The Best Payroll Services for Contractors

If your business works with independent contractors, you know that managing payroll comes with unique challenges. Whether you work with freelancers, consultants or third-party vendors, a reliable payroll service can simplify your financial responsibilities while ensuring accurate, timely and legally compliant payments.

The best payroll services for businesses that pay independent contractors can handle tax classifications and payroll forms while providing multiple payment methods, support for employee self-service and much more. We evaluated and tested multiple platforms to help you find a payroll service that can make paying contractors seamless. Our five top options scored well in areas like unlimited payroll processing, payroll tax support, mobile platform access and international payments. Here’s a look at the top five payroll services for businesses that pay independent contractors.

Pricing models for online payroll services are generally structured as monthly or per-payroll plans.

• Monthly plans: Base fees for monthly payroll service subscriptions typically range from $30 to $150, plus a per-employee fee that may fall between $5 and $15 per month. Freelancers and contractors are considered “employees” under most payroll services, so you’ll be charged the same rate for any individual or vendor on your payroll. This structure means you can run payroll as frequently as needed for a fixed monthly cost – a cost-effective option for businesses that handle multiple monthly payroll runs or that prefer paying contractors after they complete a job.
• Per-payroll plans: In contrast, per-payroll fee structures charge anywhere from $10 to $100 per payroll run plus an additional $2 to $15 per employee. This pay structure may make more sense for businesses that pay contractors only once per month.

Regardless of your pay structure, some providers may tack on extra charges for year-end tax services and initial setup.

Payroll services offer an array of valuable features tailored to businesses with independent contractors and freelancers on their payroll. Here are some key features to consider:

Unlimited Payroll Processing

Look for services that allow you to run payroll as often as needed each month. This flexibility lets you pay independent contractors promptly after a project has been completed without incurring extra costs for additional runs.

Payment Options

Most online payroll services offer numerous payment methods, including direct deposit, paper checks and prepaid debit cards (or pay cards), to better accommodate the needs and preferences of your workforce.

Payroll Tax Calculation and Filing

If you also have W-2 employees on staff, payroll services should be able to calculate your business’s payroll taxes, handle corresponding paperwork, and file it with the relevant federal, state and local tax agencies. They also ensure that required payments are made on your behalf.

Year-End Tax Form Preparation

Businesses can rely on payroll services to handle year-end payroll tax form preparation and filing for employees and independent contractors, including 1099-NEC forms.

Employee Self-Service

Payroll software typically includes an online portal accessible to employees and contractors where they can conveniently view pay stubs and year-end tax forms.

Mobile Access for Team Members

Many payroll services offer dedicated mobile apps or mobile-friendly websites so you can manage independent contractor payments from any device.

International Payroll Support

While not all payroll software platforms support payments to overseas contractors, some specialize in facilitating payments to foreign workers, freelancers and clients. Vendors with international payment capabilities are ideal for businesses with global operations and independent contractors across borders.

If you’re beginning the process of choosing a payroll service for a business that utilizes independent contractors, follow these steps to help you make the right decision:

1. Assess your budget and needs.

When selecting an online payroll service for your small business, begin by evaluating your payroll budget. Determine what your business can comfortably allocate for payroll processing and related services. Identify the features you need and those you can do without. Keep in mind that some payroll platforms are bundled with broader HR and human capital management software, which may not suit businesses seeking standalone payroll solutions.

You should also consider how frequently you process payroll: weekly, biweekly, monthly or per-project for freelancers. This choice can significantly impact your decision because some providers offer unlimited payroll runs and others charge per run.

2. Understand your business needs and priorities.

Make a list of your top priorities, wants and needs in your payroll software. For example, are same-day or next-day deposit capabilities critical for your freelance and contractor payments? Determine whether your business needs additional HR services integrated into the platform. Create a list of your payroll software requirements to guide you in your search for providers.

3. Compile a list of potential vendors.

Based on your specific feature requirements, create a list of potential payroll software providers through research and reading reviews from trusted resources like Business News Daily. Examine each vendor’s features and determine whether they align with your business needs; remove any platforms that do not meet your criteria.

4. Schedule demos where available.

Narrow your options to a few choices and schedule demos with these providers, if available. During demos, assess how the software functions and ask relevant questions. Inquire about the frequency of payroll runs, mobile app availability and employee self-service portal features. Sitting through product demos can also help you evaluate the software’s user-friendliness and intuitiveness.

5. Compare pricing structures and customer service.

Ask questions to gain a comprehensive understanding of the provider’s pricing structure and monthly expenses. Many payroll providers charge a base fee along with a per-employee fee. Ensure you fully understand the payment structure, setup charges and any additional fees for extra payroll runs; inquire about available discounts or incentives.

Next, research the quality of customer service offered by the company. Check the provider’s rating with organizations like the Better Business Bureau, assess customer complaints, and examine the availability of customer support channels, including phone, email and chat support. Be sure the provider’s support hours align with your business needs.

6. Narrow down your choices and make a decision.

After considering the pros and cons of each provider, identify your top choices based on your criteria. Once you’ve selected the best-suited vendor for your business, you can begin the setup process.

Managing payroll efficiently is crucial for any business, especially those working with independent contractors and freelancers. Using a professional payroll service offers numerous advantages, including the following:

Payroll services can save you time and money.

Preparing payroll manually isn’t just time-consuming; it can also lead to legal issues with tax compliance if not done correctly. Using payroll software frees up valuable time and reduces expenses by streamlining tax preparation.

Payroll services ensure accuracy and compliance.

Payroll services ensure precise calculations and strict compliance with tax regulations, reducing the risk of costly errors, tax-related penalties and the need for paper documents. This can be especially helpful during tax season when filing annual 1099-NEC tax forms for contract workers.

Payroll services offer payment flexibility.

Payroll services offer various payment schedules, allowing businesses to compensate independent contractors and freelancers upon project completion or on a weekly, biweekly or monthly schedule.

Payroll services can facilitate employee self-service.

Online portals are a standard offering among payroll services; they allow employees and contractors to quickly access documents like pay stubs, W-2s and direct deposit details.

Payroll services can enable mobile accessibility.

Many payroll services offer mobile apps or mobile-friendly websites for easy payroll management from smartphones and tablets. This increases flexibility and accessibility for busy business owners and workers.

Payroll services make contractor management easier.

The right payroll service can help your business manage remote workforces, especially those with freelancers or independent contractors, more efficiently. With a full-service payroll provider, you can ensure compliance with laws and regulations across various jurisdictions, including overseas.