Let's say I hire some remote contractors. Some are based in the US, and some are international.
I want to pay the contractors on a bi-weekly basis.
What is the best service to use for paying my contractors?
My understanding is that paypal has a large fee when you pay more than $1K. What is the best alternative?
You don't payroll contractors, contractors are usually paid as contractors 1099. The best way to pay them is by check, international ones by wire or paypal (paypal is cheaper than wire usually).
Make sure that all your contractors have signed the right agreements and that you are reporting amounts paid to the irs.
As a Canadian contractor who has worked with many international companies, here are some notes on the financial side of things (not legal or automated)...
My bottom line: if you can avoid any middle-man services, you will save a lot of money!
We are dealing with contractors in countries with strict currency importation laws because of runaway inflation (cough, Argentina).
I recently learned about ATMCash and it appears to be exactly what we needed. For 10 bucks you send the freelancer an ATM card then load it up. The limit is $2,500/mo and the best part is that they only charge $5 per transaction regardless of the amount. They can withdrawal their funds from just about any ATM. It appeals to me also because I think the plastic in their hands makes the relationship that much more tangible.
You can ask your contractors to get a free paypal account that accepts credit cards. You can pay them their actual salary (using your card) and let them worry about the fees. An alternative way is to to hire them through odesk. It gives you more control and guarantees your work upto a certain limit. Again, Odesk will charge your contractors 10% percentage of their wages.
You can use Ikobo, Moneybookers, Wire transfer (for larger amounts). You can't really get that much cheaper than paypal unless you have a local bank account in that country.