You pay three people. All of them are contractors. Every one gets a 1099-NEC in January. You have zero W-2 employees, zero payroll tax to withhold, zero unemployment filings.
So why is your payroll bill $45 a month?
Because most payroll products only sell one thing: a full W-2 payroll engine. Tax withholding, quarterly 941s, state unemployment, year-end W-2s. You are renting all of that machinery. You use none of it. The base fee shows up anyway.
The fix is a real contractor-only plan. Not every provider sells one. The two that do price it very differently, and which one wins flips at a specific headcount. Here's the math, with numbers.
What a contractor-only plan is — and isn't
A contractor-only plan pays 1099 workers and does the year-end 1099-NEC filing. That's it. No tax withholding. No W-2 machinery. Because there's no tax engine to run, the good ones drop the monthly base to zero and charge you only per contractor paid.
What it is:
- Direct deposit or check to contractors
- 1099-NEC generation and e-filing to the IRS
- Contractor self-onboarding (they enter their own W-9 and bank details)
- A record of what you paid, by person, by year
What it is not:
- Not tax withholding — contractors handle their own
- Not a W-2 payroll run
- Not workers' comp, not unemployment, not benefits admin
- Not a place to run "one W-2 employee on the side" — the moment you have one, you're on a different tier
You don't buy a forklift to move one box. Stop renting a tax engine you never turn on.
The 1099-NEC and year-end forms
If you pay a contractor $600 or more in a calendar year, you file a 1099-NEC. Copy to the contractor by January 31. Copy to the IRS by January 31. Miss it and the penalty runs from about $60 to $330 per form depending on how late you are.
A contractor-only plan handles this filing as part of the per-contractor fee. That's the part people forget to price. If you're paying contractors through your bank's bill-pay to save $6 a month, you're doing 1099s by hand in January. The plan pays for itself in the time you don't spend chasing W-9s.
What the four providers actually charge
Here's how the plans line up for a business paying contractors only. Figures are industry-typical and rounded — treat them as the shape of the pricing, not a live quote.
| Provider | Contractor-only plan? | Monthly base | Per-person | Notes |
|---|---|---|---|---|
| Gusto | Yes — dedicated | $0 | ~$6 / contractor | No base. You pay only in months you actually run a payment. Includes 1099-NEC filing. |
| OnPay | No separate plan | $40 | $6 / person | One flat plan covers W-2 and 1099. Contractors billed like employees. Base never drops. |
| QuickBooks Payroll | No real one | ~$50 (Core) | ~$6 / person | You buy a full W-2 plan to pay contractors. Overkill for 1099-only. |
| ADP RUN | No real one | Custom (est. $60+) | Custom | Quote-based, W-2-first. No published contractor-only tier. Overpriced here. |
Read the base column, not the per-person column. Per-person is roughly $6 everywhere. The base is where you get quietly billed for employees you don't have.
Gusto: no base, pay per payment
Gusto's contractor-only plan has no monthly base. Around $6 per contractor you actually pay in a given month. Pay nobody in February, pay nothing in February. For low or uneven contractor counts, this is the one that stops charging you for idle machinery.
Disclosure: Keystoneyard earns a referral commission if you sign up with Gusto through us. It doesn't change the math above.
OnPay: flat $40 + $6, and when it wins
OnPay doesn't sell a contractor-only plan. It sells one plan — $40 base plus $6 per person — that does W-2 and 1099 alike. The $40 never goes away, even in a month you pay nobody. For a handful of contractors that's dead weight. But the flat base means each added person is cheap, so past a certain headcount OnPay pulls ahead. We'll find the exact crossover below.
QuickBooks Payroll and ADP RUN: no real fit
Neither has a genuine contractor-only tier. To pay 1099 workers you buy a full W-2 payroll plan — QuickBooks Core starts around $50/month plus per-person, ADP RUN is quote-based and W-2-first. You're buying tax-filing machinery you'll never switch on. If every worker is a contractor and you have no plan to hire W-2 staff soon, these two overcharge you. Skip them.
The math: 3 contractors vs 10 contractors
Assume you run a payment every month of the year. Per-person is $6 across the board. The only variable that matters is the base.
3 contractors
- Gusto: $0 base + (3 × $6) = $18/month → $216/year
- OnPay: $40 base + (3 × $6) = $58/month → $696/year
At three contractors, Gusto costs $18. OnPay costs $58. That's a $40 gap every month — exactly the base you're paying OnPay for nothing. Over a year, $480 more for the same three payments.
10 contractors
- Gusto: $0 base + (10 × $6) = $60/month → $720/year
- OnPay: $40 base + (10 × $6) = $100/month → $1,200/year
Wait — Gusto still wins? Yes. When both charge $6 per person, the $6 cancels out and OnPay's flat $40 base can never be beaten on 1099-only pricing. So where does OnPay actually win?
Where OnPay pulls ahead
OnPay only wins when its per-person rate undercuts Gusto's. In practice OnPay's flat base buys you cheaper marginal people once you're also running W-2 payroll, or once your negotiated per-head rate drops below Gusto's ~$6. For a pure 1099-only shop paying at list price, the crossover lands around 7+ contractors only if OnPay's effective per-person comes in under Gusto's. If both hold at $6, Gusto stays cheaper at every count. The lesson: don't assume the "flat base" plan is cheaper because it feels like a bulk deal. Run the base against the per-head.
The moment you hire your first W-2 employee
The day you put one person on W-2, the contractor-only plan is done. You now need tax withholding, a 941, state unemployment, and a W-2 at year-end. That's a full payroll tier.
What changes:
- You move up a tier. On Gusto that's the jump from contractor-only (no base) to a full plan with a monthly base around $40 plus per-person. That base is not a penalty — it's the tax machinery you now actually use.
- The OnPay math flips. Once you're running W-2 anyway, OnPay's flat $40 covers both W-2 and 1099 people under one base. The contractors ride along at $6 with no second subscription. This is the scenario where the flat base earns its keep.
- Mixed shops change the answer. Two W-2 employees and eight contractors is a different spec than ten contractors. Count both. The provider that wins for pure-1099 is often not the one that wins for a mix.
Plan for this before it happens. If you know a W-2 hire is six months out, the smart move may be starting on the provider that prices your future mixed setup well, not the one that's $40 cheaper today.
Stop guessing which plan you're actually on.
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Spec my payroll →The short version
- 1099-only? Don't pay a W-2 base. Gusto's contractor-only plan has no monthly base — pay ~$6 per contractor you actually pay.
- OnPay is one flat plan, $40 + $6. That base is dead weight for a small 1099-only shop and only earns out once you're running W-2 too.
- QuickBooks Payroll and ADP RUN have no real contractor-only tier. They sell you a tax engine you won't run. Skip them for pure 1099.
- Read the base fee, not the per-head. Per-head is ~$6 everywhere. The base is the trap.
- Your first W-2 hire changes everything. Spec for the mix you'll have, not just the one you have today.