What is contractor management software?
Contractor management software is a system for managing critical data related to the employment of independent contractors, automating the entire employment lifecycle – from onboarding through payment. Whereas the capabilities vary between systems, this can include information related to insurance, health and safety, training, and other documentation relevant to the contractor and the hiring person or organisation.
What is an independent contractor?
An independent contractor is a type of contingent worker who is contracted to complete a scope of work by an individual or organisation. Though the hiring group controls the outcome of the work, contractors generally have greater freedom than full-time employees in how the work will be completed.
Contractors are classified as 1099 workers, meaning their wages are subject to self-employment tax. They are additionally not entitled to many of the benefits offered to full-time employees, such as health insurance or retirement contributions.
What are the challenges of using both contractors and full-time employees?
An increasing number of organisations are employing contractors and other contingent workers in addition to their full-time employees. Because contractors are governed by different laws and regulations than full-time employees, they often require different hiring, onboarding, payment and management practices in order to ensure compliance. As a result, it can be difficult to manage these non-employees within the same daily practices and software systems as full-time employees.
When do companies need contractor management software?
Companies can benefit from contractor management software any time they employ contractors, but the solution becomes more valuable as the number and type of contractors – and complexity of managing these workers – increases.
What are the benefits of using contractor management software?
Good contractor management software streamlines the management tasks related to contract workers across the entire employment lifecycle. This includes helping your organisation:
- Streamline onboarding and offboarding
- Manage assignments
- Track and analyse worker performance
- Simplify invoicing
- Mitigate security and compliance risks
“We were able to decrease our contingent labour spend by 25% in the first six months. A main driver was the ability to streamline the number of agencies, the rates that we were paying and the roles that we were publishing.”
– Kerry Kiley, Head of Extended Workforce Program Management, Workday (2023 Workday Rising Session)
Features of good contractor management software
Though the exact capabilities of this type of software can vary by provider, typical features of contractor management software tend to include improvements to onboarding, assignment management, billing, risk mitigation, headcount tracking and reporting capabilities.
Can contractor management software be integrated into human capital management software?
Yes, in some instances, it is possible to integrate contractor management software into human capital management software. However, it depends on the systems you are using. Some software providers make the process much easier than others by providing total talent management.
What is the difference between contractor management software and a vendor management system?
A vendor management system (VMS) includes many of the capabilities found in contractor management software in that it empowers organisations to automate and streamline processes related to contract worker management. However, a VMS goes beyond this and supports teams that manage all types of contingent – or non-employee – workers, including gig, hourly and freelance, in a single system of record. A VMS has the tools needed to manage those larger project requirements via full statement of work capabilities and offers a business more when it comes to core VMS functionality in areas such as invoicing, vendor collaboration, configurability and much more.
“We recognised our need for a single source of truth that would holistically help us see and manage our contingent workforce. We knew we needed to be more agile and adaptable, so we needed something that would help us on that journey.”
– Sarah Keisling, Associate VP, Talent Management and HR Operations, Banner Health (2023 Workday Rising Session)
Contractor management software and IR35 compliance.
IR35 refers to the UK's tax rules for off-payroll working. It's designed to determine whether an individual providing services through a personal service company (PSC) would, if you engaged them directly, be regarded as an employee for tax purposes. Where IR35 applies, their engagement is broadly taxed as employment, with their Income Tax and National Insurance accounted for through PAYE.
If you're a mid-sized or large business, the responsibility for determining IR35 status generally sits with you – the organisation engaging the contractor. You must make a determination for each engagement, and provide your contractor with a Status Determination Statement (SDS) explaining whether the off-payroll rules apply. This means you'll have an ongoing requirement to document your decisions, communicate the outcomes and maintain the evidence that supports your determination.
On 6th April 2026, the regulatory landscape changed significantly. The threshold used to determine whether your business qualifies for small-company exemption has increased. The turnover threshold has risen from £10.2 million to £15 million, and the balance-sheet threshold has increased from £5.1 million to £7.5 million. Around 14,000 companies have been reclassified from mid-sized businesses to small. If you're one of these newly exempt organisations, you're no longer responsible for IR35 determinations. Instead, it's the responsibility of the contractor's own PSC as per the existing rules.
From the same date, new Joint and Several Liability (JSL) provisions have come into force for certain umbrella-company arrangements. If you haven't correctly operated PAYE within your labour supply chain, HMRC can pursue other parties in the chain for unpaid tax. This potentially includes any agencies you work with, and end clients who've been serviced by your contractors. This increases the importance for you and your company of understanding not just the contractor relationship, but also the organisations sitting between your worker and your end client.
How Software Delivers End-to-End IR35 Compliance and Visibility.
In this landscape, contractor management software is increasingly relevant for supporting you with IR35 compliance. It's not enough to treat compliance as a one-off assessment. Instead, you and your organisation need to maintain accurate records of engagements, track which party's responsible for determining status, retain Status Determination Statements and monitor changes.
If you're working with multiple recruitment agencies, PSCs and umbrella companies, software can also give you greater visibility across your labour supply chain. When you centralise your contractor information, engagement details, documentation and compliance status, you can identify gaps before they become costly tax liabilities.
All of this makes contractor management software a natural choice for managing your IR35 compliance. It doesn't simply automate individual status assessments. It creates a consistent, auditable workflow that manages your contractor classification, documentation and supply-chain oversight.
At Workday, we have proven systems to help. Ready to find out more? Take a look at Workday VNDLY, our contingent workforce system.