Expense Card for Contract Employees: What Are They & Top Options

Many companies have increasingly decided to hire independent contractors. The percentage of tech companies hiring contract workers rose from 6% in January 2021 to 20% by October 2022.¹

Expense cards can be an excellent option for businesses who hire contract workers. These cards can help businesses track and manage expenses. Moreover, they can also reduce paperwork and help companies save time.

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What is an Expense Card for Contract Employees?

Expense cards are similar to other types of debit or credit cards. One of the main differences is that businesses can prefund these cards and give them to employees to pay for expenses securely. Moreover, it is possible to create cards for specific categories and limit certain transactions.

These cards are also convenient for contract employees. Contract employees can ensure that they don’t mix personal expenses with company expenses. In addition to this, they don’t need to spend time submitting reports after they use the card. This saves time for both the employee and the contractor.

Companies can use an expense card for contract employees to spend less time on expense reporting. Many card providers allow companies to integrate popular software programs, such as QuickBooks, to keep track of expenses automatically.

How Expense Cards for Contract Employees Work

Expense cards are a common alternative to other payment options, such as debit or credit cards. These prepaid cards allow contract employees to have their own card to make purchases.

Setting up an expense card for contract employees is relatively straightforward. It’s crucial to first explain the business expense procedure to contract employees to avoid any confusion or misuse.

You can then begin setting up the expense card by funding a card with a preset limit. Prefunding a card allows you to create a set limit for expenses over a certain time period. You can also fund a card for a specific category, like travel.

By using these cards, you can also generate custom expense tracking reports and easily manage expenses.

Use Cases and Scenarios for Expense Cards in Contract Work

Some of the most common types of employee or contractor expenses include travel, supplies, or meal and entertainment reimbursements. Businesses can give contract employees expense cards that cover some or all of these categories.

Travel and Accommodation Expenses

Travel and accommodation expenses are one of the most common business expenses. Prepaid cards can help employees and contractors pay for travel expenses. These cards are convenient and save the contractor and employer time.

Many popular hotels and travel agencies accept prepaid cards. It may also be possible to use prepaid cards for international travel expenses.

Equipment and Supply Purchases

Contractors or employees who need to purchase equipment can also use prepaid cards. Doing this can be useful for recurring purchases. Some prepayment card vendors offer prepaid cards for recurring payments from vendors.

Meal and Entertainment Reimbursements

It can be time-consuming for contractors to request reimbursement for every meal. Contractors can be given a prepaid expense card instead, which they can use for meal and entertainment expenses. Weekly or monthly budgets can be created for meals and entertainment expenses.

Benefits and Advantages of Expense Cards for Contract Employees

Expense cards for contract employees are useful because of the extra convenience. Businesses can better manage their expenses, and contractors can easily access any funds they need.

They are also a much safer option than having one company card that can be more difficult to track. Expense cards offer more options to set limits and categories for spending for each employee.

Convenient Access to Funds

Contractors can instantly access the funds they need when they use an expense card. Companies can set clear policies about eligible expenses and the monthly limits. Companies prefund these cards, so contractors do not have to worry about companies not approving these expenses.

In comparison, some contractors may have to worry about submitting expense reports if they use a credit card and request a reimbursement. These reports can be time-consuming for both the contractor and company.

Streamlined Expense Reporting

Many expense card providers also include useful analytics. This makes it possible to access information about spending categories and the amount spent.

Expenses can be tracked in real time and with the amount that each contractor spends. Most prepaid card issuers also allow integration of popular software programs to expedite the expense reporting process.

Separation of Personal and Work Expenses

Contractors may prefer using expense cards. It can be confusing for contractors who use their personal or business credit cards for these expenses. Expense cards can help separate personal and work expenses.

Challenges and Considerations in Using Expense Cards for Contract Work

Expense cards have many benefits. However, there are also many compliance issues to consider. Companies should ensure that these cards are compatible with their expense reporting requirements. They also need to communicate their procedures with contractors.

Compliance with Company Expense Policies

If you offer a contractor an expense card, it is crucial to train them about your company’s policies. Contractors should be aware of the expense limits and eligible expenses.

Companies can block certain merchants, set spending limits, and create other restrictions. Companies can also make adjustments to each individual’s card.

Reporting and Documentation Obligations

Contractors may need to complete other documentation requests. Moreover, some prepaid card companies may require users to complete authentications and other necessary steps.

Most companies can request prepaid cards with customizable features. This is an important step in ensuring these cards meet your compliance requirements.

Top Expense Card Providers for Contract Employees

There are plenty of companies that focus on providing expense cards for contract employees. Some expense card providers to consider include Bento, Emburse, BILL Spend and Expense, Pex and Wise Business.

Bento for Business

Bento helps companies track and control employee expenses. Companies can fund Bento cards for specific departments and/or team members.

These cards can help companies restrict certain transactions and set daily limits. Bento notes that these cards can help the average business reduce spending by 15%.²

Emburse

Emburse allows companies to effectively track and manage its employee expenses. Both companies and contractors benefit from the convenience of this company.

Emburse helps companies quickly create expense reports. It also allows contractors to receive pre-approval for expenses and to stay up to date with the company’s expense policies.

BILL Spend and Expense

BILL Spend and Expense (formerly known as Divvy), provides expense management solutions for businesses.

It allows businesses to integrate popular programs like Intuit QuickBooks, Oracle Netsuite and Sage Intacct.⁴ Businesses can also use its mobile app and virtual cards.

PEX

PEX provides companies with prepaid physical and virtual cards for employees and contractors. It also has software that helps companies with expense management and other features.

You can integrate popular software programs like QuickBooks, Zero, Sage, and Zapier. PEX also provides payment solutions for vendors who receive automated payments.

Wise Business

The Wise Multi-Currency Card for businesses is an excellent option for companies with employees or contractors in multiple countries.

Wise Business allows you to exchange currencies at the mid-market rate, saving money on international expenses.

You can let any employee order up to three business digital debit cards for free, and pre-set their spending limit. Easily connect with Xero, QuickBooks or FreeAgent for smoother, speedier reconciliation. Your team can also upload receipts straight away after paying with their employee expense cards.

Factors to Consider When Choosing an Expense Card Provider

There are plenty of prepaid card options available. It is best to consider all factors before making this decision. Some important factors could include security, compatibility with other programs, and international use.

Customization and Control Options

Many cards offer customization options for companies, which help them better control the process. Having these options can make it easier to ensure that companies stay in compliance with their expense reporting requirements.

Some examples include the following:

• Spending limits
• Restrictions on international transactions
• Restricting certain vendors or types of vendors
• Restricting spending during certain days of the week
• Allowing employees or contractors to request additional funds
• Cards for specific categories

It is important for companies to have control over the process. Companies may also need to make changes from time to time. Customization options can help companies spend less time on reporting.

Integration with Expense Management Software

Most businesses already have multiple bank accounts, credit cards, and software programs. Adding another card to the equation can be overwhelming and time-consuming. It's important to ensure a new card will save time and/or create new benefits.

Luckily, most prepaid card providers have noted this objection. Most expense cards are user-friendly and compatible with popular software programs. Many expense card providers allow you to import data into popular programs like QuickBooks. If this is a concern, it is best to research this information beforehand and start with a trial.

Fee Structure and Accessibility

Monthly fees can typically be between $0-100.⁸ These fees depend on the size of your company and the amount of features you use. However, larger companies that use extensive features may be willing to pay more than this.

Another important factor to consider is cash back rewards. These rewards may also be able to offset some of the fees.

Frequently Asked Questions

Can contract employees use expense cards like regular employees?

Yes. Contract employees can also use expense cards. This decision is based on a company’s internal expense policies. If you decide to do this, it is important for you to inform your contract employees about your company’s policies.

How do expense card providers ensure security?

Expense card providers implement similar measures as credit card companies to make sure transactions are secure. They also allow companies to restrict certain transactions, such as international transactions and specific categories. Spending limits can also be set to ensure expense budgets are adhered to.

Are there restrictions on what expenses can be covered with these cards?

Most vendors will accept payments made with prepaid expense cards. However, some vendors may not accept these cards. If you are traveling internationally, it’s important to ensure these cards work abroad.

Companies are also able to make certain types of restrictions depending on the provider. For example, they may choose to restrict certain vendors or spending categories. Moreover, they may restrict contractors from using these cards during certain days or hours of the week.

Conclusion: Should you use an expense card for contract employees?

Expense cards can be mutually beneficial for companies and contract employees. They can help save contractors time and ensure that companies meet all their compliance requirements.

As contractors become more popular in the workforce, it’s crucial for companies to reduce the amount of time spent on expense management. Prepaid expense cards can be a tool to help companies achieve this goal.

Luckily, companies do not have to sacrifice control and convenience. Expense card providers offer multiple options for companies to track, monitor and adjust their expense cards. These companies also provide software solutions and allow companies to integrate other types of popular software, such as QuickBooks.

Wise Multi-Currency Card for businesses - Making Expense Management Easy

Wise Multi-Currency Card for businesses can be a solid option for companies who need to manage their expenses. It allows businesses to organize employee expenses by category and currency. There is no monthly subscription fee, just a simple one off fee to get account details in the US.

Find out more about Wise Business

Wise Multi-Currency Card for businesses help businesses save money on foreign exchange fees. You can access physical and digital cards, and business tools to help track expenses in multiple currencies.

Signing up to Wise Business allows access to BatchTransfer which you can use to pay multiple invoices in one go.

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Sources:

1. To Cut Costs, Companies Will Hire Contractors Instead Of Permanent Employees In 2023 (forbes.com)
2. Revolutionize Your Business Spending | Bento for Business
3. Enabling Two-Factor Authentication as a User – Emburse Spend
4. BILL Spend & Expense (Formerly Divvy)
5. Divvy Review 2023 | Business.org
6. Welcome to PEX | Simplify your employee spending (pexcard.com)
7. PEX 2023 Review | Reviews, Ratings, Complaints (merchantmaverick.com)
8. 4 Best Prepaid Business Cards - NerdWallet

Sources checked September 2023.