The Difference Between A W2 Employee And A 1099 Employee
There are some hard decisions that employers have to make when it comes to hiring employees. For a long time, there has been confusion whether workers are independent contractors or employees. There are advantages and disadvantages as well as business implication that come with hiring a W2 employee and 1099 employee.
When filling out tax forms, you need indicate if your employees are W2 or 1099. A 1099 employee is required to fill a 1099 form. Such employees get paid based on the terms of the contract and are self-employed. As for W2 employees, they get benefits and wages from their employer. Their employers have total control in the work they assigned to them. The check stub differ depending on the employer.
A 1099 employee relies on contracts which makes them fully independent. A 1099 employee is independent and works on different contracts. They have the option of flexibility because they determine their time to work and use their skills set. They charge a cost that they find suitable. They have the option of working for different companies. This means that their taxes can be withheld from their pay checks.
The advantage of hiring a 1099 employees is that they don’t get benefits. You spend a less amount hiring them compared to W2 employees. The greatest advantage is that you hire them only when necessary. They come highly trained in their specific fields.
The con of hiring an independent contractor is that at times your interests may differ. The contracts are also binding which means as an employer you cannot fire them since you will have breached the contract. In addition, in case they get injured on your premises, they have the right to sue you.
A W2 employee on the other hand, get regular salary and benefits from an employer. Employers can withhold taxes from W2 employees and allocate the type of work they are supposed to do.
The benefit of W2 employees is that they are committed to their work. You can count on them on busy time by having them work late when necessary. Employers have total control over their job descriptions and schedules.
The con is that training and managing the W2 employees is not an easy task. You need to dedicate time to keep motivating them for more productivity. As an employer, you will be required to offer them the needed tools as well as the workspace. As an employer it is your duty to pay their wages, sick leave, Medicare taxes, sick leave as well as other benefits as the page suggests.
Most employers misclassify W2 and 199 employees. This means that you may get harsh penalties. It is important you know the difference. To avoid confusion, ensure you know the IRS requirements.