There are some hard decisions that employers have to make when it comes to hiring employees. There has been argument 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 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 are self-employed and get paid depending on the contract. As for W2 employees, they get benefits and wages from their employer. Their employers have total control in the work they assigned to them. 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 get to do their job when they want and they rely on their skills. They also charge an amount that they see fit. They can also choose to work for more than one company. This means that their taxes can be withheld from their pay checks.
The main benefit of hiring a 1099 employee is that you don’t have to pay them benefits. You spend a less amount hiring them compared to W2 employees. The greatest advantage is that you hire them only when necessary. They come highly trained in their specific fields.
The con of hiring an independent contractor is that at times your interests may differ. As an employer you don’t have the option of firing them because you have a 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 on the other hand, get regular salary and benefits from an employer. 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 benefit of W2 employees is that they are committed to their work. You have the advantage of counting on them during busy times. You have total control of their schedules.
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. You also have to provide the workspace and the necessary tools. 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 could result in harsh penalties. You need to be able to distinguish between the two. Familiarize yourself with the IRS requirements to know more about taxes.