A 1099 employee is someone who is a business owner or contractor that provides services to other businesses. The Internal Revenue Service generally qualifies these types of workers as self-employed and not employees. They are non-salaried and companies do not pay them wages for their services. Companies come to a mutual agreement with a 1099 employee about how much they will pay, the schedule, or the frequency. Businesses often pay 1099 workers hourly or per assignment.
There are three classification categories that distinguish 1099 employees from W2 employees:
Behavioral – You do not control what the worker does or how they complete their job when you hire an independent contractor.
Financial – How you pay a worker and whether or not you reimburse for any expenses dictates their relationship with your business. Some companies include expense reimbursements as the 1099 income or avoid reimbursements altogether.