Majority of employers have found themselves in a dilemma when hiring employees. There has been argument 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 relies on contracts which makes them fully independent. A 1099 employee is independent and works on different contracts. They get to do their job when they want and they rely on their skills. They charge a cost that they find suitable. They do work for many businesses. However, depending on the job they do their taxes can be withheld from their pay check.
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. 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 on the other hand, get regular salary and benefits from an employer. 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. They can work late for you when needed. 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. As an employer, you will be required to offer them the needed tools as well as the workspace. As an employer it is your duty to pay their wages, sick leave, Medicare taxes, sick leave as well as other benefits as the page suggests.
Majority of employers make the mistake of misclassifying their employees as independent contractors. This could result in harsh penalties. You need to be able to distinguish between the two. To avoid confusion, ensure you know the IRS requirements.