Finance Software

7 Best Payroll Software for Independent Contractors

By | 8 min read | Published ; Updated on

Payroll software automates compensation management and tax filing for contractors.

As a small business owner, running payroll for independent contractors can be tricky, as you may not have the same processes set up for them as for your regular staff.

Independent contractors file a separate form 1099 at the year-end for their income tax. Manually tracking forms for both your regular employees and contractors can cause a lot of confusion.

Fortunately, many payroll software tools are available for independent contractors. These solutions can help, for instance, automate the process of filing form 1099 so you don’t have to chase contractors for information at the end of every year.

Not only does payroll software help save time, but it also generates year-end financial reports for you to keep an eye on the money that comes in and goes out.

This article looks at the seven best payroll software for independent contractors (arranged alphabetically) from Capterra’s 2021 Shortlist report. (Click here to read how we selected these products.)

See the full list of payroll software tools in Capterra’s software directory.
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7 best payroll software for independent contractors

1. ADP Workforce Now: Generates detailed financial reports

ADP Workforce Now is a software suite that specializes in payroll and employee management. It helps run payroll processing for both permanent employees and independent contractors.

ADP Workforce Now provides a dashboard to track finances for the freelancers and independent contractors you’ve onboarded. You can process payments in bulk and pay contractors through ACH deposits. You can also automate billing and invoicing by setting up triggers each time you release payments.

The software provides a self-service portal where your employees and contractors can track time, attendance, and all the tax forms they need to file. You can generate financial reports to oversee transactions and make data-driven decisions for your business.

ADP Workforce Now offers email, chat, and phone support. It is web-based and has a mobile app for Android and iOS devices.

*Analysis accurate as of December 2021
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Key Features:

  • 360-degree feedback
  • 401(k) tracking
  • Applicant tracking
  • Compensation management
  • Contractor management
  • Direct deposit
Trial/Free Version:
Free Trial
Free Version
Starting price:

Contact vendor

Device Compatibility:

Screenshot:

<p><i><span style="font-weight: 400;">Benefits section in </span></i><a href="https://www.capterra.com/p/155895/WorkforceNow/"><i><span style="font-weight: 400;">ADP Workforce Now</span></i></a></p>

2. Gusto: Provides insurance management

Gusto is an online payroll software solution for small businesses and accountants. It helps automate payroll and tax management.

The software assists with time tracking, matching 401(k) contributions, and storing and organizing tax management forms such as employee I-9s, W-2s, and contractor 1099s. It also manages the state tax registration process for employees and contractors.

With Gusto, you can generate custom payroll reports for contractor and tax payments you’ve made in a given period. The software automatically syncs all outgoing expenses to your general ledger and generates year-end reports for analysis.

Gusto is web-based and offers email, chat, and phone support.

*Analysis accurate as of December 2021
Visit Website

Key Features:

  • 401(k) tracking
  • Benefits dashboard
  • Compensation management
  • Deduction management
  • Direct deposit
  • Electronic forms
Trial/Free Version:
Free Trial
Free Version
Starting price:

$6 per user per month

Device Compatibility:

Screenshot:

<p><i><span style="font-weight: 400;">Payroll management in </span></i><a href="https://www.capterra.com/p/131882/Gusto/"><i><span style="font-weight: 400;">Gusto</span></i></a></p>

Payroll management in Gusto

3. Justworks: Tracks time and attendance

Justworks is an online payroll solution that takes care of benefits, tax deductions, and payments for employees as well as independent contractors.

The software automates payroll tax filing for employees and contractors. It keeps track of government regulations and automatically updates the filing process in case of any changes in regulations.

Justworks has a self-service dashboard via which employees and independent contractors can file their W-2s and 1099s. The tool syncs employee timesheets with payroll and offers multiple integrations with third-party accounting software so it’s easier to migrate data whenever required.

Justworks is web-based and offers email, chat, and phone support.

*Analysis accurate as of December 2021

4. Paylocity: Offers a self-service dashboard for contractors

Paylocity is a payroll processing software solution that automates expense tracking and compliance management.

It helps calculate and organize the expenses and taxes your business needs to file in a financial year. It also automates reporting and filing tax forms with the IRS in all fifty states in the U.S.

Paylocity creates custom general ledgers, accruals, and reports that let you spot, verify, and correct inaccuracies (if any) with paychecks. Your employees and contractors can keep track of changing tax regulations with the help of in-app alerts. They can also file W-2s and 1099s for tax returns.

Paylocity offers email, phone, and chat support. It is web-based and has a mobile app for Android and iOS devices.

*Analysis accurate as of December 2021
Visit Website

Key Features:

  • 360-degree feedback
  • ACA reporting
  • Applicant tracking
  • Benefits dashboard
  • Compensation management
  • Direct deposit
Trial/Free Version:
Free Trial
Free Version
Cost to upgrade:

Contact vendor

Device Compatibility:

Screenshot:

<p><i><span style="font-weight: 400;">Employee time card in </span></i><a href="https://www.capterra.com/p/86714/WebPay/"><i><span style="font-weight: 400;">Paylocity</span></i></a></p>

5. QuickBooks Payroll: Provides direct deposits for 1099 contractors

QuickBooks Payroll is a payroll solution that automates tax management, employee time tracking, and payroll management for your employees and contractors.

With QuickBooks Payroll, you can track your business expenses and sort them into categories, making it easier to file federal and state taxes during returns. You can also identify areas where you can maximize tax deductions and predict how much money you can save in a fiscal year.

The software helps send, track, and file 1099 forms for independent contractors. With features such as payment tracking, it helps you stay tax compliant and avoid penalties due to inaccurate payroll tax filing.

QuickBooks Payroll offers email, chat, and phone support. It is web-based and has a mobile app for Android and iOS devices.

*Analysis accurate as of December 2021
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Key Features:

  • Direct deposit
  • Multistate tax management
  • Payroll reporting
  • Self-service portal
  • Tax compliance
  • W-2 preparation
Trial/Free Version:
Free Trial
Free Version
Cost to upgrade:

$22.50 per user per month

Device Compatibility:

Screenshot:

<p><i><span style="font-weight: 400;">Payroll dashboard in </span></i><a href="https://www.capterra.com/p/174981/QuickBooks/"><i><span style="font-weight: 400;">QuickBooks Payroll</span></i></a></p>

6. Rippling: Automates time tracking

Rippling is a payroll solution that helps manage payroll, employee benefits, and direct deposits for employees and independent contractors.

Rippling automatically calculates payroll taxes and files them with the IRS and other federal, state, and local agencies. It lets you track the personal information of employees and contractors and update it in case of any changes.

With Rippling, you can track daily hours for an independent contractor and automatically sync the data with your payroll processing system. You can also set automatic triggers to release payments on specific dates and approve time-off requests.

Rippling offers email, phone, and chat support. It is web-based and has a mobile app for Android and iOS devices.

*Analysis accurate as of December 2021
Visit Website

Key Features:

  • 401(k) tracking
  • Access certification
  • Applicant tracking
  • Approval process control
  • Automatic time capture
  • Background screening
Trial/Free Version:
Free Trial
Free Version
Cost to upgrade:

$8 per user per month

Device Compatibility:

Screenshot:

<p><i><span style="font-weight: 400;">Time and PTO tracking in </span></i><a href="https://www.capterra.com/p/172127/Rippling/"><i><span style="font-weight: 400;">Rippling</span></i></a></p>

7. Zenefits: Automatically updates changes in salary

Zenefits is a payroll platform that tracks hours for contractors and assists with tax management for independent contractor payroll.

The software helps you stay tax compliant by automating payroll tax calculation and filing. It easily links with third-party accounting and 401(k) platforms to track your business’s cash flow.

When you hire new contractors, it automatically syncs their information with your payroll system and keeps track of the benefits they receive.

Zenefits updates any changes in salary, hourly working rates, and benefits, and automatically calculates related taxes and deductions. It offers a user dashboard where employees and contractors can view deduction breakdowns, changes in taxation laws and procedures, reimbursements, among others.

Zenefits offers email, chat, and phone support. It is web-based and has a mobile app for Android and iOS devices.

*Analysis accurate as of December 2021
View Profile

Key Features:

  • 360-degree feedback
  • 401(k) tracking
  • Applicant tracking
  • Compensation management
  • Deduction management
  • Document management
Trial/Free Version:
Free Trial
Free Version
Cost to upgrade:

$8 per user per month

Device Compatibility:

Screenshot:

<p><i><span style="font-weight: 400;">Document management in </span></i><a href="https://www.capterra.com/p/133019/Zenefits/"><i><span style="font-weight: 400;">Zenefits</span></i></a></p>

How to choose the right payroll software for independent contractors

These considerations can make selecting payroll software for independent contractors easier:

  • Verify the geo-area it serves. An ideal tool should be functional in the area of your business. When selecting a solution, make sure the payroll software recognizes all the cities and districts your company operates in and complies with applicable regulations. The software should also be able to handle global payroll for international contractors.
  • Check the customizability of the tool. Your business might have a mix of salaried employees and independent contractors. An ideal solution would let you customize separate pay schedules for your workers based on hourly rates or monthly salaries.
  • Assess the integration support. An ideal small business payroll software solution should easily integrate with your existing set of human resources or workforce management tools and migrate data automatically. Before investing in a solution, look out for integration support.

Common questions to ask while selecting payroll software for independent contractors

Having the right set of questions to ask vendors can improve your chances of finding the ideal software for your needs. These are some questions you can ask vendors when looking for payroll software for independent contractors:

Does your payroll software automatically update tax rules?

Before finalizing, check if the software updates its forms and tax filing processes per the latest tax submission and filing guidelines. An ideal tool would automate this process.

What are your integration options?

Most payroll software tools integrate with accounting and employee management software to migrate tax and employee information easily. Before finalizing, ask vendors if their software tools provide easy integration with third-party tools and apps.

Is your software mobile-friendly?

An ideal payroll tool would have a mobile app that lets you handle payments and manage tax filings remotely from any device. Before investing in a solution, ask the vendor if they have a functional mobile app for their software.

How did we choose these products? We didn’t—you did

To find your ideal software match, you need information you can trust so you can save time, stay on budget, and focus more on growing your business. It’s why we vet and verify all our user reviews and recommend only the tools endorsed by people like you.

In other words, our product recommendations are never bought or sold, or based on the opinion of a single individual—they’re chosen by your peers, reflecting the views and experiences of our independent base of software reviewers.


To be considered for this list, products were shortlisted on Dec. 22, 2021, based on the following parameters:

  • They should be listed under Capterra’s 2021 Shortlist for Payroll Software in the “Top performers” quadrant. (Read more about the Shortlist Methodology here.)
  • They should offer “1099 form filing” as a core feature for independent contractors, verified on the vendor website as of Dec. 22, 2021.
  • They should meet our payroll software market definition: “Payroll software automates the process of managing employee salaries, wages, bonuses, and deductions. It also tracks time off, vacation accrual, and benefits, and enables users to factor-in these to calculate payroll amount. In short, you know exactly how much amount needs to be deposited to each of the employee’s accounts, and you are also able to automatically remit it.”

We selected the top seven products from this list to feature in our article.


Looking for Payroll software? Check out Capterra's list of the best Payroll software solutions.

About the Author

Ashish Upadhyay

Ashish Upadhyay

Ashish Upadhyay is a content writer at Capterra, helping small businesses identify the right software for their business needs by analyzing user reviews data for the highest rated products in relevant software categories. Prior to joining Gartner, he worked in insurtech, fintech, and real estate. Specializing in marketing, project, and IT management, Ashish’s works have been featured in MAST magazine and Medium. In his free time, he enjoys working out and playing video games.

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Comments

Comment by Kevin Brown on

I am interested in two key points of information:
1. Does it do ACH?
2. What is the cost?

The bookkeeping, the 1099s, not an issue. However quickly and inexpensively getting the payments out is. The article covered neither point. I have too large a percentage of my costs going to bank fees.

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