For various reasons, some workers prefer to be paid on 1099 instead of a W-2. But it’s not the worker’s decision. The IRS guidelines determine whether a worker is classified as a 1099 independent contractor or a W-2 employee.
Still, recruiters and their clients often get push back when trying to convince their candidates that they need to be paid as a W-2 employee rather than a 1099 independent contractor. So how do you convince them that they need to be paid on W-2?
For starters, you may want to point out the risks. Independent Contractor misclassification audits have increased on both the federal and state levels over the past few years. There has been a lot of focus on how this affects the tax liability of companies, but workers can also be subject to audits. If it is found they had been misclassified, they could be required to file amended tax returns, which could result in additional taxes and penalties.
Plus, there are many advantages to being classified as a W-2 employee. By being a W-2 employee, workers will:
- Receive a weekly paycheck with the option of direct deposit
- Have access to contractor benefits like medical insurance, vision, dental, and life insurance
- Have access to a 401(k) plan
- Be eligible for unemployment insurance
- Be covered under the employer’s Workers’ Compensation plan
- Not have to negotiate and/or write a client contract
- Not have to generate invoices to the client
- Not have to handle collection issues with the client
- Not have to float expenses while waiting on payment from the client
- Not have to do their own quarterly tax filings
- Have half of the Social Security Tax paid by the employer
- Have half of the Medicare Tax paid by the employer
By pointing out the risks of being classified as an independent contractor and the advantages of being paid on W-2, you can convince even the most reluctant candidate that being properly classified is in their best interest.