The rise in technological innovations, the evolution of employer relationship, and an increase in the number of independent workers are just but a few vital factors that are resulting in the development of the workforce landscape. As a small business owner, you have obviously faced the difficult task of choosing from a broad spectrum of talents and also getting to manage how the work is done. You are no longer looking for the best person to fit into the job, but are seeking the best type of workforce model; with the discussions ranging from the traditional W-2 employees and the 1099 independent contractors. With this debate in mind, your organization must comprehend the pros and cons, and legal implications in talent acquisition to correctly classify workers.
During calculations, the hourly pay of an independent contractor is probably higher than that of an employee, but at the end of the day, independent contractors result in an overall lesser spend. This is because the independent contractors are liable to pay both the employee and employer portion of Social Security and Medicare. In so doing, your company will be exempted from this costly and time-consuming tax. For the W-2 employees, the employer is expected to pay half of the taxes.
Flexibility is a key determining factor on whether to hire the 1099 independent contractors or the W-2 employees. If your company is seasonal and needs certain specific talents at specific times of the year, you can comfortably hire the independent contractors. However, if your organization needs to have particular employees all year round, and have complete direct control over the staff at all time, then the W-2 employees are the best. The decision to use a W-2 or a 1099 employee lies in the specific demands of your project.
Independent contractor misclassification risk can be one of the costliest if you misunderstand it. You have to consider whether an individual fit in to be an independent contractor because, in the case of misclassification, your organization risks heavy penalties. While to correctly classify them can be a daunting task, you can always reach out to us for clarity.
Finances, flexibility, and misclassified risks are critical for business, making the decision between W-2 and 1099 employees hiring decisions. In having a well-thought engagement process, you will minimize the disadvantages and have retained advantages.