What Does Contract W2 Mean for Small Businesses?

As a new business owner, you may wonder: What does contract w2 mean for a job position? Employers often hire W2 and 1099 workers. Even so, employers onboard a W2 contract worker into the workspace in a different manner. A temporary contract W2 is a hybrid document – somewhere between an employment contract and an independent contract, most often distributed by a temporary workplace.

We will break down what the position entails, including what a W2 contract is and its various benefits and drawbacks.



What is a W2 Contract?

Some staffing agencies hire workers and place them in an organization. When that happens, it qualifies as a W2 contract position. The staffing agency uses the worker to fill a short-term role. Other times, the worker may handle a specific project for a set amount of time. Knowing what does contract w2 mean is understanding that your business will work with the staffing agency when arranging to fill a position.

The agency is responsible for paying these W2 contract workers. Your company simply creates a contract with the staffing agency. Then, your company will let them know when you need their workers for a short-term or contract project.


Do W2 Contractors Work Full Time?

Working with a W2 contractor is like having a full-time employee in your company. However, W2 contractors do not work full time for the same company. They work for your company until they complete their duties. Afterwards, they will move onto different organizations for new work.


What Does Contract W2 Mean for Payroll?

You will not put W2 contract workers on your payroll. Your business will pay a fee to the staffing agency. The agencies recruit, hire, and then propose the ideal candidates for your assignments. If you do not want many people on a payroll, outsourcing for W2 contractors is highly beneficial. However, if you want to manage your own payroll, accounting and payroll software can help.


Pros and Cons of W2 Contract Workers

W2 contractors come with their own expertise. You can give them an assignment and trust that they will quickly get to work. Companies also only have W2 contractors for a set period of time. During that time, you can see if they fit well with your workers. Lastly, your company will spend less money filling these positions. Unlike for your employees, you do not need to offer benefits.

Alternatively, the short-term roles can mean that W2 contractors may not adjust to the company culture. You will also need to navigate multiple contracts to hire resources. The resources for a job function can become time-consuming. Thirdly, if you like your W2 contractor, it may be hard to work with them again. They are within their rights to move onto the next job once they finish.


Using AMS for W2 Contractors

You may wonder what does contract w2 mean when tax season rolls around. Even though you do not pay the contractor, you will need to keep track of the staffing agency’s fees. Our software helps users electronically file year-end W-2 and 1099 forms directly to the IRS and SSA. Also, tax software helps minimize your chances of losing or misplacing data.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.