What Is a Better Solution for Your Business: 1099 Employees or W2 Employees?

Last updated: 1 June 2023

Faced with the war on talent, many businesses are trying to come up with a hiring strategy that will grant them access to a bigger talent pool and cut the expenses, and many decide to hire 1099 employees. What are 1099 employees and whether that might be a solution for you, find out in our blog.

The Difference Between 1099 Employees and W2 Employees

There's a common misconception that the 1099 employees are the same as W2. However, they are not, and the main differences are related to tax forms, work location, and pay. 

These types of workers are named according to the type of American tax form they are obligated to fill out when filing their taxes; a 1099 and W2. People who work for themselves have to handle taxes on their own with a 1099 tax form while W-2 tax form are employees of the company. W2 employees work directly for a specific business. 

An independent contractor, freelancer, self-employed individual, or sole proprietor are other terms used to describe 1099 workers since they are not permanently employed by the company. On the other note, W-2 employees are directly employed by their company, and are typically full-time or permanent employees. Important differences between these types of workers include benefits,  scheduling, equipment procurement, and training. W-2 employees have mandatory benefits and scheduled working hours which are determined by their employers. 1099 employees have more freedom to determine their hours, but do not receive mandated benefits. 1099 employees are trained professionals who bring their own equipment, but the employers of W-2 workers have to provide training and tools for them.

When it comes to pay, W2 employees always get paid from the same company, while 1099 workers get paid from whoever they are currently working for. This means that they usually work for multiple companies on a various projects at the same time. 

What are the benefits of hiring 1099 'Employees'?

Hiring a permanent employee can be a costly commitment, particularly when an employer must pay taxes toward an employee's benefits in addition to funding their training and equipment costs. Hiring 1099 employees offer more flexibility for both employer and employee. A 1099 employee has the flexibility to work on their own schedule, the potential to earn more than they may have as a salaried employee, and the freedom to control their work-life balance. For an employer, hiring a 1099 employee can cut costs by granting the freedom to contract to work out only when necessary when workload increases and by not having to pay for training or equipment. Hiring 1099 employees also give employers the unique opportunity to access fresh global talent and new skills in the European market.

What are the downsides of hiring 1099 Employees? 

Even though hiring 1099 employees can be beneficial for some businesses, there are still some disadvantages that might cost your company money at the end of the day. Since 1099 employees are working for more than one client, there is a chance they will have less focus because they are juggling many projects at the same time. This might result in longer completion times and/or lower quality work. Also, when you have in-house employees you can manage them on a day-to-day basis easier, so be prepared that with hiring 1099 employees you will have less control. Employees 1099 are their own bosses, because they are self-employed. From a legal perspective, hiring a 1099 employee can be risky for employers. They are not covered by workers' compensation insurance and are not subject to the company's unemployment or payroll taxes.

The best of both worlds

If you are currently trying to find the right talent for your company, but you want them to be dedicated to your business only, then the best solution for you is to find an HR Outsourcing partner. In this case, you don't have to have a permanent establishment, but you can still hire employees all around Europe. Your HR Outsourcing partner will take care of all legal challenges, payroll, compliance, and also managing your employees. It is beneficial for both ends because your employees will have a single point of contact that can always address any questions or concerns they might have. 

How Can EuroDev Help You? 

EuroDev was established in 1996 in the Netherlands with a single, defined purpose to help mid-sized North American companies expand their business in Europe. So far, we have partnered up with over 500 companies and helped them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing, and Digital Marketing. Services provided include Sales Outsourcing, HR Outsourcing, and Digital Marketing.

Disclaimer: While we strive to provide accurate and timely information, please note that HR policies and regulations can change frequently. It is recommended that you seek guidance from our HR consultants to ensure that the data presented here is current and accurate.

Spread the value