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 seven independent contractor payroll software for small businesses and narrowed it down to our top three.
- Gusto: Best (overall) for small businesses looking for affordable and easy-to-use contractor payroll software.
- Square Payroll: Best for Square POS users that want low-cost contractor payroll services.
- QuickBooks Payroll: Best for QuickBooks users who need fast direct deposits to pay contractors.
How We Chose the Best Contractor Payroll Services
We started our search with seven 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, tax filing services, and year-end reporting. We also compared each system’s ease of use, pricing, customer support, and online user reviews.
Based on our evaluation, Gusto offers the best contractor payroll services for small businesses. It has an affordable contractor-only plan, wherein you pay only for the months that you process contractor payments. It also has all of the basic tools you need to onboard, pay, and file year-end tax reports for independent contractors.
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.
25% of Overall Score
Small businesses need payroll software that integrates with common third-party software, such as 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, Gusto and Square Payroll are good alternatives since both offer a lot of choices.
20% 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, then consider Square Payroll. It only costs $5 per contractor monthly, as compared to Gusto’s monthly fees of $6 per contractor.
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. Gusto and Square Payroll provide all these, while QuickBooks Payroll only offers online 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 three payroll solutions included in this guide, only Gusto 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 two.
5% of Overall Score
Software with 60+ canned 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. Although the payroll providers we reviewed don’t have 60 or more canned reports, all of them provide customized reporting. For users who want to build their own reports, Gusto and QuickBooks Payroll are excellent choices as they let you do that directly from their systems.
- Has a self-service portal that contractors can access for a lifetime
- Self-onboarding with electronic W-9 forms
- 2-day direct deposits; preps and files 1099 year-end reports
- Limited premade reports
- No expedited payments (same-day deposits) for contractors
|RATING CRITERIA||Pricing||5.00||OUT OF||5|
|HR Features||4.75||OUT OF||5|
|Payroll Features||5.00||OUT OF||5|
|Ease of Use||4.25||OUT OF||5|
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. Scoring 4.70 out of 5, it prepares and files 1099 reports and even lets your new contractors onboard themselves. In addition, it has a special pricing plan for contractors—wherein Gusto’s $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 data, including electronic tax forms, they have on file. Gusto and Square Payroll provide this functionality; QuickBooks Payroll does not.
While Gusto received a high score overall, it would have earned perfect marks in our evaluation had it not been for its limited built-in reports (didn’t reach our criteria of having 60+ canned reports), the lack of a community forum, 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 has solid pay processing tools that enable you to efficiently manage both employee and contractor payroll. It’s our top pick for small businesses looking for the best HR payroll software, including those that need the best restaurant payroll software and church payroll services. To learn more about its functionalities, check out our Gusto review.
- Contractor-only plan: $6 per contractor monthly
Gusto also offers payroll plans for paying W-2 employees. It has three tiers (Core, Complete, and Concierge) that come with additional features like employee benefits, paid time off (PTO) management, and team management tools.
- Core plan: $39 plus $6 per employee monthly
- Complete tier: $39 plus $12 per employee monthly
- Concierge option: $149 plus $12 per employee monthly
Gusto Standout 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 that you process payroll for 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—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. However, it doesn’t have QuickBooks Payroll’s same-day direct deposits (which is under its Premium tier), so if you require fast payment timelines, we recommend QuickBooks. You may also consider Square Payroll as it offers instant payments through its Square Payments solution.
- 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 Square Payroll also provides, but QuickBooks Payroll doesn’t.
- Custom report builder: You are granted access to a report builder that allows you to create custom payroll and employee reports. QuickBooks Payroll has this functionality as well, but Square Payroll doesn’t.
- Cheapest payroll software for paying contractors
- Integrates with Square POS and provides free time tracking
- Self-service onboarding; preps and files year-end contractor tax reports
- Standard direct deposit has a four-day processing time
- Can’t build new reports from scratch
- Phone support requires a customer code; difficult to reach at times
|RATING CRITERIA||Pricing||5.00||OUT OF||5|
|HR Features||4.50||OUT OF||5|
|Payroll Features||4.63||OUT OF||5|
|Ease of Use||3.75||OUT OF||5|
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’s point-of-sale (POS) solution since it integrates with the payroll software and provides free time tracking. This is great if you’re paying contractors by the hour. Overall, it earned a score of 4.11 out of 5.
While it offers low-cost and efficient contractor payroll services, what pulled the scores down for this provider include its four-day direct deposits, limited reporting options (doesn’t have 60+ canned reports), and the additional customer code requirement needed to contact phone support. It also doesn’t let you create custom reports directly from the system—unlike Gusto and QuickBooks Payroll.
If you’re wondering whether Square Payroll has the online tools you need to manage employee and contractor payments, check out our Square Payroll review.
Square Payroll Pricing
- Contractor-only plan: $5 per contractor monthly
Square Payroll also has a payroll option for processing W-2 employee payments. Priced at $35 plus $5 per employee monthly, it includes full-service payroll, tax filing services, tips and commission tracking, live support for account setup, and more.
Square Payroll Standout 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. In addition to mailing 1099-MISC forms, it lets you pay contractors either through checks or direct deposits. However, its direct deposit timeline is four days. It does offer next-day and instant payments but you need to have an active Square Payments account. If you’re not a Square user and want fast payouts, QuickBooks Payroll offers same-day direct deposits—provided you get 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.
- Same- and next-day direct deposit options
- Seamless integration with QuickBooks and QuickBooks Desktop
- Self-service onboarding; preps and files year-end contractor tax reports
- Doesn’t handle local payroll taxes
- No special contractor plan
- Doesn’t work with QuickBooks for Mac
|RATING CRITERIA||Pricing||2.00||OUT OF||5|
|HR Features||2.88||OUT OF||5|
|Payroll Features||4.25||OUT OF||5|
|Ease of Use||4.63||OUT OF||5|
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 (federal and state) and fast direct deposits (next- and same-day options). Overall, it earned a score of 3.35 out of 5.
Some of the factors that prevented QuickBooks Payroll from getting high marks in our evaluation include its limited reporting options (doesn’t have 60+ canned reports) and third-party software integrations (it integrates mostly with other QuickBooks products). In addition, it doesn’t have a contractor-only plan like Gusto and Square Payroll. Despite all these, many users still appreciate its easy-to-use platform that makes processing payroll easy for them.
QuickBooks Payroll has robust online tools that can process payroll for different types of employees and businesses. It’s our recommended payroll software for accountants and our top payroll solution for trucking companies. To learn more about its pay processing and tax filing services, read our QuickBooks Payroll review.
QuickBooks Payroll Pricing
- Core plan: $45 plus $4 per employee/contractor monthly
- Premium tier: $75 plus $8 per employee/contractor monthly
- Elite option: $125 plus $10 per employee/contractor monthly
All plans include full-service payroll with automated taxes and forms, including 1099 e-filings and payments. The Core plan comes with next-day direct deposits, while both the Premium and Elite options have same-day direct deposits.
QuickBooks Payroll Standout 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 handles federal and state taxes. If you want robust filing services that include local taxes, Gusto and Square Payroll are better alternatives.
Alternative Payroll Software for Paying Contractors
The three contractor payroll services that we recommended in this guide have all of the essential tools you need to process pay and file taxes for 1099 staff. But if you need a free way to run contractor and employee payroll and don’t mind handling tax deposits and filings yourself, then consider Payroll4Free.com. It can calculate taxes, generate year-end reports, and run detailed reports, plus it supports both checks and direct deposit payments. However, its payroll service is free only for businesses with 25 and fewer employees. You also have to pay $15 monthly if you want Payroll4Free.com to handle tax deposits and filings for you.
Not seeing what you’re looking for? Read our guide on how to choose a payroll service for your business.
Hiring contractors helps many businesses save on payroll taxes, and the best contractor payroll software follows a similar sentiment. 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 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 very affordable and easy to 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.