A lot of people, employees and employers alike, have questions about 1099 vs. W-2 worker status and which is better for them. As part of our software support for employers, payroll, and
For some, the question of 1099 vs W-2, which is better for employees or employers, is an important consideration. As part of our software support for employers, payroll, and filing forms, Advanced Micro Solutions (AMS) provides general knowledge resources for these types of questions. Here’s what we can tell you:
1099 vs W-2 Employees: Which is Better in Today’s Economy?
First and foremost, you need to know whether 1099 vs W-2 workers is a real choice for your business. The IRS lays out rules that say if the employer controls the exact schedule, nature of the work, and the necessary supplies, the worker is an employee. For many businesses, it’s simply implausible to structure the work within the rules of 1099 self-employed workers. Take the restaurant industry, for example. The most effective way to staff a restaurant with restaurant payroll software is to build a schedule around peak and lull hours. In this way, the work schedule is controlled by the employer and not the service staff. In contrast, a 1099 freelance journalist may pursue a major scoop at any and all hours they want.
That said, there are also plenty of jobs that can be structured and classified as either a W-2 employee or a 1099 contractor. In these situations, there are definitely cases in which employers lean toward 1099 workers so they don’t have to worry about things like payroll taxes and employee benefits. Yet, in a modern economy increasingly driven by a demand for workers with social skills, digital content, and software development, it’s often the nature of the work and lifestyle trends that’s leading to more 1099 contractors.
- Learn more about rules that limit 1099 vs W-2 worker classification here.
- You can also make a formal determination by filing Form SS-8.
Flexible Hiring Practices and Work-From-Home Employment
Many employers are starting to recognize that specific positions may be best filled by either an employee or a self-employed contractor—often depending on the personality, work history, and skill set of the applicants themselves. As such, many hiring managers are given the latitude to fill these positions with whatever employment situation is best for the employee and the company as defined by expected production per cost.
It’s also true that job seekers may be interested in a position for which they’re well qualified but only available to work remotely or with other types of schedule limitations. From software developers to social media marketing, the latest generation of digital communications has enabled more work than ever to be done from home and other remote locations. Among the types of workers who top this list? Highly skilled professionals who are also new parents. The ability to help at home with the kids without creating a career gap can be a big incentive for these workers. So much so that employers may be able to hire these skilled professionals at a discount, while also potentially earning their loyalty over the long-term.
- You can read more about these employment factors and which is better for employees and employers at The Motley Fool.
W-2 to 1099 Calculator
A W-2 to 1099 calculator can be a great resource for trying to generate an apples-to-apples comparison. When an employer recognizes that a position could be structured and filled just as easily by a self-employed worker as an employee, they may want to put together multiple compensation packages that seek to create pay parity between the classifications. Likewise, a job seeker may want to know what’s fair compensation when successfully arguing that 1099 self-employment makes the most sense for both them and the company. For these reasons, AMS has put together our own resource center for W-2 to 1099 calculators.