You are required to withhold Social Security and Medicare taxes and file payroll taxes for W-2 employees. Additionally, it’s up to you to provide your employees with the tools and supplies they need to get their jobs done. W-2 employee is the default classification for any worker you can’t classify as a 1099 contractor.
Benefits of having W-2 workers include:
You have more control over their work:
Employers have control over employee schedules, business processes, and company policies. Employees must deliver work that meets company standards. If you need help in a certain way at a certain time, hiring an employee makes sense.
Your company benefits from employee longevity
While contractors tend to jump from gig to gig, employees stay with the company. The longer they stay, the better they understand your business objectives and brand. And they can provide more value over time. Employees can easily shift focus on short notice or wear multiple hats.
Employees are more committed to your company
Employees can develop a sense of loyalty to your business. This loyalty can translate to a better work ethic, higher morale, and a thriving company culture.
Disadvantages to hiring W-2 employees:
Employees require more time and effort
When you take on W-2 employees, you need to train and manage them. These tasks take an incredible amount of time and energy.
You supply the resources for employees
You’ll need to give your employees everything to do their jobs successfully. These resources include everything from additional training to tools and materials. And you’ll need to reimburse any business expenses.
The true cost of an employee is higher than you might expect
Employees cost more than just their salaries or hourly wages. You’re responsible for paying your share of Social Security and Medicare taxes. And you may provide employee benefits like health insurance and paid leave. These costs add up.
Lastly, hiring W-2 employees works best for businesses that need to hire help for ongoing projects and other needs.
