Can someone please elaborate on the difference between the two other than the tax obligation on the employer end for the W2 contractor.  I am struggling to see how people get away with this classification.  Any elaboration and/or advice would be appreciated as there is a push within my firm to start alternative contracting methods.

SubGrapHR:

Can someone please elaborate on the difference between the two other than the tax obligation on the employer end for the W2 contractor.  I am struggling to see how people get away with this classification.  Any elaboration and/or advice would be appreciated as there is a push within my firm to start alternative contracting methods.

 

Generally, if the person is on payroll, they are not a contractor, by definition.  As with nearly all Federal stuff, each case has to be weighed on its own merits and there is no bright line test.  On the other hand, I can't think of a contractor status challenge story that I've ever read or heard about where the Company had the contractor on regular payroll and won the dispute.

There have been times in the past where I have made it a requirement that the company hire me on a temporary basis to do certain kinds of work because of how that changed my own liability; being their employee and under their insurance.  But I was a temporary employee, not a contractor, in those situations.  That was actually the point of the arrangement, to ensure that I was not in a contracting relationship.

Typically a 1099 contractor is a self-employed individual or small company that has the ability to assign its own personnel to a job, provides its own tools, has the ability to make a profit and to work for other entities providing similar services.  Someone who receives a W-2 is an employee, not a contractor.