W2 Employment: Why It Is Better Than 1099 For Company Drivers
When it comes to hiring drivers, there are two main types of employment: 1099 and W2. While both have their advantages, the best option is to focus on hiring employees who are W2-qualified.
Read on to learn more about why 1099 employment is not great for the best companies for team drivers and what exactly makes W2 so much better!
What Is A 1099 Worker?
1099 workers are independent contractors. They have no formal relationship with the organization that employs them. Instead, employees would be seen more like vendors than team members by being treated differently in many aspects, including benefits and pay rates for work done on behalf of different companies or organizations.
According to the IRS, if an employer answers yes to even a single one from questions below about the type of control they have over their 1099 contractors, then they need to classify those workers as W-2 employees:
Does the employer control what the employee does or how they do their job?
Does the employer directly control how the worker is paid or whether expenses are reimbursed?
Does the employer provide the worker with additional benefits like retirement benefits or health insurance?
Classifying employees as independent contractors can have a devastating effect on your business, including fines for failing to deduct taxes from their paychecks and denying them benefits.
What Is A W-2 Employee?
A W-2 employee is a full-time worker dedicated exclusively to the company they work for. They receive benefits along with their salary, which can include health care coverage in some cases if eligible.
The first step best companies take when they hire a new employee is to collect all necessary documents. One such document must be submitted with each W2 form, even if it's not being used at the time of collection- Form W4 for withholding purposes, which helps them know how much tax should come out before their paycheck.
Difference Between 1099 & W2 Forms Of Employment
Full-time employees receive IRS Form W-2, which has details of their wages and earnings for the year. Independent contractors get a form 1099 that lists all kinds of income, including salary or tips, in one place!
1099 contractors and W-2 employees both deserve to be treated with dignity, but there are essential differences between the two. 1099 workers are not direct employees of your company – they're independent parties, more like vendors.
In exchange, W-2 employees are eligible for company benefits such as health insurance and a 401(k) retirement plan. However, 1099 contractors generally don't receive these employee benefits. Instead, they work individually with their new employers or in trials when joining the position at hand.
The Benefits of Being a W2 Employee
Employment Benefits Working as a W2 employee will allow you to take advantage of all benefits provided by your company. Best companies for team drivers often offer medical, vision dental coverage with 401k plans as well! This is in addition to paid vacation time off work.
Job Security If you're a W2 employee, then your job security is better than an independent contractor. You also get consistent income and benefits as a full time employee.
Legal Rights As a W2 employee, you get much better job security compared to independent contractors. You also have consistent income even when there's no work from your employer, depending on how your paid. And this doesn't apply if they pay by the mile!
The Downsides of Being a 1099 Worker
No Company Benefits You might not think that a 1099 worker is an employee, but the truth of the matter is they get fewer benefits than full-time W-2 employees. For example, health insurance and paid leave aren't available to you - only your funds can cover these things.
Financial Instability The higher earning potential of a 1099 worker is often offset by financial instability. Unlike W2 employees, you won't get paid when there's no work and will always be on the road making money instead of having any guaranteed salary like most other jobs do these days!
Administrative Burden As a 1099 contractor, you will have to manage your taxes and ensure the correct amount is withheld from each paycheck. You also need all of this information for financial records if something happens at some point--like claiming bankruptcy.
Which Is Better For Employees? 1099 Or W2
It is essential to understand the different tax benefits that come with choosing one form over another.
If you need steady pay or want protection for yourself and your family, it might make sense to go down the W2 route. Best companies for team drivers will provide you with all the legal rights like sick days and healthcare coverage from day 1.
GP Transco is one of the best companies for team drivers. We have the most friendly and supporting staff, and we care for our drivers. If you want a secure and happy career in trucking, apply today!