Should i hire w2 or 1099

Cleaning personnel or tech support are typically the types of roles you'd fill with independent contractors. Hiring employees on a W2 means including them in your payroll, paying all taxes and health insurance, and contributing to unemployment insurance on their behalf. All in all, the regular costs associated with hiring a salaried employee are quite high.

Another thing you should remember is that terminating a contract with a W2 worker is more difficult than that of an independent contractor. At the same time, a pro of W2 salaried employees is that they feel more secure. This can lead to them showing more loyalty and accountability for their work and its quality.

As an employer , you could attract a wider pool of talented people if you hire them as salaried employees, because highly skilled professionals often cherish social stability, paid vacations, corporate perks, and incentives that an employer provides. Hiring independent contractors, on the other hand, means saving on costs.

Not only do you save on taxes, health insurance, retirement plans, and social contributions, but you can also pay them on an ad-hoc basis for the projects that they have completed. Another pro of workers is that you can find someone who can solve your particular problem; independent contractors tend to be someone with very specific expertise. Another advantage of contractors is freedom for both parties. Freelances can work for higher rates and might have a better work-life balance.

Many independent contractors will work online and will only be in contact with a few members of your team via email, with perhaps the occasional Skype or phone call. For employers, the advantage of work contracts is that contractors are not entitled to overtime pay, worker's compensation, or vacation. Of course, this freedom implies a possible disadvantage to workers, because without the incentive of certain work benefits there is no guarantee that the worker will perform the quality of work you may be looking for.

Another thing to keep in mind is that a partner might not be bound by a service agreement solely with you. They can be working for a few clients at the same time and may not be available to work if you require urgent assistance. Independent contractors might never become part of your close-knit team because they come in only when needed.

Hiring an independent contractor comes out cheaper; however, you should be proactive and consider how things will look long-term. For example, you might be better off hiring a salaried community manager whose personality and approach to work will help you build a flourishing community. At the same time, thanks to visitor management systems , you might need a receptionist on rare occasions, like for special events held at your space, and thus can hire them as a contractor.

The same holds true about technical support and cleaning personnel. To help you decide whether you should hire a salaried employee or an independent contractor, ask yourself these questions:. If the answer is 30 hours or more, you need to hire an employee. If the answer is yes, we are also talking about a W2 worker.

Usually, independent contractors charge more per hour but cost you less in the long run, because you pay for them as they complete specific work for you which does not happen regularly.

Weigh all the options and see whether you can save long-term by hiring a freelancer, or if it makes sense to invest in a highly talented employee whose diligence and work ethic will generate more profit than costs. However, while this may all sound too good to be true to employers, there are some practical disadvantages of hiring workers.

For example, there is a basic understanding that independent contractors can choose whether or not they want to come to work without the fear of losing employment.

They have the ability to control their own hours, and can typically get things done on their own terms without having to adhere to strict company policies — as long as the work performed has been completed and lives up to the standards that the employer has set out. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.

The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Lawyer Directory. Call us at 1 Home Legal Topics Employment. Setbacks of being a worker Many workers are often tempted by the employment option because they are told that they will get a bigger check.

Advantages of The good news for independent contractors is that most of them have the ability to set their own price, and companies tend to pay a higher rate to workers than they do for W2 employees because there are fewer costs associated with hiring self-employed workers. Contrary to employees, when you hire independent contractors, you pay them their total earnings for the period. Contractors are responsible for squaring up their tax bill with the IRS on their own.

In this sense, both employees and contractors have at least some responsibility to settle any outstanding bills with tax agencies. Employers help facilitate this by issuing year-end tax forms and W2 that show the total amount each worker earned for the year. Employees receive Form W2; it shows the same basic information, in addition to total taxes and other deductions withheld.

W2 employees and contractors are also treated differently when it comes to federal labor law protections. Keep in mind that there are other differences between employees and contractors, but those are the top three you should know about before you decide on which kind of worker to hire. According to the IRS, there are three main questions to ask yourself about classifying vs W2 team members at your business. Note that in general, only ONE of the questions has to fit the bill for a worker to be considered an employee.

Some business owners like hiring contractors, because of certain advantages over W2 employees. There are disadvantages to having a contractor on staff that employers should take note of when hiring. Both employees and independent contractors can be valuable assets to a business as they perform work you need to run the company. Avoid falling into the trap of calling an employee a contractor, because that can come back to haunt you; taxes add up quickly, especially if you have to add fines and penalties.

Find Charlette On LinkedIn. Charlette Beasley is a writer and editor at Fit Small Business focusing on payroll. With more than a decade of accounting and finance experience, Charlette has worked side-by-side with HR and accounting leaders to establish and help implement payroll best practices, controls, and systems.