" as you call it would try to make any judgment as to the legality of your transactions unless they feel there is money laundering involved. It really isn't their place to determine the status of your work force.

[DerekS]

Why not cut checks to the contractors? That way you hold onto the cash longer, especially if you pay them bi-weekly. Money in and money out might be efficient, but it limits your control and, of course, your liquidity at any given point.