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. Whether you decide to hire a 1099 employee or a W2 employee there are advantages disadvantages of both options.
When filling out tax forms, you need indicate if your employees are W2 or 1099. You will use a 1099 form to file for taxes if you are a 1099 employee. Such employees get paid based on the terms of the contract and are self-employed. W2 employees receive their wages and benefits from those who have employed them. Their employers determine the kind of work they do. Check stubs are not the same.
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 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 main benefit of hiring a 1099 employee is that you don’t have to pay them benefits. In comparison to W2 employees it costs less to hire them. They provide the flexibility because they are hired when necessary. They come highly trained in their specific fields.
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. 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 can withhold taxes from such an employee and tell them the work they are supposed to do by setting rules and regulation.
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. Motivating them is necessary for increased productivity. It is your duty as the employer to provide all the necessary tools and workspace. It is your responsibility to pay for their Medicare taxes, sick leave, social security, wages and other benefits.
Many employers get caught misclassifying employees as being independent workers as opposed to being full-time. This means that you may get harsh penalties. You need to be able to distinguish between the two. To avoid confusion, ensure you know the IRS requirements.