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. Hiring a 1099 employee or a W2 employee each comes with their advantages and disadvantages.
When filing for taxes you need to make a distinction of whether your employees are W2 or 1099. A 1099 employee uses a 1099 form to file for their taxes. Such employees get paid based on the terms of the contract and are self-employed. A W2 employee get regular wages and benefits from their employer. Their employers determine the kind of work they do. The check stub vary based on the employer.
A 1099 employee is fully independent and has contracts for specific jobs. They use their skills and can work at their own time. They charge a cost that they find suitable. They can also choose to work for more than one company. However, depending on the job they do their taxes can be withheld from their pay check.
Hiring a 1099 employee has an advantage of not paying benefits. In comparison to W2 employees it costs less to hire them. You have flexibility because you hire them only when in need. They have a lot of training.
The disadvantages of a 1099 employee is that there may be times when you will 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. Since companies don’t provide insurance cover or 1099 employees, in case of any injury they can 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. 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 have the advantage of counting on them during busy times. You can control their job description and working schedules as the website suggests.
The disadvantage of W2 employees is that it is not easy to train and manage them. 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. You also need to pay their wages, social security, sick leave, Medicare taxes and other benefits.
Majority of employers make the mistake of misclassifying their employees as independent contractors. This can cause 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.