While most companies will hire employees with the necessary skills to keep things running smoothly, you may encounter a situation when your existing team's skill set doesn't quite cut it. Contrary to popular belief, you don't have to hire a new full-time employee. You can always turn to independent contractors.

What is an Independent Contractor?

An independent contractor is a person or entity you hire to do a specific task. As the name implies, they work on a contract basis. But, they're not an official employee. They don't get employee benefits or any other perks. Instead, they perform the work you request, fulfill their side of the contract, and get paid!

Independent contractors are a valuable asset. They can handle tasks your team isn't capable of doing, bridging a skills gap without needing to hire a new employee.

Most companies use independent contractors for the occasional odd job or project. For example, they might bring in an artist to create marketing materials. That artist works for the company during that period, but they're not an official employee.

How to Pay Independent Contractors

Here's where things get tricky. You're not adding independent contractors to your traditional payroll. But you're not paying them "under the table" either. When companies hire people for the first time, they must learn how to pay independent contractors while still fulfilling their tax obligations.

That's where the 1099-NEC comes in. This form is to report non-employee compensation.

There are no official requirements for how you pay your contracts. That's up to you and the people you hire. Whether you go with one large lump sum or track hours to pay for their time, that's up to you. But your responsibilities aren't over after you write a check.

You must keep track of what you pay the contractor and file a 1099-NEC.

The best way to do this is with a contractor management system. The right software can generate reports, manage necessary documentation, and generate your 1099-NEC for easy filing.

Fulfilling Your Tax Obligations

If you hire independent contractors, you must file a 1099-NEC. The contractor will report their earnings when tax season comes. Failing to do your part will only result in fines. Invest in management software, and handling this small detail is a breeze.

Author Resource:-

Emily Clarke writes about employee management, benefits and payroll service. You can find her thoughts at employee benefits blog.