Scope of payroll services for contractors

Due to the business conditions caused by the covid-19 pandemic, a large number of businesses are postponing the hiring of permanent full time employees since they cannot predict business growth. Hence these businesses are preferring to use contractors who provide the services which the business requires. These contractors will provide services which not related to main focus of the business, managing the information technology (IT systems), accounting, security. The business should ensure that they pay all these contractors on time, else they could face legal issues and the contractors may also not work for them in future, since the business reputation will get affected.


Since most businesses do not have staff with the skills or expertise in providing payroll services, it is better to outsource payroll services for contractors to a competent service provider. Before choosing the service provider, the business should check the scope of the services. Usually contractors who make less money are not expected to pay any taxes, while other contractors should have taxes deducted from the payment which is made to them. So based on the amount which is paid to the contractor, the service provider should get the required forms filled by the contractor and submit them to government agencies.


Before hiring any contractor, the business will finalize the amount which the contractor will be paid for the work he does, and other terms and conditions. In most cases, the contractor is paid on an hourly basis, and the rate will depend on the skills, experience and market demand for the services. However in a few cases the contractor may be charging a fixed amount for the work done. If the contractor is paid hourly, the business will also keep records of the time which the contractor is spending doing the work for the business at the business premises or elsewhere. These records will be provided to the payroll service provider.


The service provider will review the terms of the contract and records of the work done so that the contractor can be paid accordingly. The payment is done weekly, fortnightly or monthly based on the terms of the contract. In case the contractor is paid a larger amount, the payroll company is also responsible for deducting the relevant taxes from the contractor payment and depositing them with the government agencies. Detailed records of how the payment is calculated, the taxes paid, filled forms available should provided by the payroll company to their client, so that they provide it to government agencies or using for future planning.

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