Most employers have a hard task when deciding to hire 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. A 1099 employee is required to fill a 1099 form. This is because they are self-employed and get payment based on the terms of contract. A W2 employee get regular wages and benefits from their employer. Their employers have total control in the work they assigned to them. Check stubs are not the same.
A 1099 employee is fully independent and has contracts for specific jobs. They get to do their job when they want and they rely on their skills. They are the ones who set the amount they wish to charge. They can also choose to work for more than one company. However, depending on their pay check their taxes can be withheld.
Hiring a 1099 employee has an advantage of not paying benefits. It is also cost-effective to pay them compared to W2 employees. You have flexibility because you hire them only when in need. They are also trained in their field.
The cons of hiring a 1099 in may have a clash of interest. You will also not be able to fire them anytime you want because the contract is binding. 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 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 con is that training and managing the W2 employees is not an easy task. Motivating them is necessary for increased productivity. You also have to provide the workspace and the necessary tools. 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.
Many employers get caught misclassifying employees as being independent workers as opposed to being full-time. This means that you may get harsh penalties. It is important you know the difference. Check the IRS requirements to learn about the taxes and avoid confusion.