How to add and pay contractors

This feature is currently only available for Payroll by Wave in the US.

You can pay independent contractors using Payroll by Wave. Because of their special tax status, contractors are considered vendors in Wave. This keeps your accounting accurate and your business compliant!

Add a contractor

You can add a contractor under Purchases > Vendors. If they are a contractor, instead of a regular vendor, make sure to mark them as a 1099-MISC contractor. This will allow Wave to generate the 1099-MISC form at the end of the year.

Contractors are distinct from other vendors who provide goods or services to your business, like your utility or phone provider. They are usually individuals who are providing a an agreed upon service specific to your business.

Indicate whether you will be paying the contractor by direct deposit.

If you’re setting up Payroll by Wave for the first time, you’ll also have the option to add contractors during this process.

Pay a contractor

To pay a contractor, create a bill for their services. You can do this by clicking on Create a Bill under Purchases > Bills. From here, create a bill as your normally would. You can add multiple line items for the contractor’s services, as needed.

Make sure you select the correct Expense Category (“Subcontractor Services”) for regular services, or applicable Expense Category for reimbursements, supplies, etc.

If you are paying a flat rate for contractor service, leave the item quantity as 1 and enter the dollar amount. If you are paying by the hour, enter the number of hours in the quantity column, and the hourly rate in the amount column.

You can see the status of all contractor bills on the Bills page under Purchases:

  • For unpaid bills, you'll see the option to Pay contractor. Clicking this will allow you to add the payment to your next payroll run if the contractor is on direct deposit. If they're not on direct deposit, you'll need to record a manual payment.
  • Any bills that have already been added to your next payroll will be marked as pending.
  • If you use direct deposit, bills included on a payroll that is currently being processed will be marked as scheduled.
  • Paid bills, whether by check or direct deposit, will be marked as paid.

If you're paying your contractor using direct deposit, Wave will automatically add a payment transaction for that bill, which marks it as paid. If you are paying by check, you'll need to manually add a bill payment.

Contractors will be paid on your regular payroll schedule. Make sure you add them to the payroll that runs when you want them to be paid. For example, if you run payroll for your regular employees bimonthly, but you’ve agreed to pay your contractor at the end of the month, make sure to add them to the second payroll for that month.

What about the accounting?

When you create a bill for your contractor and run payroll for that bill, Wave will create the accounting entries for you. You will see a liability transaction when you create the bill, and a payment transaction when you run payroll. All the accounting is automatically taken care of!

How much does it cost?

Paying contractors through Payroll by Wave costs $4 per contractor paid per month, in addition to your payroll base fee. You will not be charged the $4 fee on months you do not pay the contractor.

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