Two offers with the same hourly number can be worth very different amounts. The difference is usually whether you would be a W-2 employee or a 1099 independent contractor.
W-2 employee
- The employer withholds income tax and your share of Social Security and Medicare from each paycheck, pays its own share on top, and sends you a Form W-2 each year.
- You may get benefits such as health insurance, a 401(k), paid time off and unemployment insurance coverage.
- If the role is non-exempt, you are owed overtime for hours over 40 in a workweek.
1099 independent contractor
- You are paid the full amount with nothing withheld, and receive a Form 1099 if you are paid above the reporting threshold.
- You pay self-employment tax, which covers both the employee and employer halves of Social Security and Medicare, and you usually make quarterly estimated tax payments.
- You normally get no benefits, no paid time off and no overtime, and you buy your own equipment and insurance. You also control how you do the work.
Contract and contract-to-hire
Many "contract" roles are W-2 jobs through a staffing firm for a fixed period. Contract-to-hire roles start that way with the possibility of becoming a direct employee, often after three to six months. Ask who would employ you, how long the contract runs, and how often contractors are converted.
Compare offers fairly
A common rule of thumb is that a 1099 rate needs to be noticeably higher than a W-2 rate to come out even, once you add self-employment tax, health insurance, retirement savings and unpaid time off. Work out the yearly value of each offer, not just the hourly number.
Watch for misclassification
Whether you are an employee or a contractor depends on how the work is actually done, not just what the contract says. If a company controls your hours and methods like an employee's but pays you on a 1099, the IRS and the U.S. Department of Labor have guidance on worker classification. This guide is general information, not tax or legal advice.
On USA Jobs 24, each listing shows the job type the employer gives (full-time, part-time, contract or internship). Browse all jobs.
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