Managing contractors can be a complex task, particularly when it comes to payroll management. With legislation like the IR35 in the UK, ensuring compliance while also maintaining efficient payroll systems becomes all the more critical. Fortunately, there are payroll solutions specifically designed to make this process easier for businesses.
In this article, we’ll explore some of the best payroll solutions available for paying contractors. The criteria for selection will include ease of use, cost-effectiveness, scalability, and compliance features.
Why specialised payroll solutions for contractors are essential
Before delving into specific providers, it’s crucial to understand why specialised payroll solutions are particularly beneficial when dealing with contractors. Here are some key reasons:
- Tax Compliance: Contractors often have different tax obligations compared to regular employees, and specialised solutions help ensure that you are compliant with tax laws and regulations.
- Payment Flexibility: Payment schedules for contractors may differ from those of regular employees, requiring a more flexible system.
- Contract Management: A specialised payroll system can help you manage various contracts, ensuring that terms are met accurately and on time.
- Streamlined Accounting: Good payroll solutions integrate well with your accounting software, which helps to minimise errors and save time.
Criteria for choosing a contractor payroll solution
Choosing a payroll solution involves considering several key factors:
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- Ease of use: The system should be user-friendly.
- Features: Ensure the software provides necessary features like tax calculations, various payment options, and reporting capabilities.
- Compliance: The software should stay updated with current tax laws and regulations, including IR35.
- Cost: The solution should offer value for money.
- Customer Support: Adequate support should be available to troubleshoot issues or guide you through setup.
Top payroll solutions for paying contractors
| Payroll Provider | Key Features | Compliance | Starting Cost (Per Month) |
|---|---|---|---|
| Orbital | Direct deposit, automated tax calculations, simplified dashboard | IR35, UK tax laws | £50 |
| MHR | Real-time data analysis, flexible payment scheduling, multiple payment options | National Insurance, UK tax laws | £40 |
| SD Worx | Direct deposits, extensive reporting, real-time data analytics | IR35, UK tax laws | £60 |
| Moorepay | Employee self-service, comprehensive reporting, automated tax calculations | UK tax laws | £35 |
| Payfit | Automatic payslips, real-time modifications, intuitive dashboard | UK tax laws | £40 |
This table summarises the primary features, compliance measures, and starting costs for each of the payroll solutions discussed. It should offer a helpful starting point for businesses evaluating options for contractor payments. Remember that many of these providers offer customised plans, so the starting cost is not the only factor to consider.
Orbital
Orbital is versatile and comprehensive, making it well-suited for handling contractor payments.
- Features: Direct deposit, automatic tax calculations, and a simplified dashboard.
- Compliance: Regular updates ensure that the system remains compliant with tax and IR35 regulations.
- Cost: Starting prices are around £50 per month for the basic plan, with higher tiers offering additional features at a premium.
MHR
MHR provides a scalable payroll solution that is particularly adept at meeting UK-specific needs.
- Features: Features like real-time data analysis, flexible payment scheduling, and multiple payment options stand out.
- Compliance: Ensures adherence to local laws and regulations, including National Insurance for contractors.
- Cost: Modular pricing starts at approximately £40 per month, customisable based on specific requirements.
SD Worx
SD Worx offers a highly customisable and compliant solution.
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- Features: Direct deposits, extensive reporting capabilities, and real-time data analytics.
- Compliance: Stays abreast of tax and legislative updates to ensure compliance.
- Cost: Plans start at about £60 per month, with pricing dependent on the specific needs and size of your business.
Moorepay
Moorepay is another UK-focused payroll solution that offers a range of features well-suited for managing contractor payments.
- Features: Employee self-service options, comprehensive reporting, and automated tax calculations.
- Compliance: The system stays up-to-date with UK tax laws and regulations, ensuring full compliance.
- Cost: Prices start at approximately £35 per month for the basic tier, with additional features available for an extra cost.
Payfit
Payfit offers an easy-to-use solution designed for simplicity and efficiency.
- Features: Automatic payslips, real-time modifications, and an intuitive dashboard.
- Compliance: Payfit is designed to remain compliant with UK tax laws and regulations.
- Cost: The basic package starts at around £40 per month, with customised pricing for added features.
FAQ for contractor payroll options
Below is a collection of frequently asked questions that can help businesses further understand the nuances of choosing a payroll solution for contractors.
Contractors have different tax and payment obligations than regular employees, necessitating specialised solutions for compliance and efficiency.
IR35 is a UK tax legislation aimed at identifying ‘disguised employees’ working as contractors. Compliance is essential to avoid penalties.
Providers usually specify compliance features on their websites and through customer service channels. Look for regular updates that align with tax law changes.
Yes, especially for growing businesses. Scalable solutions can adapt to increasing contractor numbers without requiring a system overhaul.
Prices vary but usually start around £35-£60 per month depending on features and the number of contractors you have.
Always read the terms and conditions. Some providers charge extra for additional features or for exceeding a certain number of contractors.
Switching payroll providers can require some administrative effort. Always check for data portability options when considering a switch.
Look for detailed tax reports, payment summaries, and real-time analytics that can help in decision-making.
While not mandatory, it’s a helpful feature that allows contractors to manage their own information, thereby reducing administrative load.
Automated tax calculations, multiple payment options, and real-time data analytics are generally considered essential features.
This FAQ aims to answer common questions you might have while selecting a payroll solution for contractors. For more specific questions, it’s always advisable to consult with the providers directly.