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The Key Differences Between 1099 and W2 Employees: Choose Wisely!

This post is part of my Choose Wisely series.

Note: This post was updated April 23, 2023

When I first joined a remote jobs group a while back, I saw people throwing the terms "W2" and "1099" out there frequently. Any time someone posted looking for the job, someone would comment and ask if they needed a W2 or 1099 position.

Up until last spring, I had only worked W2 jobs, and I was not familiar with what 1099 forms were. I'd heard of them, but I didn't know the pros and cons of working as a 1099 contractor as opposed to a W2 employee.

Many job seekers and business owners may have some of the same questions I did, so I wanted to simplify the the key differences between 1099 and W2 employees for everyone.

The Key Differences Between 1099 and W2

W2 and 1099 are both tax forms used to report wages. However, they function differently, as do the businesses who use each form.

1099 vs. W2. Forms

1099 forms are issued to independent contractors who have made at least $600.

W2 forms are issued to employees of a company.

The key difference between issuing a 1099 or a W2 form comes down the difference between an employee and an independent contractor (or freelancer).

Employees vs. Independent Contractors

Employees are Committed to Your Organization

It's possible to hold multiple W2 jobs. I did it back in 2016-2017, and I found it very challenging. Both jobs had very specific expectations and often required working longer hours than I expected to be working when I was hired.

I dropped one job after a year because I had no personal life at all because I was working seven days a week under strict schedules. If you need someone to be committed to your organization under a strict schedule, you will need to hire a W2 employee.

Independent Contractors Usually Set Their Own Hours

A big reason people choose to become independent contractors is so they can set their own hours. It's normal for contractors to make their own schedules, and it makes it easier for managing a healthy work-life balance.

Independent Contracts Do Not Work 40 Hours for One Client

Independent contracts do not and should not be expected to work a full-time schedule for one company. While there may be short periods of time where they agree (at their discretion) to work extra hours, independent contractors normally do not exceed 20 to 25 hours of work in a week for a single client.

Most independent contracts work with many businesses to keep their contracting business afloat, which allows them flexibility. Most contractors also don't like to put "all their eggs in one basket".

Independent contractors understand that jobs come and go, and working with many businesses allows them to maintain a steady flow of income all year round.

W2 Employees Receive Paid Training

Less time is devoted to training contractors, so it's important to hire contractors who are already skilled in their field and are proven self-starters.

Contract work is not ideal for someone who thrives best with clear instructions on how to do specific tasks (although there are courses contractors can purchase to learn a specific skillset to make themselves more marketable to businesses).

W2 Employees are Entitled to Employee Benefits

There are local, state, and federal laws regulating who must receive benefits. Contractors are not entitled to benefits because they are not employees. This may be the deciding factor for many people when choosing to apply for W2 positions or 1099 positions. If a person feels they need benefits, they will seek out W2 positions.

If an employer wants to save money and also avoid payroll taxes, the best path for them is to start hiring 1099 workers. Employers can find high-skilled workers in a specific field and not have to worry about paid training and benefits.

However, in some cases, businesses must operate during specific timeframes, so W2 employees are a must in those situations.

Do You Need a 1099 Contractor or W2 Employee?

Hopefully you know which will work best for your business after reading this post. 1099 contractors are ideal for small business owners and entrepreneurs because they allow clients with low budgets to find the high-quality help they need to reach their goals.

Are you considering between a temp and a virtual assistant? Read my thoughts on this topic to help your decision-making process.

Are You a Freelance Writer or Virtual Assistant?

Take a look at these helpful books I've come across during my freelancing journey!

Amazon Affiliates Disclosure:

This post contains affiliate links. As an Amazon Associate, I earn from qualifying purchases.


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