Here's high-level guidance on deciding when to add a contractor vs. a vendor:
If you think of the entity you are paying as a person, add them as a contractor
If you think of the entity you are paying as a business, add them as a vendor
You may also make your decision based on differences in product functionality. Because a company's team is typically comprised of employees and/or contractors, we updated the latest version of our HRIS so you can manage vendors separately. Vendors will no longer be grouped with team members and will have a more streamlined experience.
Note: You may not have access to the latest HRIS yet, but it is important for you to understand the differences in functionality for contractors and vendors. All customers will be migrating to the latest HRIS in 2024.
Important differences in product features for contractors and vendors
Adding a contractor to Plane requires more information — such as legal name, date of birth, and residential address — than is required for vendors.
Contractors also have access to specific HRIS functionality designed for team members:
Detailed HRIS tracking, e.g., compensation history and reporting/manager history
Vendors have streamlined features:
Vendors are paid with one-time payments and cannot be added to payroll
Less information is tracked for vendors; only the minimal information to get them paid is required
Contracts are not supported
What if a contractor has a business?
A contractor may optionally provide a business name and business address. This is most commonly used when the business is a sole proprietorship, but it isn’t limited to this business type.
If the contractor has a business and you use a Plane-generated contract, the contract will be between your organization and the contractor’s business, with the contractor as the signatory. Otherwise, the contract is between your organization and the individual contractor.
Form W-8/W-9 and Form 1099-NEC
Both contractors and vendors should complete Form W-8 and Form W-9. How they fill out this form is independent of your decision to add them as a contractor or vendor.
Plane will generate Form 1099-NECs for contractors or vendors for your review around mid-January for the previous tax year
The latest Form W-9 on file is used to populate Form 1099-NEC
Form 1099-NECs are only required for US persons who were paid more than $600 in the tax year and have not elected to be taxed as a corporation.