The Business Owner's Guide to Classifying W-2 Employees and 1099 Independent Contractors

As a business owner, you’ve likely considered the benefits and potential drawbacks of hiring (W-2) employees and working with (1099) independent contractors.

In years past, most American workers held a full-time job, worked a 40-hour workweek, and were paid a salary and (often) benefits by their employer. Today, independent contracting has become much more prevalent, and workers are increasingly embracing this alternative employment arrangement. Business owners, too, have welcomed the option as an opportunity to access the expertise they need for an often-reduced price (since taxes, benefits, and paid time off are not typically part of an independent contractor agreement.)

But as with all staffing options, the devil is in the details. Many business owners engage the services of independent contractors—and classify them as such—but make the mistake of treating them as employees. Misclassifying independent contractors, however, can put your company at risk of violating various state and federal employment laws.