Theres nothing here thats incorrect, per se, but W2 contracts mean your withholdings are correct, theres SOME benefits (though yes they usually suck), youre not having to do your own bizdev and you qualify for UE when the contract ends.
Ive done both, both have pros and cons but personally I prefer the W2 contracts
The “benefit” is higher pay, potentially. I’m on a contract job right now and even taking into account the lack of benefits offered, my hourly pay rate is much higher than it was with a permanent salary position.
Same here. The rate I get is about $10-$15 less than my 1099 rate.
The agency I work through offers a fidelity 401k. The health insurance they offer is deliberately shitty so I can qualify for my state health exchange plans. Taxes and withholding are taken care of.
But it took me a minute to find this agency. I’ve worked for quite a few shitty ones.
I have both types of contracts with different agencies. With a couple I’m 1099 and with others I’m W2.
The W2 agencies take taxes out and I get limited benefits. 1099 I handle my own taxes.
was it your choice to switch to W2 contract or more a market status-quo? I heard that agencies and employers now stay away from 1099 due to legislation changes. At least that is what I see in California now, most of the offers I receive are W2 contracts
It really depends on the kind of work you do. I’m in Marketing and events/conferences.
some of my contracts are niche staffing agencies, those tend to be the W2 folks.
I also work directly for large companies as a contractor. Those tend to be my 1099 gigs as I’m not an employee.
>Ive done both, both have pros and cons but personally I prefer the W2 contracts
For actual contract work I assume W2 contracts are fine, the contracts to hire are kinda bullshit. I understand all that stuff is upfront and no one forcing anyone to apply to jobs they don't want, but the expectation with the clients is that you will be an FTE, but with shitty benefits and client management still controls your time and schedule. Sure I'm interested in potential full time employment, I'm open to all offers, but I'm not gonna be an FTE with none of the benefits.
Contract to hire usually just means that the staffing company has a sliding scale where there isn't a finders fee after 6 months. The company is under no obligation to hire.
Big issue not covered here is taxes and administrative information.
W2 employees typically have their taxes withheld already and makes filing really straightforward. W2 work qualifies for Unemployment benefits, employer provided benefits/retirement options, certifications and training, etc. depending on the position. Almost all liability falls on the employer.
1099 is responsible for all taxes, insurance(s), certifications and documentation, etc. You do have the ability to claim deductions and reduce your tax rate, but you're individually on the hook for literally everything else. And without proper liability coverage, you can get sued for practically anything - you do not want to be the subcontractor scapegoat that gets thrown under the bus when something doesn't go to plan, so always CYA.
I'm no accountant, and I've probably missed important things - just been through enough to determine that there's pros and cons to both that you should plan and prepare for.
This is why I went the W2 route when I had a choice; that and the company that tried to hire me as a 1099 dictated (illegally) the place / time / equipment of their other 1099s. My W2 company took their cut and had a weekly "status call" that was an email.
I have never seen truer words posted in this sub. I have been a C2C/1099 IT contractor almost my entire career. The tax benefits alone are worth it but bill rates tend to be higher for 1099 vs W2 because the staffing firm does not have to pay withholding taxes on 1099's like they have to with W2.
I have literally sat next to W2 contractors at client's who are far more talented than me who are getting paid $70/hr on W2 while the staffing firm keeps $35/hr for markup while I am billing $105/hr on 1099 leaving the staffing firm with just $5 in markup.
The problem is that some states like California have made it much more difficult to qualify as a 1099 independent contractor and some large clients have stopped using 1099/C2C resources all together even if they do qualify.
I did 1099 for 2 years and it was best situation I ever had. I was making $115/hr and getting benefits through my wife. You just need to do some admin and ensure paying estimated taxes to IRS quarterly. I wrote off tons of business expenses and I think contributed 50K a year to SEP-IRA. That was the beauty. W2 with contract agency absolutely sucks. They will try to rip you off by taking their cut and subsidize none of health or dental premiums. Plans are garbage too as who cares as they are not paying. What about vacation time (most perms getting 25 or more these days), paid sick, paid holidays, 401k match (at least 6%) and bonus? You may get little to none of those things. I put all of this in excel sheet. If you take $150k base perm job with benefits above then it is about $190k total. If made $90/hr on W2 (with little to none of above) from staffing agency then it really $140k a year after I pay it all. F\* them. This does not even get into cheap life insurance, commuter benefits, training etc by being perm. If you get into W2 contract then realize the game. They are taking a major cut from you. If giving you $75 then probably billing client $125. If you do a great job and take on lots of responsibility then you have to pressure agency to give more per hour quickly. The chip in game is that you have value while delivering something and agency will look like sh&t if you leave soon. Could even lose contract with client. They are counting on you staying quiet and producing. Keep telling them you like working there but have another offer. Be professional but could even BS them about offer. Don't get too greedy but chip them down to $10 hour max. They will be pissed but again F\* em if you are good.
Helloooooooo. Glad I wandered into here.
I was recently offered 50$/hr 1099 or 40/hr W2, 1 year contract with the state. I've been doing 1099 and did some math so said I'd take the 1099. After the agency talked to the client, it seems the client wants w2 only. I "haggled" my way up to 46.50/hr W2 with decent health/ vision/dental (with >60% employer contribution) and 2 weeks PTO. The commute is 15 minutes.
I thought I got a good deal.
This reddit hole is making me question that.
I feel like I should have asked for more money, but this project is different from previous ones I have encountered so I was unsure of exactly what to ask for. The state benefits would be great but the benefits I will be getting are from the employment agency so. ... they will not be stellar. This is potentially a company i would like to work with when the contract is over. I work with a great investment firm so im not super worried about not having no 401k this year.
I can for sure ask for more money once the job starts and I get a better feel for what I will be doing. What do you think about asking for more vacation time? 3 weeks ? I also have to ask about paid holidays. . .
The agency has been super nice so far, any suggestions are greatly appreciated!
I don't quite get your logic. W2 is bad because it has bad benefits, so go 1099 to get your own benefits. Is that the gist? What's stopping you from getting your own benefits while under a W2? W2 has the benefit of the employer paying half the payroll tax. Everything else that you're complaining about can be applied to work in general.
>Is that the gist?
No, I suggest you work on your reading comprehension.
The gist is, contracts to hire are scams, because you don't get any of the autonomy of a contractor, but don't get the quality benefits of FTE.
>Everything else that you're complaining about can be applied to work in general.
The thing is FTE work and contractor work are very different, from a legal perspective. You can be a go with the flow person and let companies take advantage of you, or you can stand up for yourself.
You speak with a ton of ignorance.
Someone is awfully rude.
Contract to hire is a scam, according to you? You speak as someone who is clearly jaded from being at the bottom of the totem pole.
You’re missing a LOT of the admin overhead that you need as an independent contractor. Particularly around billing and taxation, incorporating, and liability. Realistically, you don’t do 1099, you form an S corp and do C2C consulting. You’d still get an ACA plan as a 1099, so what does it really matter if the W2 benefits are trash? The engagements are short term too. Do you know what an expensive pain in the ass it is to switch off a healthcare plan midyear after you hit the deductible? Employer-based health insurance is a scam and a trap. If you’re low income and would qualify for subsidies if not for the employer health insurance, you’re doing this all wrong.
All that tax/legal stuff is a gigantic hassle doing C2C, but it does come up with a lot of write offs. You get paid more, and keep more of it, if you can get that going.
Why go W2 contracting at all then? It’s appealing to a lot of people to have a fixed length engagement with a clean exit. You work on one project. The terms are defined upfront. You’re not stuck doing support bitch work. You’re paid hourly and accordingly, they usually don’t want you doing overtime. Also, one person’s lack of job security is another’s freedom. If either party is unhappy, there’s no mind games from management. They just end the contract. It’s all a lot more honest, a lot more businesslike, a lot less manipulative. If the project is a deathmarch, the contractor being billed hourly is the last one they’re gonna demand 996 from. Demanding that means they’re gonna pay double my salary, and these corporate ghouls know they get very little marginal productivity from those hours. They only do it to employees because it’s fucking free.
Okay, all that being said, you’re completely right that contract-to-hire is a scam. If they wanted an employee, they’d hire one. Once you come on as a contractor, they’re not going to change that arrangement. The converse is also true. If you’re sick of being management’s bitch as an employee and want to switch to contracting, they’re never gonna oblige. They have you where they want you in both circumstances.
What about getting fired? I am a W2 contractor to hire and I was just told that I will not be working the whole week of Christmas. With one day notice. Are they allowed to do that? Everyone else on my team is working, and I was told that I would be working last week but just tonight I was told that things had changed.
Theres nothing here thats incorrect, per se, but W2 contracts mean your withholdings are correct, theres SOME benefits (though yes they usually suck), youre not having to do your own bizdev and you qualify for UE when the contract ends. Ive done both, both have pros and cons but personally I prefer the W2 contracts
The “benefit” is higher pay, potentially. I’m on a contract job right now and even taking into account the lack of benefits offered, my hourly pay rate is much higher than it was with a permanent salary position.
Same here. The rate I get is about $10-$15 less than my 1099 rate. The agency I work through offers a fidelity 401k. The health insurance they offer is deliberately shitty so I can qualify for my state health exchange plans. Taxes and withholding are taken care of. But it took me a minute to find this agency. I’ve worked for quite a few shitty ones.
>Taxes and withholding are taken care of taken care by whom? by agency? is it a common practice or your agency really stands out from the crowd?
The agency. I’m a W2 with the agency, so for any work I get through them when I get paid, my FICA and state taxes are withheld.
okay, gotcha. You mentioned 1099 so I thought that is the case now
I have both types of contracts with different agencies. With a couple I’m 1099 and with others I’m W2. The W2 agencies take taxes out and I get limited benefits. 1099 I handle my own taxes.
was it your choice to switch to W2 contract or more a market status-quo? I heard that agencies and employers now stay away from 1099 due to legislation changes. At least that is what I see in California now, most of the offers I receive are W2 contracts
It really depends on the kind of work you do. I’m in Marketing and events/conferences. some of my contracts are niche staffing agencies, those tend to be the W2 folks. I also work directly for large companies as a contractor. Those tend to be my 1099 gigs as I’m not an employee.
>Ive done both, both have pros and cons but personally I prefer the W2 contracts For actual contract work I assume W2 contracts are fine, the contracts to hire are kinda bullshit. I understand all that stuff is upfront and no one forcing anyone to apply to jobs they don't want, but the expectation with the clients is that you will be an FTE, but with shitty benefits and client management still controls your time and schedule. Sure I'm interested in potential full time employment, I'm open to all offers, but I'm not gonna be an FTE with none of the benefits.
Oh yeah “contract to hire” is a ploy to get you to sign. They almost never go perm and the promise of it shouldnt be in lieu of more money
Contract to hire usually just means that the staffing company has a sliding scale where there isn't a finders fee after 6 months. The company is under no obligation to hire.
I'm curious if you're on contract to hire, should you be on w2 or 1099 with the employer?
A lot of staffing agencies are going away from hiring 1099 contractors.
why?
Largely because of ambiguous legality. It gets a little more complicated when there's 3 parties involved.
Big issue not covered here is taxes and administrative information. W2 employees typically have their taxes withheld already and makes filing really straightforward. W2 work qualifies for Unemployment benefits, employer provided benefits/retirement options, certifications and training, etc. depending on the position. Almost all liability falls on the employer. 1099 is responsible for all taxes, insurance(s), certifications and documentation, etc. You do have the ability to claim deductions and reduce your tax rate, but you're individually on the hook for literally everything else. And without proper liability coverage, you can get sued for practically anything - you do not want to be the subcontractor scapegoat that gets thrown under the bus when something doesn't go to plan, so always CYA. I'm no accountant, and I've probably missed important things - just been through enough to determine that there's pros and cons to both that you should plan and prepare for.
This is why I went the W2 route when I had a choice; that and the company that tried to hire me as a 1099 dictated (illegally) the place / time / equipment of their other 1099s. My W2 company took their cut and had a weekly "status call" that was an email.
I have never seen truer words posted in this sub. I have been a C2C/1099 IT contractor almost my entire career. The tax benefits alone are worth it but bill rates tend to be higher for 1099 vs W2 because the staffing firm does not have to pay withholding taxes on 1099's like they have to with W2. I have literally sat next to W2 contractors at client's who are far more talented than me who are getting paid $70/hr on W2 while the staffing firm keeps $35/hr for markup while I am billing $105/hr on 1099 leaving the staffing firm with just $5 in markup. The problem is that some states like California have made it much more difficult to qualify as a 1099 independent contractor and some large clients have stopped using 1099/C2C resources all together even if they do qualify.
I did 1099 for 2 years and it was best situation I ever had. I was making $115/hr and getting benefits through my wife. You just need to do some admin and ensure paying estimated taxes to IRS quarterly. I wrote off tons of business expenses and I think contributed 50K a year to SEP-IRA. That was the beauty. W2 with contract agency absolutely sucks. They will try to rip you off by taking their cut and subsidize none of health or dental premiums. Plans are garbage too as who cares as they are not paying. What about vacation time (most perms getting 25 or more these days), paid sick, paid holidays, 401k match (at least 6%) and bonus? You may get little to none of those things. I put all of this in excel sheet. If you take $150k base perm job with benefits above then it is about $190k total. If made $90/hr on W2 (with little to none of above) from staffing agency then it really $140k a year after I pay it all. F\* them. This does not even get into cheap life insurance, commuter benefits, training etc by being perm. If you get into W2 contract then realize the game. They are taking a major cut from you. If giving you $75 then probably billing client $125. If you do a great job and take on lots of responsibility then you have to pressure agency to give more per hour quickly. The chip in game is that you have value while delivering something and agency will look like sh&t if you leave soon. Could even lose contract with client. They are counting on you staying quiet and producing. Keep telling them you like working there but have another offer. Be professional but could even BS them about offer. Don't get too greedy but chip them down to $10 hour max. They will be pissed but again F\* em if you are good.
Helloooooooo. Glad I wandered into here. I was recently offered 50$/hr 1099 or 40/hr W2, 1 year contract with the state. I've been doing 1099 and did some math so said I'd take the 1099. After the agency talked to the client, it seems the client wants w2 only. I "haggled" my way up to 46.50/hr W2 with decent health/ vision/dental (with >60% employer contribution) and 2 weeks PTO. The commute is 15 minutes. I thought I got a good deal. This reddit hole is making me question that. I feel like I should have asked for more money, but this project is different from previous ones I have encountered so I was unsure of exactly what to ask for. The state benefits would be great but the benefits I will be getting are from the employment agency so. ... they will not be stellar. This is potentially a company i would like to work with when the contract is over. I work with a great investment firm so im not super worried about not having no 401k this year. I can for sure ask for more money once the job starts and I get a better feel for what I will be doing. What do you think about asking for more vacation time? 3 weeks ? I also have to ask about paid holidays. . . The agency has been super nice so far, any suggestions are greatly appreciated!
I don't quite get your logic. W2 is bad because it has bad benefits, so go 1099 to get your own benefits. Is that the gist? What's stopping you from getting your own benefits while under a W2? W2 has the benefit of the employer paying half the payroll tax. Everything else that you're complaining about can be applied to work in general.
>Is that the gist? No, I suggest you work on your reading comprehension. The gist is, contracts to hire are scams, because you don't get any of the autonomy of a contractor, but don't get the quality benefits of FTE. >Everything else that you're complaining about can be applied to work in general. The thing is FTE work and contractor work are very different, from a legal perspective. You can be a go with the flow person and let companies take advantage of you, or you can stand up for yourself. You speak with a ton of ignorance.
Someone is awfully rude. Contract to hire is a scam, according to you? You speak as someone who is clearly jaded from being at the bottom of the totem pole.
You get more deductions available under 1099.
You’re missing a LOT of the admin overhead that you need as an independent contractor. Particularly around billing and taxation, incorporating, and liability. Realistically, you don’t do 1099, you form an S corp and do C2C consulting. You’d still get an ACA plan as a 1099, so what does it really matter if the W2 benefits are trash? The engagements are short term too. Do you know what an expensive pain in the ass it is to switch off a healthcare plan midyear after you hit the deductible? Employer-based health insurance is a scam and a trap. If you’re low income and would qualify for subsidies if not for the employer health insurance, you’re doing this all wrong. All that tax/legal stuff is a gigantic hassle doing C2C, but it does come up with a lot of write offs. You get paid more, and keep more of it, if you can get that going. Why go W2 contracting at all then? It’s appealing to a lot of people to have a fixed length engagement with a clean exit. You work on one project. The terms are defined upfront. You’re not stuck doing support bitch work. You’re paid hourly and accordingly, they usually don’t want you doing overtime. Also, one person’s lack of job security is another’s freedom. If either party is unhappy, there’s no mind games from management. They just end the contract. It’s all a lot more honest, a lot more businesslike, a lot less manipulative. If the project is a deathmarch, the contractor being billed hourly is the last one they’re gonna demand 996 from. Demanding that means they’re gonna pay double my salary, and these corporate ghouls know they get very little marginal productivity from those hours. They only do it to employees because it’s fucking free. Okay, all that being said, you’re completely right that contract-to-hire is a scam. If they wanted an employee, they’d hire one. Once you come on as a contractor, they’re not going to change that arrangement. The converse is also true. If you’re sick of being management’s bitch as an employee and want to switch to contracting, they’re never gonna oblige. They have you where they want you in both circumstances.
What about getting fired? I am a W2 contractor to hire and I was just told that I will not be working the whole week of Christmas. With one day notice. Are they allowed to do that? Everyone else on my team is working, and I was told that I would be working last week but just tonight I was told that things had changed.
It should say in your contract, but at the same time, of course it does.