I want to explain everything about the displayed warning messages in the most simple way as possible, Richard.

"Vendors with 1099 tracking turned on can’t be added as time tracking users at this time. You can add them as a new vendor with a different email address, or enter timesheets for them."

You can add your contractors as Time tracking only users as long as they haven't reached the 1099 threshold ($600 in a calendar year). 

Otherwise, you won't be able to add them as Time tracking only users. Hence, needing you to enter the timesheets on their behalf. 

I'll let our Product Development Team know about this so I can give you a better explanation, Richard. Please let me know if you have more questions.