What is the contractor option on employee records used for?

The contractor option should be selected and used for employees who are not on your payroll. Time logged by contract employees is accounted for differently than it is for regular employees. The main difference is that contractor time is not considered a labor cost, as it is for employees. Instead, contractor time is considered an expense which can be vouchered and then paid by check. Just as you can for regular employees, contractor time and expenses can also be billed to customers.