Payroll software for 1099 contractors may seem unnecessary to some small business owners. After all, 1099 contractors tend to come with less responsibility — employers aren’t required to pay them overtime, meet minimum wage requirements, or worry about tax withholdings the way they do with W2 employees.
But 1099 contractors still come with important employer responsibilities like W-9 forms, taxpayer ID verification, and written contracts. In addition, while you may choose to handle your 1099 contractor payroll with a single Excel spreadsheet or by juggling different documents, that kind of solution won’t be easy to scale as you grow.
Payroll software for contractors can help you streamline your payroll process now and plan for tomorrow. That’s why we’re going to look at eight of the best options in this article, and discuss some of the key features and benefits payroll software provides that might work perfectly for your small business.
The Best Payroll Software for Contractors
|SMB (small to medium-sized business) owners looking for an all-in-one solution
|SMB owners looking for good value for money
|CPAs and accounting consultants
|Lots of integration options
Whether you run a coffee shop or an accounting firm, your contractor payroll software should meet your unique needs. We created our independent contractor payroll shortlist with the diverse needs of small businesses in mind.
Homebase: Best all-in-one solution
Homebase is an intuitive small business performance management tool built for hourly work, and it lets small business owners manage their payroll, time clocks, HR and compliance, work schedules, and team communication.
- Takes care of compliance tasks when you set up your payroll: Homebase helps you automate payroll, and we’ll also instantly convert your timesheets into hours and wages. Our platform will even distribute 1099s automatically for new hires and submit necessary reporting.
- Helps owners and employees stay on top of hours and schedules: When your team clocks in with our mobile app, Homebase instantly calculates hours, breaks, overtime, and PTO and syncs everything with your payroll tool. Our team communication tool also helps small business owners stay on top of shifts and schedule changes.
- Gives access to HR experts: Homebase gives small business owners direct, person-to-person access to HR experts who can weigh in on everything from payroll to compliance issues.
- A Free plan
- An Essentials plan for $16/month,
- A Plus plan for $40/month
- An All-in-One plan for $80/month
You can also add payroll to any of those plans for $35/month and $5/month per active employee.
Square: Best value for the money
You may know Square for its POS tools, but Square Payroll lets you run payroll, manage employee benefits, automatically file payroll taxes, and import your time tracking data from Square POS.
- Integrates with Square POS and Square Team Management: Small business owners already using Square’s POS and Team Management tools can sync their data automatically with Square Payroll.
- Automates worker’s compensation: Square offers a function for pay-as-you-go worker’s compensation that business owners can integrate with their payroll process.
- Square’s Contractor’s Only plan lets you use their tool to pay 1099 contractors for $5/month. There’s no monthly fee for business owners who haven’t hired W2 employees.
Patriot: Best for CPAs and Bookkeepers
Patriot is an accounting and payroll software with functions for accounting, payroll, time and attendance, and self-service HR management.
- A partner program for accountants: Patriot offers special discounted pricing for bookkeepers, CPAs, and accountants, should that be applicable to you.
- Add on time, attendance, or HR software tools to your payroll plan: Patriot’s time and attendance tool lets you track your hourly or salaried workers manually or with time punch entry. Patriot’s HR software also allows you to run standard HR reports for new hires, demographics, retirement, and employee census.
Patriot’s pricing plans include:
- A Basic Payroll plan for $17/month plus $4 PEPM (per employee per month)
- A Full-Service Payroll plan for $37/month and $4 PEPM
You can also add Time and Attendance or HR Software to any plan for an extra $6 a month and $2 per contractor.
Remote: Best for global payments
Remote is an HR software for global and remote teams that offers features for hiring, running payroll, organizing benefits, and offering stock options to employees and contractors.
- Global infrastructure: Remote partners with local legal entities and HR specialists in every country to help companies stay compliant no matter where their employees and contractors work.
- IP (intellectual property) protection: Remote’s IP Guard works to make sure companies with remote international teams can claim proper ownership of their intellectual property.
Remote’s plans are as follows:
- A Contractor Management plan that lets you manage your 1099 contractors for $29/contractor/month.
- An Employer of Record plan that lets you hire employees in countries where you don’t have a business set up. That starts at $299/month.
You can also get a custom quote to add Global Payroll onto any plan to run payroll in countries where you do have your business set up.
Rippling: Lots of integration options
Rippling offers solutions for IT and HR, and their HR platform includes payroll, time and attendance, benefits, learning and compliance management, talent management, and PEO (professional employer organization) services.
- Tons of integration options: Rippling’s App Shop gives you access to dozens of integrations for every kind of tool — from customer support to design to team communication to finance and legal. And if you notice they don’t have an integration you need, you can request it.
- Training and compliance features: Rippling’s learning management catalog lets growing companies keep large teams on track with development and compliance training.
Rippling’s plans include:
- An Employee Management platform for $8 PEPM
- Access to full-service payroll for $35/month plus $8 PEPM
You can also talk to their customer service team to get custom quotes.
Gusto: Best for accounting firms
Gusto is a payroll, benefits, and HR management software that offers businesses tools for full-service payroll, employee benefits, time and attendance, hiring and onboarding, talent management, and insights and reporting. They also offer Gusto Pro for accountants who need more dedicated tools to support their clients.
- A downloadable app for employee payments: When employers use Gusto, Gusto Wallet lets employees and contractors download and track their paychecks, banking, and savings accounts all in one app. The platform also comes with a Gusto Wallet debit card.
- Pay contractors internationally: Similar to Remote, Gusto lets you pay contractors in 80 countries worldwide, so you can easily manage a global team.
Here are Gusto’s paid plan options:
- A Contractor Only plan for businesses who haven’t hired W-2 employees for $6 PEPM
- A Core plan for $39/month plus $6 PEPM
- A Complete plan for $39/month plus $6 PEPM
- A Concierge plan for $149/month plus $12 PEPM
Businesses that need premium tools and have more than 25 employees can contact Gusto’s sales team for a custom Select plan quote.
QuickBooks: Best for direct deposits
Business owners might be familiar with QuickBooks as well-established accounting software, but QuickBooks Payroll lets business owners manage payroll, schedule direct deposits, file payroll taxes, create timesheets, and receive tax penalty protection if an error occurs while using their software.
- Direct deposits: Instead of handing contractors a check, QuickBooks lets you set up direct deposits so that they’ll always get payments on the same day.
- Tax penalty protection: If you incur a federal, state, or local tax penalty while using QuickBooks Online Payroll Elite to file your taxes, they’ll help you resolve the issue and reimburse you for the penalty and interest cost of up to $25,000.
QuickBooks plans include:
- A 30-day free trial
- A Core plan for $22.50/month plus $4 PEPM
- A Premium plan for $37.50/month plus $8 PEPM
- An Elite plan for $62.50/month plus $10 PEPM
Wise: Best for enterprises
Wise — originally TransferWise — is a banking software that lets business owners pay contractors, vendors, and employees, as well as manage international invoices in 80 countries around the world.
- Payments for international teams: Just like Remote and Gusto, Wise lets large enterprises and companies with international teams pay their contractors and employees in 80 countries.
- Wise open API (application programming interface) for businesses: For larger businesses that want more technological control of their interface for finances and tools, Wise offers an open API that you can test, program, and build before you’re ready to implement it.
It’s free to open an account with Wise, and here’s how their pricing works after that:
- A 0.41% fee for the money you send
- A 2% fee plus $1.50 for ATM fees over $100
- A $5 to get a Wise debit card
- A 0.41% fee to convert money into another currency
- A $31 fee to receive payments in 10 currencies
- A $4.14 fee to receive US dollar wire payments
What to Look for in Contractor Payroll Software
As the owner of a growing small business, you deserve to find a software for contractor payroll management that lets you:
- Track your payments
- Stay compliant with your local, state, and federal laws
- Customize your processes to suit your needs
- Integrate with your favorite tools
- Communicate with a team that’s not always together in one physical location
Let’s dig into the features we think you shouldn’t go without.
It pays to make sure the tool you use has HR functions, even for 1099 contractors. Why? Because teams with contractors are usually spread out, and payroll software with HR features lets you merge everything into one place for necessary employee certifications, information, and paperwork.
A payroll tool with HR features can also provide you with guidebooks and resources to help you stay compliant with local, state, and federal laws and even give you access to a real HR expert who can review your documents and policies and answer your HR and compliance questions.
1099 contractors do come with some tax responsibilities for small business owners, and if that concerns your small business in particular, payroll software with tax management might be a worthy investment.
To start, a dedicated tax management feature should let you automatically issue both W2s and 1099s for new hires.
For example, if you’re a home repair company that employs both full-time staff and 1099 workers, payroll software should let you automatically calculate your wages and taxes for both kinds of workers. It should also help you submit the right payments to workers, the state, and the IRS, so you don’t have to.
Reporting and analytics
For small business owners who want extra assurance that they’re staying on top of their contractor payroll obligations, a payroll analytics and reporting tool can help you manage and keep track of the payroll reports you need for your 1099 contractors and regular employees — including payroll registers, individual paycheck histories, and tax filing reports.
The owner of a small spa doesn’t need the same things out of a payroll service as a small accounting firm. That’s why customization matters in your payroll tool, even if you only hire contractors, salaried employees, or a mix of both.
For example, the designers of Homebase created their payroll tool with hourly workers in mind, but it also works great for salaried employees. Best of all, team members can clock in and out of their shifts from mobile devices and have Homebase automatically sync those hours with payroll.
It’s hard to let go of tools you’re attached to, so a payroll tool with easy-to-use integrations should allow you to keep your starter system.
Let’s say you’re happy with Square or QuickBooks’ business management tools, but you’re looking for a payroll solution that has more team management and communication features. You should be able to smoothly sync your data between both solutions and keep using them together.
The more convenient you can make your time tracking and timesheet system, the easier it will be to have a legally compliant, error-free payroll experience.
We suggest a payroll tool with a mobile timesheet application, which lets you track employee and contractor hours from your phone or mobile device so you’re not location dependent — you just need an internet connection.
Benefits of Using Contractor Payroll Software
When you’re starting out as a small business owner, you might feel that the only way to get really hands-on with the payroll process is to do it manually. But that can be a time-consuming process that puts you at a higher risk of making mistakes or facing legal issues. Here’s how payroll software can help you avoid that:
Transferring each contractor’s hours to a manual payroll spreadsheet can easily lead to mistakes. You’re only human! A contractor payroll software isn’t, though, and it should be designed to sync data automatically so that when your contractors clock in, their information instantly uploads to a timesheet for payroll.
Automate tedious processes
It’s not just data entry that makes payroll tedious, is it? It’s also the onboarding and paperwork collecting that overwhelms small business owners. But you can automate that process with a contractor payroll tool that lets employees onboard themselves and even reminds them to sign any required paperwork before they start working.
If staying compliant keeps your small business team awake at night, a payroll tool can take care of that for you by automatically issuing tax documents and onboarding packets to new contractors, tracking worker certifications, and notifying you of any changes in local or state labor laws.
Sometimes new small business owners need some extra peace of mind, though, which is why Homebase’s platform even lets you access direct one-on-one guidance with HR professionals to make sure you’re staying above board with your contractor services.
Cut Down on Time and Hassle with Payroll Software
Trying a new payroll software to manage your independent contractors shouldn’t involve too much risk. You can always go back to your old system if it feels too complicated.
But we also want you to pay attention to how much time and hassle you avoid when trying a new tool. If you find that you’re saving hours every day, reducing your spreadsheet clutter, and gaining more peace of mind about staying compliant, then we think the return on investment is worth it.
Optimizing Contractor Payroll Management with Innovative Solutions in 2024
Integrating contractor payroll services into your business framework not only simplifies the management of contractors’ payroll but also enhances the efficiency of handling financial obligations towards 1099 workers.
By adopting contractor payroll software, small businesses can ensure accuracy in their payroll processes, mitigate risks associated with tax compliance, and foster a more organized approach to contractor management.
This transition from traditional methods to utilizing specialized services and software dedicated to contractors’ payroll marks a proactive step towards optimizing operational workflows, thereby supporting the sustainable growth of your business.
Payroll Software for Contractors FAQs
What is a 1099 worker?
A 1099 worker, or freelancer, is a contract worker who’s not technically considered an employee by the IRS the way a salaried W2 employee is. We refer to them as 1099 workers because of the tax form — the 1099 — they’re required to fill out before they work for someone. They work in a variety of positions, from freelance writers to skilled laborers to attorneys on retainer.
How is an independent contractor paid?
Business owners can pay independent contractors hourly or by project via the contractor’s invoice. For example, freelance graphic designers or attorneys on retainer might prefer a lump sum at the beginning of each month, while freelance writers or skilled laborers might prefer to be paid at the end of a project based on how many hours they worked or their deliverables.
Do I need a payroll system for independent contractors?
You may need a payroll system for independent contractors if you want to update your tools or automate everything you do manually.
So, whether you run your small business payroll with a spreadsheet or with accounting software, look into a payroll solution that automatically issues 1099s to new contractors, syncs time tracking with timesheets, and helps you stay compliant with your local labor laws for contract work.