In most cases, no — independent contractors are responsible for managing and paying their own taxes. The key exception is if a contractor fails to provide a valid Tax Identification Number, or the one on file is incorrect, in which case you may be required to withhold a portion of their payment as backup withholding. Tax obligations also vary by country, so if you work with international contractors it's worth seeking advice from a tax professional.

External workforce management is the structured process of classifying, onboarding, engaging, and overseeing contractors, freelancers, and other non-employee workers. In 2026, it matters because regulatory scrutiny around worker misclassification has intensified, and the financial penalties — including back taxes, fines, and legal fees — can far outweigh the cost savings that contingent hiring is meant to deliver. Companies that lack a formal management framework risk compliance failures, fragmented oversight, and poor ROI on their contingent workforce spend.