Paying independent contractors is simpler compared to paying employees because you’re not required to withhold taxes and pay taxes for contract workers. Given that contractors are not your employees, you also don’t have to include them in your company’s benefits plan (such as retirement and health insurance). In terms of W-2 vs 1099 reporting, you don’t have to file year-end tax forms for independent contractors—they are responsible for paying and filing their own payroll taxes. However, as an employer, you should prepare 1099-NEC forms for your contractors to show how much each worker earned for the calendar year. Employee payroll, on the other hand, requires you to deduct income taxes, garnishments, Medicare, Social Security, and benefits premiums (if you offer employee benefits), among others. You also have to remit tax payments and submit the quarterly and annual tax forms to government agencies.