Payroll solutions for 1099 and W2 employees

Managing a hybrid team? Here’s a quick guide to payroll solutions for 1099 and W2 employeesโ€”so you can find the right platform without the guesswork.

payroll solutions for 1099 and w2 employees

Navigating payroll solutions for 1099 and W2 employees can feel like managing two completely different playbooks, like youโ€™re juggling two completely different systems. From tax compliance and contractor classification to international payments and reporting, businesses need a unified approach thatโ€™s built to handle complexity without increasing risk.

In this post, weโ€™ll break down your options for managing a blended workforce, highlight common payroll challenges, and help you choose a solution that works for both employee and contractor needs.

Whatโ€™s the difference between payroll solutions for 1099 and W2 employees?

Payroll Solutions for 1099 and W2 Employees

The core distinction between payroll solutions for 1099 and W2 employees comes down to classification, tax, and legal obligations. These are outlined in the following table for ease of understanding. 

Payroll solution differences between W2 employees and 1099 contractors

Feature1099 ContractorsW2 Employees
Tax WithholdingContractor handles their own The employer is responsible (Should File Form W-2)
BenefitsNot eligible for employer benefitsEligible for benefits like health insurance, PTO, etc.
Payroll SystemOften invoice-based or milestone-basedRuns on a schedule (weekly, biweekly)
ComplianceGoverned by contract and classificationSubject to employment laws
Payment Tooling (Payment method)Often managed via invoicing and disbursement platformsTypically managed through payroll software

Itโ€™s imperative to get this distinction right, especially worker classification, since misclassified workers lead to serious financial and legal consequences. 

What payroll solutions work best for mixed teams?

If youโ€™re managing a hybrid workforce, there are a few payroll options that you can explore that can help you manage paying independent contractors effectively. Here are the three most popular.

All-in-One Workforce Management (e.g., Payoneer WFM)Full-Service Payroll ProvidersContractor-Only Platforms
Handles W2 Employee Payrollโœ…โœ…โŒ
Handles 1099 Contractor Paymentsโœ…โŒโœ…
Global Payment Supportโœ…โŒโœ…
Contractor Classification Assistanceโœ…โŒโœ…
Integrated Compliance Toolsโœ…โœ…โŒ
Ideal for Blended (W2 + 1099) Workforcesโœ…โŒโŒ

All-in-one workforce management platforms (like Payoneer WFM)

Payoneer Workforce Management supports both employees and contractors, offering a centralized platform that streamlines global payroll, classification, tax documentation, and compliance. Itโ€™s ideal for companies hiring internationally or scaling remote-first operations.

Full-service payroll providers

These providers handle tax calculations, W2 filings, and employee benefits.

Contractor-only platforms

These platforms are designed for freelancer-heavy teams, offering contractor payments and, in many cases, basic classification support. However, they typically lack the full capabilities needed to manage employee payroll.

Why Payoneer Workforce Management stands out

You donโ€™t need separate systems or messy workarounds to manage your hybrid workforce. What you do need, however, is a platform built for how modern teams actually work. With Payoneer Workforce Management, you can:

  • Automate payroll for 1099 employees and W2 staff
  • Manage local compliance and documentation in 160+ countries
  • Issue timely global payments in local currencies
  • Reduce misclassification risk with built-in support and documentation workflows

Ready to simplify your workforce payroll solutions?

When it comes to payroll solutions for 1099 and W2 employees, Payoneer Workforce Management reduces the complexity when managing hybrid workforces by handling the details on your behalf. 

For over 20 years, weโ€™ve helped businesses of all sizes scale with confidence by simplifying global payroll, streamlining compliance, and giving teams the freedom to focus on what they do best: delivering exceptional solutions to their clients.

Ready to hire globally?


Effortlessly manage and pay teams across 160+ countries and 70 currencies.

FAQs

1. Can I Use the Same Payroll Software for W2 and 1099 Workers?

Yes, with the caveat that most platforms are not built for both. While traditional payroll software may support basic 1099 functionality, only integrated solutions provide the end-to-end tools necessary to effectively manage both workers under one platform, especially when hiring globally.

2. How Do I Stay Compliant When Paying 1099 Contractors?

  • Classify workers correctly under local labor laws
  • Collect Form W-9 and issue 1099-NEC forms
  • Avoid treating one group like the other (e.g., treating an employee like a contractor or vice versa)

All-in-one workforce management platforms like Payoneer WFM simplify this by automating onboarding, tax documentation, and classification. 

3. Is the process the same for paying 1099 contractors and W-2 employees?

No, the process is different. W-2 employees have taxes withheld by the employer and receive benefits. 1099 contractors handle their own taxes, and employers only issue payments and, if required, a 1099 form.

4. How do I file taxes if I have both a 1099 and a W-2?

Youโ€™ll report your W-2 income as wages and your 1099 income as self-employment income on your tax return. You may need to file additional forms like Schedule C and pay self-employment tax on your contractor earnings.

5. Can an individual be both an employee and an independent contractor?

Yes, but only if the roles are completely separate. The work done as a contractor must be outside the scope of the employeeโ€™s regular duties and meet IRS guidelines for independent contractor classification.

Disclaimer 

Nothing herein should be construed as if Payoneer Inc. or its affiliates are soliciting or inviting any person outside the jurisdiction where it operates/is licensed to engage in payment services provided by Payoneer Inc. or its affiliates, unless permitted by applicable laws. Any products/services availability are subject to customerโ€™s eligibility. The availability of this product is not guaranteed and may vary. Not all products/services are available in all jurisdictions in the same manner.

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