Many companies require trained professionals only for a specific project, so it is more cost effective to hire contractors. In other cases, because of the uncertain business conditions the company does not want to hire full time employees since it is more difficult to dismiss the employees, and the employee salaries are a major expense. So a large number of companies are hiring contractors for different projects or other work. Like employees they should be paid on time, so businesses hiring more contractors should consider payroll solutions. If these solutions are not used earlier, the management may ask what are contractor payroll solutions.
The business offering payroll solutions for its clients contractors processes the payment for the contractors on behalf of the company. Many companies, especially smaller companies do not have enough staff or the expertise to process the compensation to the contractors as agreed with them. So instead of wasting resources finding the specialized staff and paying them salaries, it is usually more economical for the company to outsource the contractor payment processing to a service provider specializing in payroll processing for contractors. The contractor is also updated with the latest regulatory norms for hiring contractors
Usually for each contractor hired by the business, the payment depends on the skills, experience and the time spent by the contractor doing the work for the company. Typically the company will sign a contract with each of the contractors where the hourly rates and other terms and conditions are clearly defined so that there is no confusion at a later date. In some cases, the payroll processor may also be involved in deciding the terms of the contract, so that there is no dispute later, and since the payroll processor has the expertise in dealing with contractors for a large number of organizations.
Depending on the terms of the contract, the payment for the contractor may be calculated weekly, fortnightly, monthly or after a specific period. After the payment is calculated based on the hourly rate agreed and time spent, the company and contractor are informed of the amount and details of the calculation for verification. In some cases, the company will pay the contractor directly, in other cases, the payroll processor will pay the contractor. Often the government makes it mandatory to deduct taxes from the amount paid to the contractor, which is deposited with tax department. This tax deduction will also be handled by the payroll processor.