Which Is Better, W2 Employees or 1099 Contractors?

We often get this question from our clients. Should they hire their new team member as a 1099 contractor or a W2 employee? At times, the choice is easy as the laws are evident as to which one it should be. If someone is actively involved in the day-to-day running of your business, there should be no question. They should be a W2 employee. Other times, if they are working on marketing and social media, working as an assistant responsible for various personal and business tasks, or working on a specific project, it’s not as easy to make a choice. We’ve created an excellent visual resource for quick information on this topic. You can grab it on the Free Resources page of our website or at this link: W2 vs. 1099

There are also some essential regulations when it comes to 1099 contractors. Two of the most important are 1) you can’t tell a contractor when they must work or 2) how to accomplish their tasks. That’s up to them. You tell them what you need and give them due dates - and then leave it up to them to get it done. You also cannot assign them KPIs or performance reviews. The benefit here is that if you don’t enjoy working with them or they don’t complete the work assigned to your specifications, you can end the relationship and not use them again. 

As with any W2 employee, your labor costs will be higher. You will pay a percentage of their social security tax and are responsible for withholding taxes made to the government on their behalf. Typically, employees have PTO, paid time off, provided by the company. However, you can expect a W2 employee to follow your SOPs and adhere to KPIs. You can also conduct annual reviews with them. If you’re thinking about providing a laptop or offering a bonus, a W2 employee is probably your best option.

Whether or not you will bring on your next team member as an independent contractor or a W2 employee, We Recruit Well can help you find them. Don’t forget to download the resource that gives you a quick overview of a W2 vs. 1099 contractor.