Adding & Classifying Employees as Contractors (1099)

Updated

7shifts Payroll allows you to streamline payments for both W-2 Employees and 1099 Contractors in one place. You can easily classify your staff as a contractor within their 7shifts profile and send them an onboarding package with the necessary tax documents to ensure everything is ready for year-end filing. This article overviews how Admin and Manager users can add new contractors or classify existing employees as contractors in 7shifts.

⚠️1099 Filing: While taxes are not withheld for contractors, 7shifts will handle 1099 filing at year-end.

⚠️This feature is designed for 7shifts Payroll Customers who employ contractors who are paid regularly by the restaurant (not one-time services like a handyman or DJ).

SKIP AHEAD TO:

Add a New Employee as a Contractor
Classify an Existing Employee as a Contractor
Send an Onboarding Package to a Contractor
Enter Year-to-Date Earnings for Contractors 

Add a New Employee as a Contractor

      1. Login to the 7shifts web app as an Admin or Manager with permissions.
      2. Navigate to: Team > Employees > +Add Employee.
      3. Fill in employee details and enable the 'Send onboarding package'.
      4. Click 'Add and onboard employee'.
        Screenshot 2024-09-20 at 10.00.34 AM.png
      5. Update the Payroll classification to 'Contractor' to send a contractor-specific onboarding package.
        Screenshot 2024-09-20 at 10.01.43 AM (1).png
      6. That's it! This employee is now classified as a Contractor in Payroll. The employee is responsible for completing their onboarding package to become payroll ready. 

Classify an Existing Employee as a Contractor

The process for changing an employee’s payroll classification from W-2 Employee to 1099 Contractor (or vice-versa) depends on whether they’ve previously been paid through 7shifts Payroll under a different classification. Use the drop downs to reveal the steps for each scenario. 

Scenario 1: Worker has not been paid previously via 7shifts Payroll
      1. Log in to the 7shifts web app as an Admin or Manager with the necessary permissions.
      2. Go to: Team > Employees > Open the employee's profile > Employment > Employment History > Edit Employment Details.
        Screenshot 2024-09-20 at 3.36.49 PM.png
      3. Select Contractor (1099) and Save!
        Edit Employment.png

      4. Finally, send an onboarding package:

        • Send the employee a new onboarding package with the updated classification to collect the appropriate tax documents and get them payroll-ready.

 

Scenario 2: Worker has been paid as a W-2 Employee via 7shifts Payroll
  1. Log in to the 7shifts web app as an Admin or Manager with the necessary permissions.
  2. Go to: Team > Employees > Open the employee's profile > Employment > Employment History > Edit Employment Details.
    Screenshot 2024-09-20 at 3.36.49 PM.png
  3. Check the Payroll Classification field: If this field is uneditable, the employee has already been paid under the current classification.Screenshot 2024-09-20 at 11.00.32 AM.png
  4. To update the classification, first, terminate the employee's current employment.
    Screenshot 2024-09-20 at 11.04.35 AM.png
  5. Then, add a new employment period with the correct classification.
    Screenshot 2024-09-20 at 3.43.05 PM.png
    Screenshot 2024-09-20 at 11.08.41 AM.png
    Important: This ensures accurate year-end tax filings, ensuring the employee receives the correct tax documents.

  6. Finally, send an onboarding package:

    • Send the employee a new onboarding package with the updated classification to collect the appropriate tax documents and get them payroll-ready.

 

Sending an Onboarding Package to a 'Reclassified' Contractor

Once you’ve updated an employee's payroll classification to Contractor (1099), follow these steps to send them an onboarding package and collect the necessary documents:

      1. Go to: Team > Employees > Onboarding.

      2. Select Send Onboarding Package.

      3. Select the Location & Employee.

      4. Ensure that Contractor is selected as the Payroll Classification.

      5. Review the onboarding package to make sure all required documents (e.g., W-9 forms) are included.

      6. Click Send.

Note: This ensures that the contractor receives and completes the appropriate forms for accurate tax and payroll processing.

Send Package.png

Enter Year-to-Date (YTD) Earnings for Contractors

If a contractor has already been paid outside of 7shifts Payroll this year, it's crucial to record their year-to-date (YTD) earnings to ensure accurate quarterly and year-end tax filings. Follow the steps below to correctly enter their YTD earnings into 7shifts:

  1. Create an Off-Cycle Payroll: Start by creating an off-cycle payroll run. This is typically used for payments outside of regular payroll cycles but will be used here to capture the contractor's existing earnings.

  2. Add the Contractor: In the off-cycle payroll, only include the contractor whose YTD earnings need to be recorded.

  3. Enter YTD Earnings and Reimbursements: Manually input any earnings or reimbursements the contractor has received to date. This will update their earnings record in the system.

  4. Set Payment Method to Paper Check: To avoid issuing an actual payment, set the contractor’s payment method to Paper Check.

  5. Do Not Print the Check: Since this is for record-keeping purposes only, you don’t need to print or distribute the check. This ensures the YTD earnings are logged without making an additional payment.

Note: Following these steps ensures accurate tax records and prevents duplicate payments while keeping the contractor’s earnings up-to-date for year-end reporting.

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