Contractor Payment Solutions: How to Choose the Right One

"Contractor payment solutions" actually covers two pretty different problems, and picking the wrong category of tool is the most common mistake businesses make here. One kind of solution pays individual 1099 contractors and freelancers directly, handling W-9 collection, direct deposit, and year-end tax filing, similar to how payroll software works. The other kind pays contractor businesses and subcontractors as part of accounts payable, the same way you'd pay any vendor invoice. Which one you need depends entirely on who you're actually paying. 

This distinction has gotten more relevant lately. The One Big Beautiful Bill Act raised the 1099-NEC and 1099-MISC reporting threshold from $600 to $2,000 for payments made starting in 2026, the first change to that threshold since 1954. That means fewer contractors will trigger an automatic 1099, which sounds like less paperwork, but it also makes it easier to lose track of who you've actually paid over the course of a year if that tracking lives in someone's memory instead of a system. 

Two very different kinds of contractor payments 

Paying individual freelancers and 1099 workers 

This is what most people picture when they hear "contractor payments": a business paying a person directly for their work, collecting a W-9, and filing a 1099-NEC at year end. Tools built for this look and function like lightweight payroll software. 

Paying contractor businesses and subcontractors 

This is different. Here, the "contractor" is itself a registered business, often a subcontractor firm, agency, or sole proprietor operating as a business entity, and the payment functions like any other vendor bill. This is accounts payable, not payroll, and it needs the approval workflows, invoice matching, and accounting sync that come with AP automation rather than a payroll tool. 

Mixing these up is where a lot of businesses waste time. A payroll-style contractor tool won't give you the approval routing and invoice capture a subcontractor relationship needs, and a pure AP tool generally can't collect W-9s or file 1099s for individual freelancers who aren't operating as a business. 

Top contractor payment solutions 

For paying individual 1099 contractors and freelancers 

Gusto 

Best for small businesses that want contractor payments handled inside a broader payroll platform. 

• Direct deposit payments to contractors alongside employee payroll 

• Automatic 1099-NEC generation and e-filing at year end 

• Strong reputation for ease of setup and use among small businesses 

QuickBooks Contractor Payments 

Best for businesses already using QuickBooks Online who want contractor payments to stay inside that ecosystem. 

• Unlimited contractor payments via direct deposit 

• Self-service portal for contractors to submit bank details and W-9s 

• Intentionally basic, without configurable onboarding workflows or instant payment options 

Square Payroll 

Best for businesses that already use Square for point-of-sale and want contractor payments in the same system. 

• Contractor-only accounts with automatic 1099-NEC issuance 

• Runs payroll and contractor payments from the same dashboard 

Remote and Deel 

Best for businesses paying contractors internationally, where local compliance and classification risk are the main concern. 

• Country-specific onboarding and local tax support 

• Built to reduce worker misclassification risk across borders 

For paying contractor businesses and subcontractors 

Forwardly 

Best for businesses and staffing agencies that pay subcontractors, vendors, or contractor firms operating as registered businesses, and want that payment handled as automated AP rather than payroll. Forwardly is built for business-to-business payments, so it works when the contractor is verified as a business or sole proprietor entity, not for paying an individual who isn't operating as a business.

• AI-powered bill capture reads and codes subcontractor invoices with near 100% accuracy 

• Instant, same-day, and standard payment speeds, so subcontractors aren't waiting on a batch run 

• Custom approval workflows and full audit trails, useful once more than one person signs off on a payment 

• 2-way sync with QBO, Xero, NetSuite, Sage, and MS Dynamics, so nothing needs re-entering into the books 

• Free payments between businesses connected through the Forwardly Business Network 

BILL 

Best for small and midsize businesses that want subcontractor and vendor payments handled inside an established AP platform. 

• Automated invoice scanning and approval routing 

• Broad integration coverage with popular accounting software 

The right fit here isn't about which tool has the better brand. It's about which kind of contractor you're actually paying. 

Key features to look for 

• Compliance handling that matches your contractor type: W-9 collection and 1099 filing matter for individual contractors. Business verification and invoice matching matter for subcontractor businesses. A tool built for the wrong type will leave gaps. 

• Payment speed: Contractors and subcontractors both tend to be more sensitive to payment delays than a large enterprise vendor might be, since cash flow gaps hit smaller operations harder. 

• Approval controls: Once more than one person needs to sign off on a contractor payment, whether that's a manager approving a freelancer invoice or a finance team approving a subcontractor bill, clear approval workflows and an audit trail stop being optional. 

• Accounting sync: Whichever category of tool you choose, payments should flow into your books automatically. Manually reconciling contractor payments at year-end is exactly the kind of work these tools are supposed to eliminate. 

If your business pays subcontractors or contractor firms as part of accounts payable, see how Forwardly automates those payments, or read more on how staffing agencies handle 1099 subcontractor payments specifically. You can also start a free trial to see it against your own vendor list.