Payroll Software for Independent Contractors

Find the best independent contractor payroll software solution based on payroll system ratings and HR software reviews by other independent contractors.

Payroll Software for Independent Contractors

Independent contractors have completely different payroll needs than regular employees. Taxes are calculated differently because they’re not withheld by the employer. Whether you are an independent contractor issuing invoices for payment or an HR professional working for an organization that hires independent contractors, payroll software is a must. Payroll software for independent contractors should have the following features to best handle their unique payroll needs.

Self-Service Portal for Contractors

Many payroll software systems offer self-service portals for employees. However, if you employ independent contractors as well, it’s important that they also be able to log in to the self-service portal. It’s through the self-service portal that both employees and contractors are able to manage and update their own information. They can also keep track of upcoming paychecks as well as past ones.

Independent Contractor Forms

Independent contractors use different documentation for employment than an employee would. Some payroll software may allow independent contractors to onboard themselves into the software by submitting their I-9 forms. Even if this feature isn’t an option, your payroll software should be able to process those I-9 forms no matter who submits them. The payroll software should also be able to generate 1099 forms for independent contractors at the beginning of each year. The company may not have to withhold or pay income taxes for an independent contractor, but those contractors will still need tax documentation.

Direct Deposit

Not every independent contractor wants to be paid the same way. While direct deposit is convenient, it’s best to have payroll software that can process paychecks and invoices in multiple methods. Some independent contractors may want multiple accounts on file for a split direct deposit.

Time and Attendance Tracking

Some contractors are paid by the hour. It’s therefore essential for a company that works with independent contractors to have time tracking and attendance features built into their payroll software. Your payroll software should ideally have time and attendance tracking features built into it. If it doesn’t, then it should be able to sync with separate time and attendance tracking software. That way, your payroll system automatically gets the data it needs to calculate how much each independent contractor is owed.

Compliance Management

Depending on the industry and the type of work independent contractors are doing, they may not be located in the same place. Companies hire independent contractors from across the world. Tax laws and other regulations can therefore be very different from contractor to contractor. A payroll software system for a company that employs independent contractors should be able to ensure that you are compliant with all regulations for where your contractors are working.

No Extra Fee for Independent Contractors

Many payroll software systems charge based on the number of employees you have. Some charge even more if those employees are independent contractors. Not all payroll software vendors do, however, so in your search keep an eye out for extra fees that may apply only for independent contractors. Depending on your budget and your payroll needs, the presence of this type of fee may help to narrow down your search.


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