Would you rather be a Contractor or a W2/FTE? Do you know the benefits of both?
Most people don't know the benefits of being a 1099 contractor. Read this to find out some of the benefits that both W2 and 1099 can offer.
Whether to be classified as a 1099 independent contractor or a W-2 employee, Averity is here to help! Things depend on a variety of factors, and each classification comes with its own set of advantages and disadvantages. It's important to note that the decision should comply with legal regulations and not be solely driven by personal preference. Here are some considerations for both classifications:
1099 Independent Contractor:
Flexibility: As a 1099 contractor, you often have more control over your work schedule, projects, and clients. This can be appealing if you value flexibility and autonomy in your work.
Variety: Contractors typically work on a project-by-project basis, which can provide the opportunity to work with a variety of clients and industries, leading to a diverse work experience.
Potential for Higher Earnings: Contractors often have the potential to earn more than W-2 employees due to their ability to set their rates, take on multiple projects simultaneously, and deduct certain business expenses. Typically, Contractors are paid on an hourly basis which means the more hours that are approved by the client, the higher the earning income.
Contractors also have the opportunity to charge on a per-project basis. This ultimately means that you may finish the project earlier than anticipated still receiving the total contracted price.
Deductible Business Expenses: Contractors can deduct legitimate business expenses (such as equipment, travel, and home office costs) when filing taxes, potentially reducing their taxable income. Always consult with your tax advisor/CPA.
Entrepreneurial Opportunities: Being a 1099 contractor can give you a taste of entrepreneurship as you manage your own business and handle tasks like invoicing, marketing, and client relationships.
W-2 Employee:
Stability: W-2 employees typically have a more stable income and benefits package, including health insurance, retirement plans, and paid time off. This stability can provide financial security. This is always the case as we have seen through the years. You are also more likely to hit the highs and lows as the company grows or retracts.
Employer Responsibility: Employers are responsible for withholding taxes, Social Security, and Medicare from your paycheck as a W-2 employee. This can simplify your tax obligations compared to the potentially more complex tax situation of a contractor. How much withheld varies on countless things including location, dependents, income, etc.
Legal Protections: W-2 employees are entitled to certain legal protections, such as workers' compensation, unemployment benefits, and anti-discrimination laws.
Employer-Sponsored Benefits: Many employers offer benefits like health insurance, dental coverage, and retirement plans to their W-2 employees, which can enhance your overall compensation package dramatically. Some employers may offer an optional 410k plan that may include a company match.
Career Growth: W-2 employees often have opportunities for career growth within the organization, including promotions, training, and professional development.
Employee Benefits: W-2 employees may have access to additional perks like paid sick leave, paid vacation, and other employee benefits that contractors may not receive.
Why is Averity crucial to your success as a Contractor?
Regular payment: When hours are approved by the client, Averity pays all Contractors on a bi-weekly basis regardless of billing and receivable terms with the client. This ultimately means that you can rest assured of getting paid on time, all the time.
E&O, Cyber, “other” Insurances: When contracting directly, most companies require umbrella coverages up to $5M with $2M per incident. This can be an expensive burden to carry. Averity is all bound for your protection.
Sales Prospecting: Most Contractors aren’t business development or sales professionals. Chances are that you’re so busy with the project you’re working on, you don’t have the time to prospect for your next client. Let the Averity Team drive the projects to you, line up the meetings, gather feedback, and negotiate your rate. Let Averity do the heavy lifting.
Before making a decision, consider factors such as your financial goals, lifestyle preferences, the nature of the work you'll be doing, the level of control you'll have over your work, and the legal requirements in your jurisdiction. Consulting with legal and tax professionals can help you make an informed choice based on your individual circumstances.
It's important to remember that your classification must align with legal regulations. Employers must properly classify workers according to their job duties and the level of control exerted over their work. Misclassifying employees as contractors to avoid providing benefits or proper taxes can lead to legal and financial consequences for employers.
Whatever route you go, Averity is here to help! All part of The Averity Experience!