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If their paying you as 1099 and not W-2, then your rate should be about
20-25% higher to cover the overhead that is now your responsibility. Did
the recruiter adjust the rate when the pay status was changed? There are a
number of issues that concern the difference between an independent
contractor (IC), 1099, and employee, W-2.
Employees get paid according to employment schedules. ICs get paid
according to their contracts.
IC's must follow the IRS's rules of ICs that include that the IC is not
required to work on-site and that the employer (client) cannot dictate how
the work will be done. The employer can provide tools to the IC, but the IC
can also use his own tools. If the employer is controlling how the work
will be done, for example, if the employer sets the employee's work hours,
then the employee is not an IC, but is an employee. In that case, laws that
protect employees working with a W-2 will also protect the employees working
with a 1099 and the tax benefits that ICs use will not be available to that
employee. Talk to an accountant for more information about that.
Labor laws vary by state and include when employment can be terminated and
when a terminated employee must be paid. For example, in California, all
employment is at-will, so both ICs and employees can be terminated at
anytime without cause. Terminated employees must be paid on the day that
they are terminated, but ICs will receive pay according to their client's
pay schedule. Employees that do not get paid, can follow up with the Labor
Commissioner to seek remedy and they will receive statutory penalties from
employers (one day's pay for every calendar day that pay was late). ICs
that do not get paid must sue in court and will receive penalties according
to their contracts. Talk to a lawyer for more information.
> -----Original Message-----
> From: techwr-l-bounces+lauren=writeco -dot- net -at- lists -dot- techwr-l -dot- com
> [mailto:techwr-l-bounces+lauren=writeco -dot- net -at- lists -dot- techwr-l -dot- com
> ] On Behalf Of R D
> Sent: Wednesday, February 20, 2008 7:48 AM
> To: techwr-l -at- lists -dot- techwr-l -dot- com
> Subject: W-2 vs 1099
> Hi Everyone-
> I just negotiated an hourly rate on W-2. The recruiter
> just called to notify me that the rate would be on a
> 1099. As far as I know, I would have to pay an
> additional 7.5% for SS taxes plus they get out of
> paying unemployment tax of 10 to 15%. Is there
> anything else I need to be aware of?
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