6 Best Contractor Payment Software for Accurate and Compliant Payments

What is contractor payment software, and how does it simplify payouts and tax compliance?

Managing payments can become one of the most complicated parts of running a contracting business. Construction companies, home-service providers, staffing agencies, and other project-based operations may rely on dozens, or even hundreds, of independent contractors daily. But with each new contractor comes additional payouts, invoices, expense reports, and tax documentation to manage.

Relying on paper checks and manual spreadsheets to manage contractor payroll can lead to delayed payments, data entry mistakes, and hours of avoidable administrative work. But modern contractor payment software can eliminate much of that friction by bringing payouts, approvals, and expense tracking into one unified system.

In this guide, we’ll share our picks for the best contractor payment software options and explain how these tools can help you streamline employee payouts. We’ll also show how Slash offers a modern alternative for managing expenses and on-site spending. With Slash, you can issue unlimited business charge cards, set customizable spending limits, and control where contractors use company funds while earning up to 2% cash back on purchases.¹ Every transaction syncs automatically into the Slash dashboard, giving you a clean, organized view of cash flow no matter how many contractors you have in the field.

What is contractor classification and why does it matter to my business?

Independent contractors aren’t part of your company’s regular payroll, so they’re responsible for handling their own taxes, benefits, and insurance. Because they operate independently, proper classification is essential for determining how they’re hired, compensated, and managed under U.S. labor and tax rules.

In the US, contractors are classified based on a project’s scope and the contractor’s financial qualifications. This classification determines the type of work they’re allowed to perform, the maximum contract value they can bid on, and the requirements that must be included in their agreement. If an agreement doesn’t meet IRS and state guidelines, a contractor may be misclassified. Misclassification refers to treatment of an independent contractor as an employee or as an improperly engaged worker, which can expose your business to fines, back taxes, and potential legal action.

Additionally, contractors can be categorized according to how they were hired. Here are a few examples:

• Independent contractor: Also called freelancers or self-employed workers, independent contractors represent themselves and are hired directly by your company. They typically control their own schedules, rates, and methods of work. They may serve multiple clients at once.
• General contractor: A contractor who oversees a project and hires subcontractors to complete specialized tasks. They act as the primary point of contact for the hiring company or agency.
• Subcontractor: An independent contractor hired by a general contractor rather than by your company directly. They contribute to the project but operate one step removed from the hiring business.
• Agency contractor: A contractor supplied by a staffing or contracting agency. The agency handles the hiring, assignment, and often administrative tasks, allowing the contractor to perform the requested services without the client managing them directly.

Your relationship with a contractor determines which payment methods are appropriate. If you are hiring subcontractors who operate under your licenses and on your work sites, you may be able to manage their payments through structured, recurring payroll-like processes. However, when working with independent contractors or agencies, payments should typically be handled through your accounts payable (AP), not your regular payroll. Adding a contractor to your employee payroll can increase the risk of misclassification.

How can I pay contractors? 8 payment methods

Below are eight common contractor payment methods, each with considerations around ease of use, compliance, and their suitability for nonemployee compensation:

Paper checks

While paper checks may seem like a straightforward way to pay contractors, they’re often the least efficient. Issuing checks requires manual writing, distribution, and recordkeeping. Mailed checks can get lost or delayed, and bounced checks can damage your relationship with contractors. If you work with multiple contractors or operate across different job sites, it’s worth moving away from paper checks whenever possible for a unified payment option tied to record keeping and reconciliation software.

ACH and direct deposits

Payments sent through the Automated Clearing House (ACH) network are one of the most common forms of electronic transfer. ACH payments can be initiated through your bank and typically take a few business days to process and clear. Direct deposit also uses ACH rails, but it’s generally intended for payroll services and recurring payments to full-time employees rather than independent contractors.

Wire transfers

Wire transfers function similarly to ACH payments but typically come with higher fees and faster processing times. Because wires can move large sums quickly, they’re often a better choice for paying contractors upon completing major project milestones or deliverables.

Real-time payments

New real-time payment rails now allow businesses to send money across the country almost instantly, 24/7, on weekends and holidays. The first is RTP, a privately operated network from The Clearing House, and the second is FedNow, a public real-time rail developed by the Federal Reserve. With Slash, you can initiate and automate payments to contractors over both FedNow and RTP directly from your dashboard.

Digital wallet payments

Digital wallets can be a quick and accessible way to pay contractors. However, platforms like PayPal, Wise, or Cash App can cause snags. Once a payment is sent, recovering funds from an incorrect transfer can be difficult. And if your business relies on several wallet accounts, tracking payments and preparing accurate tax records becomes more complicated. Slash simplifies this process by integrating with Plaid to import accounts payable and receivable data from multiple sources, including digital wallets.

Cryptocurrency and stablecoins

Using blockchain-based payments can offer significant advantages for contractor payouts, particularly when working with international teams. Platforms with built-in stablecoin on- and off-ramps like Slash let you send USD-denominated payments globally without incurring currency conversion or foreign transaction fees.4 Slash supports transfers through USDC, USDT, and its own USD-pegged stablecoin, USDSL.

Online payment platforms

Digital payment systems take many forms, including automated invoice platforms, ERP systems, and modern business banking tools. The most effective solutions are those that support multiple payment methods in one place, automate approval and execution workflows, and integrate seamlessly with accounting software and accounts payable systems to improve financial management.

Escrow Services

Escrow can be a useful way to ensure both your business and the contractor meet the terms of an agreement. In an escrow arrangement, a neutral third party holds the funds until specific conditions are satisfied. For contractor work, payments are typically released once agreed-upon milestones or deliverables are completed.

The best ways for contractors to access company funds

Another key part of managing contractors is giving them controlled access to company funds. Yet, cash and checks may be inefficient to distribute, while handing out unrestricted company cards can lead to overspending or misuse. Below are several ways contractors can access company funds, along with guidance on how each method can support more responsible spending.

• Cash and checks: Simple but inefficient, since cash can be hard to track and checks require manual writing, delivery, and reconciliation. Best for occasional reimbursements, not regular contractor spending.
• Business credit cards: Offer flexible purchasing power and rewards, but require strict controls to prevent overspending. Works best when paired with clear policies and expense management tools.
• Prepaid debit cards: Provide controlled access to company funds with predictable spending limits based on pre-loaded amounts. Useful for oversight, though they don’t earn rewards or cashback.
• Business charge cards: Require full payment each billing cycle and aren’t limited by preloaded funds, giving contractors flexibility with built-in financial discipline. Ideal for businesses that want control without restricting purchasing power.

The Slash Visa Platinum Card is a business charge card that earns up to 2% cash back and includes powerful spend controls and customizable limits. Because it syncs directly with the Slash financial dashboard, you get real-time visibility into spending, detailed analytics, and automated expense tracking for every purchase.

Top picks: 6 best payroll softwares for contractor payments

Slash

Slash’s unified payment infrastructure and dashboard provide the tools to meet contractors’ needs and maintain oversight of your finances. With Slash, send free domestic ACH and wires, access real-time rails like RTP and FedNow, or issue USD-denominated payments through stablecoin on- and off-ramps—giving you flexible options for every contractor. Slash charge cards can simplify how contractors access company funds while generating up to 2% cashback from project purchases. From the dashboard, managers can issue unlimited virtual cards, set custom spending rules, group cards by team, and track expenses in real time. Slash also integrates with QuickBooks and Xero, giving you access to AI-powered invoice management and features that help maintain IRS tax compliance.

Rippling

Rippling offers contractor payroll services within their broader workforce management and HR platform. Businesses can manage onboarding, calculate payroll taxes, and process payments with synced accounting and pay run data. Rippling’s platform consolidates HR, payroll, IT access, and workforce permissions into one dashboard, though some features require add-on modules. Rippling’s reliance on multiple add-on modules can make it more expensive and complex than necessary for teams that only need contractor payouts.

Gusto

Gusto is a payroll system designed for businesses that want simple payouts and built-in 1099 and tax form management. Contractors can onboard themselves, update their information, and set up direct deposits. Gusto automatically prepares and files 1099-NECs each year, which can reduce administrative work for small teams. However, Gusto is pricier than many alternatives; their contractor-only plan starts at a $35 monthly base fee plus an additional $6 per person per month.

Quickbooks Payroll

QuickBooks Payroll integrates directly with QuickBooks Online, making it a convenient option for companies that handle their accounting in the same ecosystem. Contractors can be added quickly and paid with direct deposits; and, administrators can simplify compliance with the ability to create and electronically 1099-NECs. Because contractor data feeds directly into the general ledger, reconciliation is straightforward for teams already using QuickBooks. Because it’s tightly tied to the QuickBooks ecosystem, however, it offers little flexibility for companies using other accounting tools or needing more sophisticated payout options.

Deel

Deel is a payroll, HR, and IT access platform that specializes in international contractor payroll and compliance, helping businesses engage workers across borders. The platform supports payment in over 20 local currencies and can help manage onboarding with localized contracts. Deel may be valuable for companies with distributed workforces that need help navigating international labor and tax rules. While it offers global payment capabilities, Deel’s tools may be more complex than necessary for businesses working exclusively with U.S.-based contractors.

Square Payroll

Square Payroll provides simple contractor payment features designed primarily for small businesses and service-industry teams. Payments can be made via automatic direct deposit, contractors can log their own information, and 1099-NECs are automatically prepared and filed. Square’s contractor tools integrate with Square’s broader suite of POS and invoicing products, making it a convenient option for businesses already using Square for day-to-day operations. However, its functionality remains focused on handling payouts rather than advanced spend controls or multi-rail payment options.

What to consider when selecting contractor payroll software

Because hiring independent contractors comes with specific considerations–such as onboarding requirements, location-based restrictions, and payment preferences–it can be useful to ask the right questions before choosing payroll software:

How should I manage contractor taxes?

Unlike full-time employees, independent contractors pay their own taxes and provide the hiring company with a W-9 (or a W-8 for foreign workers) instead of filling out a W-4. At the end of the year, the hiring company must generate and send a Form 1099-NEC to any contractor paid $600 or more. The business is responsible for filing this form with the IRS and delivering a copy to the contractor. For companies managing multiple contractors, using software that automatically creates and files 1099-NECs can make tax season more efficient and reduce reporting errors.

How many contractors does my business need?

Determining how many contractors your business needs starts with understanding the complexity of the work ahead. Adding more contractors can boost capacity and help projects move faster, but it also increases payment processing, oversight, and administrative workload—especially if you’re relying on tools that weren’t built to scale. Slash helps your business manage a growing contractor workforce without added stress by automating payments across multiple rails, providing real-time spend visibility, and streamlining accounting and tax preparation through QuickBooks and Xero integrations.

How often should I pay contractors?

Independent contractors typically negotiate their payment terms with a client during the agreement process. Staying accountable to these terms is important, as it builds trust and helps prevent contract disputes. Common payment structures include recurring payments (e.g., weekly or monthly), milestone-based payouts, retainers, and time-and-materials billing. Using a payment system with flexible and automated transfer options, like Slash, makes it easier to honor contractors’ preferred payment methods and avoid losing talent due to limited payout capabilities.

How does contractor location affect payment?

When hiring contractors domestically, it’s important to follow state guidelines and IRS regulations to ensure compliance. Automated payout systems and integrated tax features can help save time and reduce the risk of errors. Hiring international contractors can be more complex, as cross-border payments often incur additional fees and present operational challenges. Your business must ensure that it’s up-to-date and compliant with labor and tax rules in both your country and the contractor’s. For a deeper breakdown of these requirements, and to learn how Slash supports global payments through international wires and cryptocurrency, see our recent guide on paying international contractors.

Streamline your contractor payments today with Slash

Slash helps contracting businesses simplify payouts, reduce administrative overhead, and eliminate the inefficiencies that come with managing multiple payment tools.

With support for ACH, wires, RTP, FedNow, stablecoins, and international transfers, Slash gives you every payment method you need in one unified dashboard. By integrating your transaction data with QuickBooks, your business can simplify accounting, automate invoice management, and strengthen your compliance procedure.

With Slash corporate charge cards, you get the flexibility and rewards of a credit card with the predictable spending controls of a debit solution. Earn up to 2% cashback, issue unlimited virtual and physical cards, set granular spending limits, and monitor every transaction in real time—helping you keep projects on budget while ensuring contractors always have the funds they need.

Whether you’re paying two contractors or two hundred, Slash makes it easier to send payments, control spending, and stay organized. Visit slash.com today to learn more about our payroll solutions and business banking tools.

Frequently asked questions

What types of payments can I make through Slash?

Slash offers unlimited, free domestic payments through ACH, wire transfer, RTP, and FedNow. For global payouts, you can send international wires through the SWIFT network to more than 160 countries. Slash also includes built-in stablecoin on- and off-ramps, allowing you to send USD payments using USDC, USDT, or USDSL. And for everyday purchasing, Slash provides corporate charge cards with customizable employee and spending controls.

How can businesses ensure compliance while managing diverse payment methods?

Businesses can stay compliant by collecting proper tax forms, standardizing payment procedures, and using software that automates 1099-NEC generation and filing. Centralized records for payouts, approvals, and invoices make it easier to meet IRS and state requirements.

How can businesses track and reconcile contractor payments efficiently

The easiest way to track contractor payments is to use a financial platform that consolidates payouts, invoices, and card transactions in one place. Automated categorization and real-time reporting remove much of the manual work associated with reconciliation.