Payroll applications for contractors, freelancers, and agency workers

By Henry Brown

Payroll applications are there to make life easier and more comfortable for contractors, freelancers and agency workers. Much simplified, they does this by allowing the self-employed to benefit from a status that looks remarkably similar to full-time employment; while still retaining the freedom to work for multiple clients, accept or decline jobs or contracts at will and, in effect, ‘be your own boss.’

A company that offers such a payroll app can be known as a Professional Employment Organisation (PEO), providing it meets strict legal and financial criteria. In this article, we’ll explain the challenges contractors, freelancers and agency workers face and how a PEO can help overcome them.

The rise self-employment and an introduction to the concept of a payroll app

The numbers of individuals across the workforce choosing (or being forced) to become self-employed is rising at a dramatic rate. But why people are increasingly turning to self-employment? It’s not just as a result of redundancies forced by the financial crisis, although that has played its part. There are other motivators, and perhaps the main one of these is the freedom to be your own boss. This allows people to pursue a better work-life balance and puts a greater emphasis on individuals fulfilling their own personal ambitions, rather than being tied to the company agenda. But that comes at a price.

As your own boss, you are responsible for compliance with a complicated self-assessment regime for tax purposes. You lose many of the benefits of being an employee, including holiday and sick pay; automatic enrolment in a pension scheme; company perks and so on. If you’re in this position, you may be seeking a better way. And that can come through a company such as a PEO that runs a payroll application. A payroll management application handles much of the administration associated with being self-employed, as the HR and/ or Finance Department of a company would if you were employed by them. Full service payroll ensures, amongst other factors, that their workers are tax-compliant and tax-efficient.

What problems will a payroll app solve?

If you’re self-employed, you could register as a company limited by guarantee and manage your own accounts, regulatory compliance, and tax affairs. Alternatively, you could register as a sole trader, where the regulatory burdens are fewer but still significant. One issue for many self-employed individuals is that they work irregular hours, depending on when work is available or on a project-by-project basis. This makes their earnings and tax arrangements erratic and difficult to keep track of. Because significant numbers of the self-employed also have multiple income streams, this also adds to the complexity of their finances.

Managing taxes by oneself can be a complex affair, and many people fall foul of the government’s strict regime or fail to take advantage of tax breaks to which they are entitled due to lack of knowledge. There can be tax advantages to becoming a limited company, but that also brings greater complexity in terms of compliance with the regulatory regime – and scrutiny too. That’s why seeking outside solutions makes sense.


Henry Brown is an online marketing executive. When he isn’t talking shop, he’s roaming the streets of London, uncovering the extra-ordinary in the ordinary.

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