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Employees are critical to the success of any business. To maximize the performance of your team, you’ve got to make sure that your employees are inspired, valued, and treated well. If you take care of them, they will take care of your business!
But which type of employee is right for your business? There comes a time where every business owner has to stop and think about this important question. There are pros and cons to each and we will now explore Unsecured business funding in closer detail to help you make the right decision.
“W-2” refers to the tax form that is used for employees. W-2 employees are what most people think of when they hear the word “employee”.
These employees are hired by businesses under a strict and clear employment agreement. These agreements are shaped by legislation and personal arrangements, and determine exactly how an employer is responsible for withholding taxes from an employee’s wages.
It also outlines how an employer will train and treat their employee over the course of their employment.
There are a few reasons that businesses choose to follow this tried and tested route. Here’s a closer look at the benefits of hiring a W-2 employee.
You will find that some people naturally gravitate toward these roles. They pursue financial security and professional growth, so they look for amazing companies that will help them to grow in both of these areas. If you find the right people, they can make great W-2 employees and your faith in them can be rewarded with more loyalty when compared to independent contractors.
As an employer, you get to exercise some level of control over your employees in terms of how and when they work. You can draw up specific contracts with your employees and cater their activities to your exact needs. If you need complex tasks to be performed on time and according to certain details, employees are often the best option.
If you find the right employees, you will find that they are very loyal. They begin to see the important role that they play within your company and as such, they are willing to offer support when you need it. If you have a particularly difficult period of the year, for example, they may stay late and pitch in when needed – very valuable and more efficient when compared to the sometimes complex and expensive process of hiring external contractors.
Of course, it isn’t all rosy. You will find that there are unique challenges that come with hiring employees. Here’s a closer look at some of the pitfalls many businesses find when they work with employees. You will get the best deals at the Lending Valley.
A new employee needs a lot of training. These individuals are not able to slot directly into your business and begin driving value: you need to train them, manage them, and motivate them.
This can take a lot of time and effort, and you’ve got to have the right management profiles to make sure this process goes well. If your employees are not inspired and well-managed from the outset, they won’t stick around for long.
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Contractors often use their own materials, but this isn’t the case for employees. You need to offer them all of the materials and supplies that they require while fulfilling your legal obligations to offering a safe and sanitary workspace. This can be expensive and complex in itself, and some businesses cannot handle this extra complexity and it’s why they prefer to work with independent contractors.
Hiring people can often be expensive.
Not only is sourcing the best talent an expensive task, but you’ll also find that you have to pay social security and a range of benefits on top of the salary that you pay to your staff. This can all mount up and as your team grows, the amount you spend on your employees can become significant.
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Now that we have a better idea of what W-2 employees are and why you may or may not want to choose them, let’s take a closer look at 1099 employees. This will help you to better understand 1099 vs. W2 Employees and which one is right for your business.
Simply put, 1099 refers to the 1099-MISC tax form that is used to detail payments that have been made by a business to independent contractors. This is why many people decide to refer to independent contractors as 1099.
But why might you want to work with 1099 contractors rather than W-2 employees? Here’s a closer look at the benefits of 1099 employees
Accounting can become much simpler (and even cheaper in some cases) when a business works with 1099 employees. Given that these contractors are not employees, your business is not responsible for withholding taxes and providing a range of other benefits. This can make the business much simpler and cheaper.
Let’s imagine that you have a difficult period of the year coming up, and you’re going to need short-term relief for just a month. If you went through the process of hiring an employee, you may find that it’s incredibly expensive and you can’t afford to keep that employee on over the long-term. This is when a 1099 contractor is the perfect option, given that they can be hired for just a set amount of time.
Contractors are independent workers and as such, they have lots of expertise in their specific area. This means that you can look forward to installing them into your business and having them perform effectively right away. It also means that you save money because you don’t have to pay for training and management.
This all sounds great… So why do businesses continue to hire W-2 employees? Well, there are some downsides to hiring independent contractors. Here’s a closer look:
Your business can work to craft a detailed contract that helps you to exercise tighter control over your employees, but that isn’t the case with independent contractors.
These professionals enjoy a greater level of autonomy which can work well at times, but it can often be disruptive. You will find that independent contractors have other commitments and that they may not be willing to go the extra mile like an employee might.
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Depending on your niche and line of work, you may find that hiring independent contractors is not worth the risk. If an independent contractor is hurt while working on your business premises, they may decide to sue. Employees, though, are generally covered by their worker’s compensation insurance and cannot sue for injuries picked up in the workplace.
It’s important that if a business begins to consider working with independent contractors, it is ready from a legal perspective. Any contracts that are drawn up and signed with independent contractors must be immaculately put together. Any issues with those contracts can mean legal trouble for your business and you do not want to be in breach of contract.
We hope that this closer look at 1099 vs. W2 employees has been helpful for you.
Businesses cannot grow without the right people, so it’s important that you are able to make an informed and empowered decision about who you hire. If you make the right choices, your business will flourish! Don’t worry if you have bad credit business loans we are here to help you with that. A final tip is that regardless of the type of employee you hire, it’s critical that you treat them well.
We are all human beings at the end of the day and whether 1099 or W-2, your employees will treat you well if they are respected.
