Paying Contractors

When paying 1099 contractors through Gusto Embedded payroll, a developer has two paths to production. They can either use the Gusto API endpoints OR use the Gusto Embedded Contractor Payment Flow. The API endpoints allow for more customization of the user interface while the flows allow for much quicker implementation.

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What’s the difference between a payroll and a contractor payment?

A payroll is leveraged for W2 employees while a contractor payment is used for 1099 contractors. A payroll will withhold all employment taxes, benefits, and deductions associated with the gross pay of an employee. A contractor payment is a straight payment with no taxes withheld that will be reported on the end of the year Form 1099.

To create the contractor payment flow, you will call the “create a flow” endpoint and in the request include the “flow_type” as a “contractor_payments”. Once that request is made Gusto will return a URL that can be iframed directly into your application.

curl --request POST \
  --url https://api.gusto-demo.com/v1/companies/{{company_uuid}}/flows \
  --header 'Authorization: Bearer {{access_token}}’' \
  --header 'Content-Type: application/json' \
  --data '{
  "flow_type": "contractor_payments"
}'

The contractor payment flow was built using the same APIs outlined here. The functionality will allow the end user to:

1. Create contractor payments (either check, direct deposit, or historical payments)
2. Preview the payment date to review any direct deposit timelines
3. Process the contractor payments.
4. View the history of the payments, by contractor or at the company level
5. Pull up the contractor payment receipts for a given contractor payment

You can preview this entire Flow using our Demo Flow Creator and selecting "Contractor Payments" from Select a type.

Contractors can have three types of payment methods:

1. Direct deposit - Gusto will deposit the funds to the bank account associated with the contractor.
2. Check - the payroll admin will be responsible for providing the contractor with a check for the amount of the payment. The amount will be reported on the 1099 of the contractor.
3. Historical payment - the contractor was already paid and the amount is being added for reporting purposes only. When using the historical payment method, the date of the payment must be in the past.

All Contractor Payments that result in ACH movement of money require a receipt be available once the payment has been funded. Contractor Payments are funded when the ACH transfer for the payment has been initiated. The Contractor Payments Flow will include a payment receipt for any payments that meet this criteria.