Hiring 1099 contractors vs employees

Business owners seeking to expand their business must make the decision early on what their goals are and how they plan to go about them. Depending on what those goals are, they may prefer a contractor or an employee. 

Often, the confusion around hiring a 1099 contractor vs an employee begins with a misunderstanding of what each one is and what they are best suited for. Let’s start with some simple definitions:

Employee	Contractor
A worker hired to perform regular duties under the company’s supervision and control.	A worker who is a self-employed individual or business entity hired by the employer to perform specified tasks.

The following article compares the processes of hiring 1099 contractors vs employees, evaluating both in terms of legal considerations, payment, and work performed. 

Regardless of which worker type is preferred, we also provide suggestions for how best to hire them.

Hiring 1099 contractors

1099 contractors are independent contributors who work with your company, rather than employees who work for it. When hiring 1099 contractors vs employees, it’s important to make sure that these workers actually qualify as contractors; misclassification can result in significant fines and penalties.

That being said, certain businesses may benefit more from hiring 1099 contractors than others. The following subsections detail the respective pros and cons of hiring a 1099 contractor.

Hiring 1099 Contractors: Pros & Cons

	Pros	Cons
Control	Typically more flexible; can be brought on for short-term work	Employers have significantly less control over how a job is done
Cost	Typically cheaper to hire due to tax and benefit differences	Contractors set their own rates
Scalability	Allows for quick and easy scaling up/down based on business needs	May result in lack of company loyalty or continuity
Specialization	Allows easy hiring for high-skill tasks	N/A
Legal	N/A	Higher risk of misclassification

In short, this makes hiring 1099 contractors ideal for companies seeking budget-friendly, short-term options that nonetheless provide a high degree of specialization. Examples include:

• Companies needing temporary web design services for a product rollout over a 4-month period
• A startup company expanding its production team to meet unexpected demand
• A business seeking an editor on an account that is closing

Now that we have an idea of what it means to hire 1099 contractors, let’s take a look at what it means to hire employees.

Hiring employees

Employees make up about 60% of the global workforce as of 2025, making them still the most popular choice of workers for employers. This is largely due to the ability for long-term employment that they are best for, which allows employers to more accurately plan for future growth without having to worry about constantly hiring and firing.

The following table provides an overview of hiring employees, according to several evaluation factors.

Hiring Employees: Pros & Cons

	Pros	Cons
Control	Employers have more control over how the work gets done	N/A
Cost	Greater long-term value	Employers must pay more in taxes, benefits, and unemployment coverage
Scalability	Greater employer loyalty	Takes more time to hire
Specialization	Greater team cohesion	N/A
Legal	IP Protections & tax incentives	Requires more administrative overhead to account for labor law protections

Because of the associated costs with hiring an employee vs a 1099 contractor, they are usually more considered by larger employers with more stable budgets. In addition, companies seeking long-term growth tend to do better when hiring employees. For example: 

• Companies opening up a new regional branch of operations 
• Businesses looking for support with ongoing accounts
• Companies hiring for management positions that require greater company knowledge

The greatest consideration when hiring new employees is that they are more covered by legal protections, regardless of which country they are hiring in. 

While the risk of misclassification tends to be lower with employees due to the greater level of involvement they have with the company, they are nonetheless covered by protections and guaranteed benefits, holidays, sick leave, and other benefits that employers will need to consider.

Managing 1099 contractors & employees

Business owners considering hiring 1099 contractors vs employees aren’t just thinking about the “why;” they are equally concerned with the “how.” 

The reality is that hiring new workers is an industry in and of itself, with various types of providers allowing business owners to easily hire both contractors and employees, each of which has their own advantages and disadvantages. 

The following table compares the most common options when hiring 1099 contractors vs employees, including what they do and who each might be best for. 

Hiring 1099 Contractors vs Employees: Prospective Partners

Solution Type	Best For	Handles Compliance?	Works With Contractors?	Works With Employees?
AOR (Agent of Record)	Contractor-focussed teams	Contracts, worker classification	✅	❌
EOR (Employer of Record)	Hiring global employees	HR, taxes, local compliance	❌	✅
Contractor Management Platforms	Freelance/contractor ops	Payments, onboarding	✅	❌
Payment Processors	Paying contractors globally	Just tax forms	✅	✅
HRIS / Payroll Systems	Managing employees	Yes	❌	✅

Often, the best choice when hiring 1099 contractors vs employees is to go with the option that allows you to do both. Several workforce management platforms, like Payoneer Workforce Management, provide multiple services for companies that want to hire employees, hire contractors globally without having to set up a local entity. In addition, these options provide tools for payment processing, like bulk payments and invoicing, that make for a smoother experience.

Hiring 1099 vs employees with Payoneer Workforce Management

Even once you know which of the two you want to hire, the reality of the process is difficult; when hiring 1099 contractors or employees, employers face a heavy amount of paperwork and registration that goes alongside the social-facing responsibilities of interviewing and determining whether or not a worker is actually a good fit for the job posted. 

That’s why companies may choose to work with an experienced partner to handle the administrative legwork for them.

Payoneer Workforce Management has helped various companies with exactly this type of responsibility, not only helping employers discern between hiring 1099 contractors vs employees, but also walking them through the process to mitigate compliance risks and maintain a healthy working relationship.

If you are interested in learning more about what Payoneer Workforce Management can do for your global hiring operations, reach out to us here. We’d love to talk.