Can a full-time position be 1099: A comprehensive guide

In today’s dynamic and diverse talent landscape, businesses often seek 1099 workers, also referred to as contractors or freelancers. These contractors are specifically hired to fill specialized roles or meet project requirements. 

A common question that is often asked in this context is, ‘Can a full-time position be 1099?’. Employers hiring 1099 employees must have a clear understanding of the key differences between 1099 and W-2 employees. 

Although 1099 employees is not the right term, businesses use it interchangeably with contractor, so we’ll be using it similarly in this article for a better understanding.

In this blog, we shall explore the basics of 1099 workers in detail, along with learning about things like can a full-time position be IC 1099, the legal guidelines regarding 1099 employees, what are the rules for 1099 employees, and much more. 

What is a 1099 employee?

A 1099 employee can be a U.S. freelancer, contractor, self-employed individual, or any other contingent worker that a business organization can engage for niche expertise or specialized skills. Such workers are often involved in short-term projects to fill specific workloads without bearing the expenses and the commitment of hiring full-time employees. 

1099 refers to the tax form that business organizations use for reporting payments to freelancers, contractors, consultants, and other self-employed professionals who work for the company but are not permanent employees. When an employee receives a 1099-NEC from their employer, it indicates that the business considers the professional to be an independent contractor. 

These professionals are required to pay their taxes and do not receive any benefits from the client or employer, like retirement contributions or healthcare facilities.  

What is the difference between a W-2 employee and a 1099 employee?

Now, we have a fair idea that a 1099 employee is a freelancer or a contractor whom a business organization has hired to complete a specific assignment or project. Payoneer Workforce Management has streamlined contractor hiring and payments globally, enabling freelancers to receive payments globally. 

A W-2 employee, on the other hand, is a common-law employee in the United States of America and a part of the conventional employer-employee relationship. The employer directly controls the employee’s performance.

There are several key differences between a W-2 employee and a 1099 employee in the United States. Let us quickly take a look at some of the major differences:

1099 Employees	W-2 Employees
These professionals can work for multiple clients.	A W-2 employee can work for a single employer.
They have the liberty to determine when they work and how.	It depends on the employer as to how these employees will work.
They do not require any kind of onboarding or training.	W-2 employees have to undergo a thorough onboarding process and extensive training.
They are not entitled to receive any benefits, such as healthcare or retirement contributions, from the employer.	W-2 employees are eligible and entitled to statutory benefits from their employer under local labor laws.
They receive payment according to the contract agreement, usually after the project or assignment is completed.	These employees are entitled to a salary from their employer.
They have to fulfil all the tax responsibilities themselves.	The employer/business organization withholds and remits taxes on behalf of the employee.
A 1099 employee uses Form 1099-NEC to file taxes.	W-2 employees use Form W-2 to file taxes.

Understanding 1099 employee rights

There are some legal guidelines that both employers and 1099 employees have to follow. Workforce management platforms like Payoneer Workforce Management assist with staying compliant with legal guidelines for 1099 employees. Here are the legal rights that 1099 employees have:

• Written contract

There must be a written contract between the employer and the contractor, in which both parties agree to the terms of the contract relationship. The contract must contain details about the project scope, timeframe, and deadline, as well as payment and termination clauses. 

• Multiple clients

A 1099 employee has the liberty to offer services to many businesses at a time. They can work with various clients simultaneously. 

• Work autonomy

Contractors follow a flexible working schedule and can decide where, when, and how they work. The contractor remains responsible for providing and securing expertise, work equipment, and required training. 

• Contractor partnerships

A 1099 employee can engage or hire additional resources or other contractors to help them complete projects or assignments within a stipulated timeline. They make contractor partnerships with other resources and contractors for transparency. 

• Business management 

1099 employees or contractors manage their business individually and pay their self-employment taxes. They do not receive any kind of employer benefits like retirement plans, health insurance, or paid vacations. 

1099 rules that employers must know to hire contractors

While engaging 1099 employees, employers must stay compliant with classification requirements and local rules and regulations. 

What are the rules for 1099 employees? The IRS follows three main criteria to help employers determine if the U.S. worker is an employee or a contractor. 

The criteria are as follows:

1. Type of relationship 

Check if there are employee benefits like insurance, vacation pay, or pension, or detailed written contracts. Find out if the relationship between the employee and the employer will continue. Also, try to assess the importance of the work done by the employee and determine whether it is a significant aspect of the business. 

2. Financial control

Understand the financial control that the employer has over the employee. For a 1099 employee, there will be no monetary aspects or benefits of the workers’ jobs provided to the contractor. 

3. Behavioral control 

In the case of a 1099 employee, the company or business organization will not have any right to control what the worker does and how the worker completes the given assignment/job. 

Once the worker is classified as a 1099 employee, the business will have a thorough plan in place to stay compliant in all aspects, including the type of work and the nature of the relationship. Along with a detailed written contract agreement, there should be a system of paying the contractor that does not withhold taxes from their paycheck. Payoneer Workforce Management provides support to streamline the process for quick and easy payments to contractors. 

Making payments to 1099 employees

1099 employees are not on any company’s payroll, and they do not have a fixed salary. The contractor agreement specifies a pay rate, payment method, and payment frequency that are agreed upon by both the contractor and the employer. 

The contractor sends an invoice for the project/assignment-based work to the employer. The employer usually makes the payment to the 1099 employee via a paycheck. No income taxes are withheld from the paycheck of the 1099 employee. 

While making payment to a 1099 employee, the employer must collect any needed information, like the contractor’s Tax Identification Number (TIN) and W-9 form. 

The best time to hire 1099 employees 

It is not always necessary to hire 1099 employees. Several factors determine the optimal time to hire 1099 contractors. 

• Saving on costs

When an employer plans to reduce costs and resources related to hiring full-time employees, like statutory benefits and contributions, payroll tax, training, and career development, etc, they can plan to hire 1099 employees. The employer has no liability of any kind for these contractors. 

• Short-term assignments

Employers might hire 1099 employees for short-term projects and assignments. They can hire contractors with specific knowledge and expertise in a particular niche or subject area. 

• Enter new markets and business domains

Global companies that are interested in expanding their business usually hire 1099 employees directly for market insights. This helps the businesses save money and time initially on entity establishment and full-time resources. 

Penalties for misclassifying 1099 workers

The US government considers worker misclassification seriously. There are rigorous penalties for misclassifying employees as 1099 contractors. Some of them are as follows:

• A $50 penalty for every unfiled W-2
• Back on employment and taxes
• A penalty of 0.5% of the unpaid tax liability per month, up to 25% of the total tax liability
• A penalty of 3% of employee wages, along with 40% of any unpaid FICA taxes

The employer may be liable for additional penalties, including those for minimum wage violations, unpaid overtime, and local and state government tax penalties. 

Payoneer Workforce Management to engage global talent

Managing 1099 contractors across borders and in various currencies is not an easy task. Payoneer Workforce Management helps simplify global business payments for employers and 1099 contractors alike with a few clicks. Billing is simplified, and 1099 employees can receive payments globally. 

With Payoneer Workforce Management, you can manage contractor payments in 70 currencies. Drive your global growth by targeting international opportunities with this platform. 

Conclusion: Can A Full-Time Position Be 1099? 

The answer to the question ‘Can a full-time position be 1099?’ is technically ‘No’. A 1099 employee is not a full-time employee, although the contractor can work full-time hours, as specified in the contract agreement. 

In the eyes of the IRS, 1099 employees are considered independent contractors, also known by names such as self-employed professionals or freelancers. An employer hiring a 1099 contractor has no liability for the worker. Once the work (project or assignment) is completed, the employer makes payment as per the clauses agreed upon in the employer-contractor agreement. 

Book a demo to see how Payoneer Workforce Management can help.

FAQs

1) What is the number of hours for which a 1099 employee can work?

As 1099 contractors have flexible schedules, they can work as many hours as agreed in the contract agreement. There is no cap on working hours unless mentioned in the contract. They are not entitled to any overtime pay under federal law. 

2) What is the number of 1099 employees that an organization can have?

A company can hire as many 1099 employees as it wants or needs. However, the employer has to classify the workforce correctly. The working relationship between the employee (both full-time and 1099) and the employer must be clear and transparent. 

3) What are the ways of making payments to a 1099 employee?

A 1099 employee is typically paid after completing a specific project or assignment. The payment amount and the work deadline are mentioned in the contract. However, some 1099 employees also receive hourly payments for their work.