The Hidden Problems Caused by

the Way You Pay Independent Contractors

Shelby S.

Founder of Servable

3 Minutes

Reading Time

Don't make these same mistakes! Most businesses that pay independent contractors are setting themselves up for more risk, less time, wasted money, and bad data.

More Risk • Less Time • Wasted Money • No Data

Most businesses still pay independent contractors the old way: invoices, bank transfers or checks, and hassling with 1099s every single year. Here are the hidden costs associated with operating the old way.

Security Risks

Paying your independent contractors the old way means you must collect and store their sensitive personal and financial information, including their social security number and bank account details. And while it seems like every day that a new major institution is hacked, many small and medium sized businesses face security risks as well. When you store this type of sensitive information for all of your independent contractors, that information is at risk - and you don't want to be responsible for that information getting into the wrong hands.

Wasted Time for Them & Wasted Time for You

Not only do your independent contractors have to spend their valuable time creating invoices and sending them to you, but your administrators (or someone else at your business) wastes their own time on the busywork of receiving these invoices and manually processing payments, one by one.

There's the yearly hassle of properly dealing with 1099s. Data must be collected to tally up the time spent working and amount paid for every single independent contractor. Then, forms must be filled out in duplicate and sent to both the worker and the IRS. Of course, there's the risk of submitting these forms incorrectly. But regardless, nobody likes the horrible, time consuming drudgery of this handling cumbersome 1099s at the start of every new year. 

Time is Money, and You're Wasting it

As a business owner or operator, you know that wasted time is wasted money. Reduced admin time means reduced admin costs. A system that makes independent contractor payments automatically and also handles 1099s effortlessly can save businesses a lot of money every month and every year. 

You’re Losing Out if You’re Not Tracking Data

Most businesses that rely on independent contractors have shockingly little information about how much they're spending, who they're spending it on, and what sort of work efficiency they're getting from different independent contractors. 

This lack of data means most businesses can't spot important trends in their contract labor expenses, can't identify new opportunities related to their contract labor, and can't accurately dial up (or down) their contract labor spend efficiently. 

Any finance-minded businessperson needs a system that provides detailed analytics on their independent contractor workforce.

You Might Lose Your Best Workers

We're living in a new on-demand service economy, and today's workers have different desires about how they work and earn money. When you pay your independent contractors the old way, they have to hassle with invoices and wait to be paid for their work. The best workers are migrating to work with businesses that use systems for paying instantly when work is complete. Given the choice between two clients, an independent contractor will choose the client who pays instantly.


You may not have thought a lot about the way you pay your independent contractors, but if you do things the old way, it's time to get serious. These are major issues that can come back to bite you in the form of wasted money, wasted time, security risks, and even potentially losing the trust of your best independent contractors. 

Next up, you should learn why now is the right time to find a better way to pay your independent contractors.