How to Pay Independent Contractors

Are you struggling to understand the ins and outs of hiring and retaining your independent contractors? We don’t blame you. There’s a lot to it, and we’re here to make understanding it all easy (promise!).

There are plenty of payment solutions out there, and it can feel frustrating to understand the best method of paying your contractors. Maybe the tools you’ve used didn’t work out because they were out of your budget. Or, they don’t integrate with your accounting software—that’s a big deal. No one wants their bookkeeping to take longer than it should. 

We know you work hard in your business and care about its sustainability and financial health over time (that’s why you’re here reading this!). And, we believe you should have more free time on your hands—starting right now. That goal begins with creating and using reliable workflows, easy online tools, and having the expert support you want when you need questions answered or could use guidance at any point.

If you’re processing contractor bills as they come in, and you know there are holes to plug when it comes to your knowledge of the legal side of things—this article is for you. We’ll show you how to pay contractors and keep a solid paper trail (you know, for audit-proof bookkeeping) while making it easy to make payments quickly. Say goodbye to losing time and money on manual data entry and clunky payment methods.

When it comes to independent contractors, there are legal details to know—not to mention it means you now have people or businesses that are owed payment. Let’s break down the “must-know” legal stuff and explain precisely how you can pay independent contractors quickly and easily. But first...

What is an independent contractor?

According to The Balance,” an independent contractor is an individual in business for themselves, providing goods or services to another individual or business.”

It’s essential to also know that independent contractors are not employees. 

And, employers do not pay taxes on 1099 employees. In other words, you are not liable for payroll taxes on the individuals or businesses you hire as contractors. There are, however, other things you are responsible for, and we’ll explain that next. 

So, you’ve hired your first independent contractor. Now what?

Here are the top four things you must do when you hire an independent contractor:

Hint: Have your contractor fill out the form before you pay them. If you wait until after, you risk not getting this necessary form back at all. You can use an e-signature tool, like HelloSign, to securely capture sensitive information and a signature electronically.

Hint: Only make a bill payment when you’ve received an invoice and confirmed the amount due. Without this document, you have no proof of purchase, and your expense may be deemed non-deductible in an audit.

3.) Pay bills when due.

Hint: Establish an easy-to-follow workflow for the day in which you’ll schedule payments for your upcoming bills This makes sure you’re never late in paying a vendor your business relies on working with.

Below is a simple step-by-step workflow for bill payments (aka Accounts Payable). 

You can copy and paste the following into your project management system and assign due dates. Include links to your company’s resources in each task.

• Step 1: Receive contractor’s invoice via email.
  
• Step 2: Enter the invoice as a bill in your accounting system.
  
• Step 3: Digitally file the invoice (this is your receipt).
  
• Step 4: On your admin day, schedule all contractor bills for direct deposit with Symply.
  

Quick and easy, right? That’s how we like things around here.

4.) File a 1099-NEC by January 31st each year. You can find the most up-to-date form and guidelines here.

Hint: To correctly file a 1099-NEC form, you must have a current Form W-9 on file for your contractor. 

Accounts payable is effortless when you have a reliable workflow, and your documents are easy to access. When you make consistent and on-time payments, your contractors see you as a trustworthy person to work with and will continue to work with you as a client. Plus, you get your time back from all that manual work. It’s a win/win for everyone!

For an easy-to-use, affordable solution for your contractor payments, try Symply. 

Symply is trusted by popular brands everywhere. Read our client success stories here. And, hey, maybe the next one will be yours.

With payroll starting at just $39 per month and $6 per employee, Symply is an affordable solution to all your payroll needs. Now, you can send quick, hassle-free payments to your independent contractors!