W2 vs 1099

In today’s job market, it is becoming more common that you will work for a company but not be an employee of that company. You may be a consultant, temporary employee (employed through an outside agency), or an independent contractor. It is important to understand the difference between each so that you can negotiate your optimal rate.

1099 Independent Contractor/Freelancer

W2  Employee

Who Covers What You are responsible for paying federal, state, unemployment, and your benefits.Company does not pay for your workmen’s comp coverage. The hiring company/staffing agency deducts for taxes and benefits.They may provide you with a wider range of benefits including workmen’s comp.
Paycheck Your paycheck will be higher in the short run, but you will have to pay the deductions and taxes.You “bill” the company for your services rendered. The company pays for your deductions and taxes, hence your take-home pay will be lower.You will receive a paycheck from the hiring company/staffing agency.
Tax Payments You will need to pay taxes quarterly to the government. At the end of the year, you will receive a W-2 statement showing your earnings and the taxes you paid.
Legal Determination If the company directs or controls only the result of the work done — and not the means and methods of accomplishing the result — then you  are probably an independent contractors. If The company directs not only what is to be done, but also how it is to be done.
Health You purchase your own health insurance annually. Generally more expensive and not tax deductible. The hiring company/staffing agency pays for your health insurance. You will pay less for it and it will be tax deductible.
Paid Sick Time None. Will usually grant you a specified number of days.
Paid Vacation Time None. Will usually grant you a specified number of days.


To better understand the difference between consultants and staffing agencies, why not take a look at a few?

Consulting Firms                                                 Staffing Agencies

Mercer Consulting                                              Kelly Staffing Services

ZS Associates                                                         Manpower