1099 or Employee – What Every Employer Should Know

Barbara Business Owner’s firm is flourishing and it’s time to hire. Barbara needs help with both client work and has several projects she needs completed to support her business growth.

As Barbara has been chatting with her fellow business owners her options in the workers have become increasingly complex. It used to be that one would post a job listing, collect applications, host interviews, and make a hire.

Barbara is now realizing there are traditional full time and part time employees and there are also the freelancers and independent contractors. The rise of the remote worker has revolutionized the workforce and talent she can access. And the trend towards contingent workers gives her a number of options for tackling project-based work.

Over the next several articles, we will explore the various types of workers, how their work product and job assignments impact hiring decisions. We will also introduce some of the most critical government regulations that impact workers. This will support Barbara Business Owners to maximize their input for business growth, and capture talent without putting her business at risk.

Let’s start with the basics.

Who is an Employee?

An employee is a traditional worker who performs services for a company, where the company is in control of what is done and how it is done. In other words, the company trains on and directs how and when a job is done. Hence, employees work a predetermined number of hours, on a regular schedule, following the company’s training and policy, and they can expect regular pay from their employer based on time worked. The employer is responsible for tax records and other employment benefits.

This description doesn’t nearly capture all dimensions of an employee, but it gives a good start.

Who is a 1099 Worker?

A 1099 worker also known by several other descriptors – an independent contractor, freelancer, gig worker. They’re often hired for specific projects that benefit from their expertise and experience and are not subject to the same hours and work style as employees.

Most commonly understood is that they are responsible for their own taxes and are not eligible for benefits from the hiring company. However, the maze of contractor compliance goes much deeper.

We are just scratching the surface on all the factors that define a 1099 worker.

1099 or Employee?

While at first glance, both definitions seem very straightforward. However, they are widely misunderstood, and this can lead to a number of issues and regulatory implications for the company and worker alike.

The most common understanding of the differences between an employee and a 1099 worker is taxes, where 1099 workers’ pay their own taxes, while employees get part of their taxes paid by their employer, but the differences go much deeper than that.

There are clear regulations about hiring an employee or 1099 worker, what kind of work they can do, and how they can interact with a business. An employer needs to know when to consider hiring a 1099 worker or an employee and how to balance schedule flexibility vs. risk.

As we continue to discuss 1099 vs. employee in this series, ClearPath Workforce Management stands ready to protect your business from these regulations and ensure they align with the law. You should book a consultation with us right away!

For a customized employee compliance plan for your business, contact us today.

ClearPath is a leading Human Resources Outsourcing company focusing on assisting employers to leverage the independent contractor labor market. We’re committed to helping business owners stay compliant and minimize the risks associated with their contingent labor requirements.

No Legal Advice Intended. This article includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal issues.