How a Payroll App Can Transform the Payment for Independent Contractors

Wednesday, August 16, 2023


Unlike full-time employees, contractors are paid on a per-project or hourly basis. These types of payments can lead to inaccuracies regarding payroll taxes and withholdings.

Enhanced Security

As the business world becomes increasingly digital, security measures are becoming increasingly important. With a payroll app like Roll by ADP, companies can ensure that only authorized personnel can access sensitive financial data. This is achieved through rules-based validation and role-based data access.

Aside from providing a seamless employee experience, a payroll system can boost employee satisfaction by ensuring they receive the correct amount on payday. This is particularly helpful for employees who need to submit verification of their pay to third parties, such as when they're shopping for a car and need the paystub for the loan application.

Streamlined Payroll Process

An efficient payroll process is crucial for tax compliance, data protection, and limiting financial risk. It also fosters trust among employees, as they can count on receiving their wages on time and seeing accurate deductions.

Streamlining the payroll process means automating workflows, making it easy for employees to track their hours, and eliminating manual double-entry. An integrated solution with both time tracking and payroll streamlines your tech stack, reducing the number of applications your business uses.

It's important to make sure your payroll processes are compliant with local and federal regulations. A streamlined system also includes an audit function to help catch errors before they affect paychecks or deductions.

It's also a good idea to set up a system that allows new hires to fill out all their forms (W-4, direct deposit form, etc.) on their first day at work. This will prevent the process from becoming a drawn-out, time-consuming affair. Make it a part of your checklist to have new hires go through this process right away, as this will keep the flow of your payroll system running smoothly.

Real-Time Payments

The invoicing and payment process is an important step for independent contractors and companies. The right software can simplify the entire task by providing a streamlined experience and making payments faster and easier to complete.

Currently, most cash transfers take hours or even days to clear into bank accounts. Real-time payments, however, uncouple transactions from traditional banking hours and can settle within seconds. This type of transaction can have a massive impact on how businesses operate, tiny businesses, and gig economy workers who depend on immediate access to funds.

For example, rideshare drivers often need to get paid quickly to cover car expenses and meet daily demands like rising gas prices and tollway fees. A payroll app with real-time payments can make this process smoother by eliminating the wait time associated with traditional bank transfers. Real-time payments can also provide better cash flow predictability for businesses as they know exactly when funds will be transferred to their account. This can be particularly helpful for businesses that pay their independent contractors based on project completion or fixed amounts per hour.

Access to Financial Data

Compared to traditional employees, independent contractors often have yet to learn how much they'll get paid monthly. As a result, they may live paycheck to paycheck and can't rely on the safety net of employer-provided benefits or even health insurance. This can lead to high turnover rates, which is costly for companies.

A payroll app can solve this problem by making freelancer payments seamless and transparent. Rather than sending paper checks, payments can be made through ACH transfers that automatically deposit funds directly into a contractor's bank account. This allows for more frequent payments—biweekly, weekly, or even daily—and makes the process quicker and easier for both parties.

Some employers even use mobile apps to pay their workers. While convenient for both parties, these peer-to-peer payment options are not designed for business transactions and come with transaction fees. A dedicated payroll platform offers a better solution with its built-in audit trail and the ability to record expenses in real-time. This can make it much easier to manage expenses and stay compliant with tax regulations.

Reduced Paperwork

A good payroll app should reduce the time and money you spend on paperwork and administrative tasks. For example, you can use the software to automate tax calculations and withholdings, ensuring that your independent contractors are paid accurately and on time. The system will also keep records to ensure compliance with record-keeping laws.

Additionally, you can use the tool to streamline expense management. This feature enables employees to submit expenses digitally, reducing the time it takes to review and approve reports. It also helps improve financial control by eliminating the risk of errors and fraud.

Look for an easy-to-use app on desktops, tablets, and mobile devices. Choose a provider that offers customer support and is knowledgeable about independent contractor regulations.

Some products offer HR add-ons, such as performance review guidance and employee onboarding tools. Moreover, the platform should be flexible to meet your changing business needs.

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