Majority of employers have found themselves in a dilemma when hiring employees. There has been an ongoing debate for a long time as to whether workers are employees or independent contractors. Hiring a 1099 employee or a W2 employee each comes with their advantages and disadvantages.
When filling out tax forms, you need indicate if your employees are W2 or 1099. A 1099 employee uses a 1099 form to file for their taxes. This is because they are self-employed and get payment based on the terms of contract. W2 employees receive their wages and benefits from those who have employed them. Their employers have control when it comes to work. The check stub vary based on the employer.
A 1099 employee is fully independent and has contracts for specific jobs. They get to do their job when they want and they rely on their skills. They also charge an amount that they see fit. They do work for many businesses. However, depending on their pay check their taxes can be withheld.
The main benefit of hiring a 1099 employee is that you don’t have to pay them benefits. It is also cost-effective to pay them compared to W2 employees. They provide the flexibility because they are hired 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 is one who an employer takes time to train, offer the necessary tools for working, provides benefits and pays them regular salary. Employers can withhold taxes from W2 employees and allocate the type of work they are supposed to do.
The greatest advantage of hiring W2 employees is that they become loyal to the company since they want to keep their jobs. 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 disadvantage is that it is not easy to train and manage W2 employees. You need to dedicate time to keep motivating them for more productivity. You also have to provide the workspace and the necessary tools. You also need to pay their wages, social security, sick leave, Medicare taxes and other benefits.
Most employers misclassify W2 and 199 employees. This means that you may get harsh penalties. You need to make a decision of whether to hire a W2 employee or a 1099 employee. To avoid confusion, ensure you know the IRS requirements.