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Best Payroll Software for Paying Contractors 2022


The best contractor payroll services help you pay and onboard independent contractors and collect the forms you’ll need for end-of-year tax reporting. Many even offer direct deposit at no additional cost. Before deciding on a service, it’s important to evaluate pricing because some providers have low-cost plans ($5 to $6 monthly per contractor) that you only have to pay for during the months you process a contractor paycheck. Given that one of the benefits of using independent contractors is the savings from not having to pay taxes on their income, it makes sense to consider a service that’s priced affordably.

In this article, we evaluated nine independent contractor payroll software for small businesses and narrowed it down to our top six.

  • Gusto: Best (overall) contractor payroll software
  • Square Payroll: Best for Square POS users that want low-cost contractor payroll services
  • Rippling: Best for tech-heavy companies looking for HR, payroll, and IT tools to manage the entire contractor lifecycle
  • Patriot Payroll: Best for companies with a handful of contractors and employees that want a do-it-yourself option
  • QuickBooks Payroll: Best for QuickBooks users who need fast direct deposits to pay contractors
  • Remote: Best for businesses looking for a free way to pay international contractors

Best Contractor Payroll Services Compared

Gusto: Best Overall Contractor Payroll Services for Small Businesses

Gusto

Gusto logo

Overall Score: 4.60
OUT OF 5

What We Like

  • Has a self-service portal that contractors can access for a lifetime
  • Self-onboarding with electronic W-9 forms
  • Preps and files 1099 year-end reports
  • Multiple direct deposit options (two-, four-, next-day payouts)

What’s Missing

  • Contractor direct deposits follow a four-day processing timeline; Gusto’s other direct deposit options are not available for contractors
  • Limited premade reports

Gusto Pricing

  • Contractor-only plan: $6 per contractor monthly

Gusto Plans for Paying Employees

  • Core: $39 per month + $6 per employee monthly
  • Complete: $39 per month + $12 per employee monthly
  • Concierge: $149 per month + $12 per employee monthly

Gusto scored the highest in our independent contractor payroll software evaluation since it provides all of the essential tools you need to manage contractor payments. It prepares and files 1099 reports and even lets your new contractors onboard themselves. In addition, Gusto has a special pricing plan for contractors—wherein its $39/month base fee is waived—and an affordable one you can transition to for W-2 employees. You can also use Gusto to provide a more personalized experience because it comes with a self-service portal your contractors can use to access the electronic tax forms they have on file.

Scoring 4.6 out of 5, Gusto would have earned perfect marks in our evaluation had it not been for its limited customizability, tax penalty guarantee that only includes tax errors that the provider makes (QuickBooks Payroll’s penalty guarantee includes even your tax mistakes), and having to upgrade to its highest tier to get expert advice from certified HR professionals. However, users still rated it positively, with many complimenting Gusto for its easy-to-use platform, affordably priced plans, and robust payroll features.

Gusto Features

  • Affordability: Gusto is one of the providers in this guide that offers affordable contractor payroll services. You only have to pay $6 for every contractor for which you process payroll in a month. Plus, you can easily upgrade to its full-service payroll if you add W-2 employees to your workforce. But, if you want to save just a little bit more, consider Square Payroll since its contractor-only option is slightly cheaper than Gusto’s—costing only $5 per contractor monthly.
  • Efficient pay processing: With Gusto, you don’t have to worry about handling payroll yourself. Even if you’re processing contractor payments, it provides you with automatic and unlimited pay runs. You can pay contractors via manual checks and direct deposits. While Gusto has two, four-, and next-day direct deposit options, it only offers four-day payments for contractors. So, if you require fast payments, we recommend QuickBooks Payroll because of its standard next-day direct deposits. You may also consider Square Payroll as it provides instant payouts through its Square Payments solution (if you use Square to pay both employees and contractors).
  • Automatic tax reporting: Automated filings of 1099 forms are included in Gusto’s standard contractor payroll services. It will even send your contractors’ 1099-MISC forms and payday notifications via email.
  • Self-service portal for contractors: Contractors can access their pay information and tax forms online through Gusto’s self-service portal. It also offers self-onboarding tools for new contractors, including state new hire reporting—a functionality that the other providers in this list (except Rippling) don’t offer.
  • Custom report builder: You are granted access to a report builder that allows you to create custom payroll and employee reports.

Gusto Drawbacks

Gusto may have all the payroll tools you need to handle contractor payments, but it lacks the option to pay your staff the next day (like QuickBooks Payroll) and even instantly (like Square Payroll, provided you pay both employees and contractors).

Visit Gusto

Square Payroll: Best for Square POS Users Looking for Low-Cost Contractor Payroll Services

Square Payroll

Square Payroll logo

Overall Score: 4.31
OUT OF 5

What We Like

  • Cheapest payroll software for paying contractors
  • Integrates with Square POS and provides free time tracking
  • Contractors are granted access to the Square Payroll app for self-onboarding and to view payslips/tax forms
  • Preps and files year-end contractor tax reports

What’s Missing

  • Standard direct deposit has a four-day processing time
  • Phone support requires a customer code; difficult to reach at times
  • New hire reporting services don’t include contractors
  • Reporting options are limited

Square Payroll Pricing

  • Pay contractors only: $5 per contractor monthly
  • Pay employees and contractors: $35 per month + $5 per person monthly

Square Payroll is our lowest-cost solution ($5 per person monthly) for paying contractors, and, similar to Gusto, you don’t have to pay during months your workers aren’t paid. It also prepares 1099s for each contractor and electronically delivers them. You get even more value if you already use Square POS since it integrates with the payroll software and provides free time tracking. This is great if you’re paying contractors by the hour.

Overall, Square Payroll earned a score of 4.31 out of 5 in our evaluation. While it offers low-cost and efficient contractor payroll services, what pulled the scores down include its four-day direct deposits, lack of new hire reporting for contractors, and the additional customer code requirement needed to contact phone support. This is unlike most of the other software in this list, where you simply call its support team without having to provide a special code.

In terms of user feedback, many appreciate its affordability and easy-to-use payroll tools. However, some users complained about its limited reporting and difficulties contacting phone support.

Square Payroll Features

  • Low-cost contractor payroll services: Similar to Gusto, Square Payroll’s contractor-only plan lets you pay only on months that you processed contractor payroll. However, its monthly fee is cheaper than those of both Gusto and QuickBooks Payroll.
  • Direct integration with Square POS: Given its direct integration with Square POS, you don’t have to purchase a separate time tracking solution if you want to capture your contractors’ actual work hours. Your staff can simply clock in/out via the Square POS. Best of all, this functionality is free. Gusto doesn’t have a similar tool that you can access for free. QuickBooks has a POS-based time clock but it doesn’t send tip and commission details to its payroll solution for processing like Square Payroll does.
  • Seamless time data imports: With Square Payroll seamlessly connecting with Square POS, you don’t need to manually upload time data to pay contractors and employees. It lets you import actual work hours with just one click.
  • Efficient pay processing: You can run payroll as many times as you need—Square won’t charge you additional fees for it. It even files 1099-MISC forms at year-end and then mails these to your contractors (Rippling and Remote don’t file 1099 forms). You can pay contractors through checks and direct deposits, although its standard direct deposit turnaround time is four days. While it offers next-day and instant payments, you need a Square Payments account, plus this option is available only if you process both employee and contractor payroll. If you’re not a Square user and want fast payouts, QuickBooks Payroll offers same-day direct deposits with its Premium plan.
  • Self-service portal: Aside from receiving pay notifications, contractors can see their payment histories online. They can also update their personal information and download the tax forms that Square Payroll generates, prepares, and files for them.

Square Payroll Drawbacks

Square Payroll doesn’t file new hire reports to the state if you have new contractors like Gusto and Rippling do—some states require new hire reporting for contractors. And unless you have a Square Payments account and use Square Payroll to pay both employees and contractors, you won’t be able to use its Instant Payments feature. For those that prefer a turnaround time that’s faster than four days, consider QuickBooks Payroll as it offers next-day and same-day options.

Visit Square Payroll

Rippling: Best for Tech-Heavy Businesses Needing HR, Payroll & IT Tools to Manage the Contractor Lifecycle

Rippling

Rippling Logo

Overall Score: 4.08
OUT OF 5

What We Like

  • Offers modular HR, payroll, and IT solutions; you can select the modules you need and want
  • Payroll capabilities include paying international contractors
  • Robust onboarding and offboarding processes
  • Integrates with 400+ apps

What’s Missing

  • Pricing isn’t all transparent
  • Lacks a contractor-only plan
  • You have to purchase its core employee management platform before you can add other solutions
  • Doesn’t file year-end 1099 tax forms

Rippling Pricing*

  • Employee management platform: $10 per person monthly
  • Full-service payroll: $8 per person monthly
  • Employee benefits: $6 per person monthly
  • Flex HSA/FSA and commuter benefits: $6 per person monthly
  • HR help desk: $100 per month
  • App management: $8 per person monthly
  • Device management: $8 per person monthly

*Pricing is based on a quote we received

Rippling is great for managing the entire contractor lifecycle given its feature-rich platform that automates onboarding and offboarding processes, as well as HR and payroll tasks. You can have contractors electronically sign documents and complete required forms to set up their online profiles in Rippling. If you need to assign computers with company-approved apps to contractors, its IT tools can help you set up and deploy devices. And when your contractors have ended their contracts with you, Rippling can send offboarding documents, revoke app access, wipe data from devices, and remotely lock company-assigned computers.

Scoring 4.08 out of 5 in our evaluation, Rippling efficiently handles payments for all types of contractors, including those working internationally. You can also set system permissions that provide contractors access to specific tools like time tracking. And while Rippling generates and distributes 1099 forms to contractors, it doesn’t file year-end reports like Square Payroll, Gusto, and QuickBooks Payroll do. Its payroll module is also a paid add-on to its core employee management platform, plus you also have to pay extra if you want device and app management solutions. However, users still rated Rippling highly as its intuitive interface allows them to easily manage HR, payroll, and IT.

Rippling Features

  • Automatic payroll: Pay contractors either by the hour or at a set rate and then send payments through two-day direct deposits and manual checks. You can also add other earning types, such as expense reimbursements. If you want to capture your contractors’ actual hours worked, Rippling offers free access to its time tracking tool, wherein all approved hours automatically sync to payroll. Rippling can even handle international payments in case you have contractors working in your global offices.
  • Year-end 1099 reports: Rippling generates and sends 1099 forms to contractors at the end of year, and even stores past and current forms for you. However, like Remote, it doesn’t offer 1099 filings.
  • Apps and device management: Rippling is the only provider on our list that offers IT tools to help you manage the entire contractor lifecycle. It lets you create online accounts and passwords for company apps that your contractors will use. If you need to assign computers, Rippling can help with the provisioning processes. It even has robust deprovisioning tools to help retrieve and reassign devices, disable app access, and remotely lock and wipe data from company-assigned computers when your contractors leave.
  • Integrates with more than 400 apps: With an extensive network of third-party software partners, you can connect Rippling to a wide variety of solutions, such as accounting, legal, advertising, sales, analytics, customer relationship management, and collaboration tools.

Rippling Drawbacks

Rippling’s modular solutions may seem ideal for those who only need pay processing tools to handle contractor payments, but its payroll module isn’t available as a standalone product—you also have to purchase its core employee management platform. While both cost only $18 per contractor and/or employee monthly, Square Payroll’s contractor-only plan ($5 per contractor monthly) is more budget friendly. Plus, Rippling can get a bit pricey if you add other features like app and device management (each costs $8 per contractor and/or employee monthly) and one-on-one HR support ($100 per month).

Visit Rippling

Patriot Payroll: Best for Small Companies Wanting an Affordable Do-It-Yourself Option to Pay Contractors & Employees

Patriot Payroll

Patriot Payroll

Overall Score: 3.79
OUT OF 5

What We Like

  • Reasonably priced
  • Offers full-service payroll plans and a do-it-yourself (DIY) option
  • Unlimited pay runs
  • Free payroll setup

What’s Missing

  • Direct deposits take four days
  • Basic plan doesn’t include 1099 filings; this service costs extra
  • Lacks a contractor-only tier
  • HR tools aren’t robust

Patriot Payroll Pricing

  • Basic Payroll with DIY taxes: $10 per month + $4 per person monthly
  • Full Service Payroll: $30 per month + $4 per person monthly
  • Full Service Payroll + HR Software: $36 per month + $6 per person monthly
  • Full Service Payroll + HR + Time and Attendance: $42 per month + $8 per person monthly

1099 e-filings (for Basic Payroll subscribers only):

  • $20 for up to five 1099 e-filings
  • an additional $2 per 1099 is required for six to 35 filings
  • no additional charge for 36 or more

Similar to QuickBooks Payroll and Rippling, Patriot Payroll doesn’t have a contractor-only plan—this makes it better for companies that pay both contractors and employees. Essentially, what it offers is a Basic Payroll option where you handle tax filings (such as 1099 year-end tax report submissions for contractors) yourself. This is ideal for small companies with only a handful of workers. If you want automated 1099 tax filings (plus employee tax filing), Patriot Payroll also offers full-service plans that even include time tracking and employee information management solutions.

Patriot Payroll scored 3.79 out of 5 in our evaluation. It didn’t rank higher on our list because it doesn’t offer new hire reporting, pay on-demand options, fast direct deposits, and onboarding tools. Its Basic plan is also more expensive than Square Payroll’s contractor-only option ($5 per contractor monthly), which already comes with 1099 filings. However, you can subscribe to its Full Service Payroll tier if you want Patriot to handle e-filings of year-end forms. Many users even find its full-service packages reasonably priced with efficient tools that make payroll and tax filings easy for them.

Patriot Payroll Features

  • Self-service payroll plan: Priced at $10 monthly plus $4 per contractor/employee monthly, Patriot Payroll’s Basic option provides you with all the online tools you need to handle both contractor and employee payments while saving you money—provided you’re willing to handle tax filings yourself. This, however, is only optimal for those that have a very small workforce. And if you employ only contractors, we recommend you look for providers with special low-cost contractor payroll services such as Gusto ($6 per contractor monthly) and Square Payroll ($5 per contractor monthly).
  • Efficient payroll tools: Run payroll as many times as you want without having to pay extra for it. Patriot Payroll also supports multiple pay schedules and rates, plus you can create your own earning and deduction types or simply use one of its standard options. Aside from manual paychecks, you can pay employees and contractors via direct deposit. However, the turnaround time is four days—longer than QuickBooks Payroll’s next-day option and Square Payroll’s instant payouts (if you have a Square Payments account and are paying both employees and contractors).
  • 1099 filings: Patriot Payroll generates and files 1099 forms at year-end—provided you get one of its full-service packages or pay extra for it if you’re a Basic Payroll subscriber. Note that both Rippling and Remote don’t provide 1099 filing services.
  • Multiple full-service payroll options: You have three full-service payroll options to choose from: One comes with payroll tax filings, the other with additional HR tools to help you manage employee information, and another with HR, payroll, and time tracking tools. All three are also reasonably priced, with monthly fees that range from $30–$42 plus $4–$8 per contractor/employee.

Patriot Payroll Drawbacks

While you get multiple payroll packages that even include DIY taxes, Patriot Payroll doesn’t have a robust HR solution suite that Rippling offers. It also doesn’t help you file new hire reports for contractors like Gusto does. And although its Full Service Payroll plan ($30 plus $4 per contractor/employee monthly) is more affordable compared to QuickBooks Payroll’s starter Core option ($45 plus $4 per contractor/employee monthly), the latter comes with next-day direct deposits—Patriot Payroll’s turnaround time is four days.

Visit Patriot Payroll

QuickBooks Payroll: Best for QuickBooks Users Needing Fast Direct Deposits

QuickBooks Payroll

Quickbooks Online logo

Overall Score: 3.77
OUT OF 5

What We Like

  • Next- and same-day direct deposit options
  • Seamless integration with QuickBooks accounting
  • Generates and files year-end contractor tax forms

What’s Missing

  • No special contractor plan
  • Can be expensive for small businesses

QuickBooks Payroll Pricing

  • Core: $45 per month + $4 per person monthly
  • Premium: $75 per month + $8 per person monthly
  • Elite: $125 per month + $10 per person monthly

QuickBooks Payroll is a good option for companies that use QuickBooks for accounting because payroll information flows seamlessly to the general ledger. It’s even better if you employ both W-2 and 1099 employees since it offers full-service payroll plans that include tax filing services and fast direct deposits (next- and same-day options).

It earned a score of 3.77 out of 5 in our evaluation. Some of the factors that prevented QuickBooks Payroll from ranking high on our list include its limited third-party software integrations (its payroll module integrates mostly with other QuickBooks products) and the lack of a contractor-only pan (both Gusto and Square Payroll offer this). It also is pricier compared to the other contractor payroll services we reviewed, with monthly fees that start at $45 plus $4 per contractor/employee. Despite all these, many users still appreciate its easy-to-use platform that makes processing payroll easy for them.

QuickBooks Payroll Features

  • Payroll tax filing while on the go: In addition to running payroll, QuickBooks Payroll lets you file taxes through its mobile apps (for iOS and Android devices)—making it our recommended payroll app for small businesses. Out of all the contractor payroll services that we reviewed, only QuickBooks Payroll has this functionality.
  • Fast direct deposits: Unlike Gusto’s two-day direct deposits, QuickBooks Payroll has a same-day option if you require fast employee and contractor payments. However, this feature is available only for Premium subscribers. While Square Payroll’s standard direct deposit timeline is four days, it has an option that lets you remit employee payments instantly (if employees use Cash App) or the next day—both provided you subscribe to its Square Payments solution.
  • Efficient pay processing and payroll tax filings: Unlimited pay runs, automatic payrolls, and check payment options are just some of the features that you get with QuickBooks Payroll. It also automatically calculates, pays, and files payroll taxes, including year-end reporting (W-2s and 1099s), but it only automates federal and state taxes. If you want robust filing services that include local taxes, Gusto and Square Payroll are better alternatives.

QuickBooks Payroll Drawback

QuickBooks Payroll’s contractor payroll service is expensive compared to the other providers in this guide. It doesn’t waive its monthly base fees like Gusto and Square Payroll do. For a more cost efficient option, consider Square Payroll since it only charges $5 per contractor monthly.

Visit QuickBooks Payroll

Remote: Best for Businesses Looking for Free International Contractor Payments

Remote

Remote Payroll logo

Overall Score: 3.59
OUT OF 5

What We Like

  • Free contractor management tools
  • Available in 178 countries
  • One-click global contractor payments with fee-free local currency payouts

What’s Missing

  • Payments through credit cards have extra charges
  • Lacks time tracking capabilities
  • Doesn’t file 1099 forms for US contractors

Remote Pricing

  • Contractor Management: $0; but payments made through credit cards have a 3% service fee

Remote Plans for Paying Employees

  • Employer of Record (EoR) option: $349 per employee monthly
  • Global payroll: Custom-priced

Remote provides international HR and payroll services including a full-service EoR option to help you hire international employees, process local and global payroll, offer competitive benefits packages, and more. For those with global contractors, it has a free contractor management solution to help simplify onboarding and payment processes (note that Rippling charges for international contractor payments).

It also has contractor invoicing capabilities that allow both local and international contract workers to create and send invoices for payment. They can even set up online profiles on Remote to help you easily manage contractors, build agreements that comply with local laws, and review and approve invoices.

Scoring 3.59 out of 5 in our evaluation, Remote is best suited for those who have contract workers deployed in different countries mainly because of its free international contractor management solution. It’s highly rated by users given its user-friendly interface and helpful support team. And, while direct deposit transactions come at no cost, payments via credit cards have a 3% service fee. Similar to Rippling, Remote doesn’t file 1099 forms at year-end. Plus, it lacks phone and chat support—if you need assistance, you can either check its online help center or contact its support team via email.

Remote Features

  • Free contractor management tools: Remote is the only provider on our list that helps you manage international contractors at zero cost. Its free solution comes with contractor invoicing, localized contracts, automated approvals, and built-in security to protect your invention and intellectual property rights.
  • One-click contractor payments: Invoices that contractors send will appear automatically in your Remote dashboard. You can approve invoices with one click and even set up automatic approvals for specific transactions. Remote then distributes the approved payments to the contractors’ accounts either through direct deposit (processing timelines range from two to nine days) or via credit card (this comes with a 3% service charge).
  • Local currency payouts but with simplified billing: Remote supports payments in over 170 countries given its financial network that allows it to pay contractors in their local currencies. Note, however, that Remote’s billing statements to you to cover actual contractor payouts won’t be in different currencies. You need only to pay in the currency that both you and Remote agreed on, which is also indicated in your agreement with the provider.
  • Customizable localized contracts: Remote offers customizable contracts that are localized to comply with each country’s local labor regulations. You can even send the completed contracts to contractors and have them sign these electronically. Remote also provides access to online guides that have been created by its team of legal experts to help you understand each country’s laws that pertain to contract employment.

Remote Drawbacks

Remote’s drawbacks include its credit card payment surcharge, limited support (email only, no phone and chat options) and its lack of 1099 filing services (only generates year-end tax forms for US contractors). However, if you only have US-based contractors and want a low-cost payroll service with 1099 filings, we recommend Square Payroll as it only charges a $5 monthly fee per contractor.

Visit Remote

Looking for something else? If you want to pay both employees and contractors for free, Payroll4Free.com is a good option—provided you only have 25 and fewer employees and don’t mind handling W-2/1099 tax filings yourself. You can also check our buyer’s guides on the best payroll services and best payroll software for other options.

How We Chose the Best Contractor Payroll Services

We started our search with nine reputable payroll companies that process payroll for contractors. Using a 5-star scale that we designed specifically to evaluate contractor payroll services, we looked for essential features like automatic pay runs, direct deposits, and year-end reporting. We also compared each system’s ease of use, pricing, customer support, and online user reviews.

To see our full evaluation criteria, click through the tabs on the box below.

25% of Overall Score

Having a direct deposit option with a quick turnaround (two days) plus 1099 form preparation and delivery were most important. Payroll solutions with the capability to pay employees, aside from contractors, were also given an additional point. While all the contractor payroll services we reviewed offer efficient pay processing tools, we recommend QuickBooks Payroll if you want next- and same-day direct deposits and Square Payroll since it provides the option to transfer funds instantly—if you have a Square Payments account and are paying both employees and contractors.

25% of Overall Score

Services with contractor-specific plans were rated more favorably (they’re cheaper and more flexible), including those that have transparent pricing and charge you a low rate altogether. Both Gusto and Square Payroll earned perfect scores in this criterion, but if you want the cheapest contractor plan, consider Square Payroll. It only costs $5 per contractor monthly, as compared to Gusto’s monthly fees of $6 per contractor.

20% of Overall Score

Small businesses need payroll software that integrates with common third-party software, such as time tracking providers When I Work and Homebase. In addition to having an intuitive interface, providers with how-to guides and phone support that’s easy to access were rated favorably. All of the payroll providers we reviewed have user-friendly platforms, but if you need robust third-party software integrations, Rippling is a great choice as it connects with 400+ apps.

15% of Overall Score

Online onboarding, which means giving contractors the option to fill out onboarding forms like the W-9 electronically, is the top criterion; following closely behind is the ability to offer a self-service portal that contractors can use to see payments made, edit W-9 information, and print 1099 forms. Rippling, Gusto, and Square Payroll provide all these, while QuickBooks Payroll and Patriot Payroll lack onboarding tools for contractors. Remote, on the other hand, only provides basic contractor onboarding.

10% of Overall Score

We considered online user reviews—including those of our competitors like G2 and Capterra—based on a 5-star scale, wherein any option with an average of 4+ stars is ideal. Also, software with 1,000 or more reviews on third-party sites is preferred. Of the six payroll solutions included in this guide, only Gusto and Patriot Payroll got perfect marks here. The limited number of online user reviews available (below 500) as of this writing pulled the scores down for the other four.

5% of Overall Score

Software basic payroll reports were rated favorably. We also gave extra points to those that offer report customization and/or have functionality allowing users to create their own reports. All of the providers we reviewed rated well here.

*Percentages of overall score

Bottom Line

Hiring contractors helps many businesses save on payroll taxes, and the best contractor payroll software follows a similar sentiment. In finding the right payroll solution, consider those with a special pricing plan for contractors. You’ll also want to evaluate how they handle W-9 forms and 1099s. Do they help prepare and file them? Contractor payroll services with online processes that are streamlined can definitely make your life much easier.

We found that Gusto offers the best features with a budget-friendly price for small businesses using contract help. It’s easy to learn and use. It also ensures you stay compliant with tax reporting regulations, and even makes adding employees to your process simple. Sign up for a Gusto plan today.

Visit Gusto



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