Everything You Need To Know About A W2 Employee And A 1099 Employee
There are some hard decisions that employers have to make when it comes to hiring employees. There has been an ongoing debate for a long time as to whether workers are employees or independent contractors. 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. This is because they are self-employed and get payment based on the terms of contract. As for W2 employees, they get benefits and wages from their employer. Their employers determine the kind of work they do. 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 use their skills and can work at their own time. They are the ones who set the amount they wish to charge. They do work for many businesses. However, depending on their pay check their taxes can be withheld.
The advantage of hiring a 1099 employees is that they don’t get benefits. It is also cost-effective to pay them compared to W2 employees. They provide the flexibility because they are hired when necessary. They have a lot of training.
The cons of hiring a 1099 in may have a clash of interest. The contracts are also binding which means as an employer you cannot fire them since you will have breached the contract. Also, because the company does not provide insurance cover for 1099 employees, in case of any injuries they may sue the company.
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. As an employer you have the right to withhold taxes and set rules and regulations for work.
The advantages of having W2 employees if that they are loyal to the company because they want to have their jobs for a long time. You can count on them on busy time by having them work late when necessary. You have total control of their schedules.
The disadvantage of W2 employees is that it is not easy to train and manage them. You will have to keep motivating them for top performance. 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.
Many employers get caught misclassifying employees as being independent workers as opposed to being full-time. This could result in 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.