Who to Hire: 1099 or Employee

Over the last several articles, we have been on a journey with Barbara Business Owner to explore her hiring options for her business. We dove deep into the worker options of 1099 or employee, the obligations she may have to each of these types of worker, where contingent and remote workers come into play here, and the importance of properly defining a worker to avoid misclassification.

Today we present a simple guide to when it’s best to hire an employee and when to hire a 1099 contractor. We will be working with Barbara Business Owner as she hires two roles for her law firm: a legal research assistant and a graphic designer. 

1099 or Employee Considerations

When determining the type of worker best suited to the hiring needs of a business, Barbara will want to start by considering the actual work that is going to be performed, what will be needed for the work to be completed, and how the worker will function in relation to her business.

What is the type and nature of work needed? Consider if the work that is needed is integral to the primary offer of the business. Meaning that if the work being performed is an extension, part of, or vital for the business to offer its core product or services.

What is needed for the work to be completed? Next, consider if there is specialized equipment, training, or location needed to fulfill the responsibilities of the job. The more context, support, or specific requirements there are in a role, the more likely it is that regulations will require an employee status.

What type of control or flexibility will the worker have in the role? Does the worker have a regular, ongoing say in their work schedule or are they required to work certain days, times, shifts, in a particular location? The more control and say the worker has the closer they may be to the 1099 option.

What is the opportunity for profit, in the role? Consider if the worker has a chance for profit or potential financial loss in their work with the hiring business.. In the case of employees, there should be no financial risk associated with their work, as the employer assumes that risk. Independent contractors, however, function as a business and have associated financial control and therefore risk as they perform their services.

Outside of this one opportunity, does the worker function as a business? Consider if the worker, outside of the work for this particular role, already functions as their own, independent business. Ask – do they do this work for other clients?  Do they have a business established? And other similar questions.

Based on this criteria, it is clear to Barbara that her new legal research assistant, Emily, will need to be hired as an employee as this position is required to work specific hours, use legal software provided by Barbara’s business, and be trained by Barbara. Emily will be completing work that is part of Barbara’s core business offer.

On the other hand, Barbara is free to leverage Frank Freelancer for her graphic design work. Frank brings specialized expertise and his own equipment to the work he does for his clients. Barbara uses Frank services as needed, and the designs he submits are used in her marketing efforts, not part of the client work she delivers.

It is important to note that if a worker meets one of the criteria for an independent contractor, this does not equate to qualifying as a 1099 worker. In fact, the opposite is true – just one of the above criteria can disqualify a worker from being a contractor. They should meet all of the 1099 criteria in order to be utilized as a contractor.

The above is just the beginning of the maze of worker compliance around 1099 or Employee classification. Please consult a professional workforce partner to ensure proper classification for each worker.

Contact us today to maximize hiring options without exposing the business to unnecessary risks.

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.