Hiring for My Agency: What's the difference between W2 and 1099 Employees?
*Disclaimer! We aren't legal professionals, or your built-in HR team, and this is not legal advice. This is based on our experience in this industry and government definitions*
You're swamped. You're beyond swamped. You want to take time off. You're sick of doing it all alone. You are turning down clients because you don't have the capacity. Yep, that sounds exactly like you're ready to hire for your social media management agency.
How do you know you're ready to hire for your agency?
Exactly what we mentioned above! If you have clients lining up at your virtual doors and you have to turn them away because you're at your max clients, oof! It's not a great feeling to send money out the door, is it?
If you constantly feel like you have zero time left in your day and your to-do list keeps stacking up, it could be one of two things, (1) you aren't managing your time properly - aka learn on your systems, automation, and tools, or (2) you need to hire, like yesterday. Or, if you are ready to fully start living your freelancer lifestyle and actually have some time in your day to go for a hot girl walk and zone out, use up those Classpass credits, or just spend some much-needed time with your family, hiring could be the solution.
Getting Prepared to Hire
If you are feeling like you have zero idea where to start when it comes to adding to your team, you are absolutely not alone - No one is born with the framework of how and the heck you hire a whole human being! Follow our quick checklist:
Brain dump. What tasks are you ready to say goodbye to? What are your strengths (so you can find someone who complements you, not IS you)? What do you want this person to look like? How involved do you want to be?
Write a job description. Use our template if you are inside our mentorship!
Choose a title, AFTER you write the description!
Have a contract. We love the Contract Shop's Hiring Bundle.
W2, 1099...what?! What's the difference? The major difference between these two employment types comes down to taxes, control, tasks,
W2
"Anyone who performs services for you is your employee if you can control what will be done and how it will be done, " according to the IRS.
Employer-controlled schedule
Employer withholds & pays taxes
Eligible for company benefits (health insurance, retirement plans, paid time off)
Set, structured pay
You (the company) pay the expenses
1099
"If the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done," states the IRS.
Sets schedule
Self-manages tax payments
No employer benefits or protections (health insurance, retirement plans, paid time off)
Varied income
Pays their own expenses
So many employers get caught up in 1099 because it can sound glamorous, not having to set a schedule, manage taxes, and have a steady stream of work with consistent pay. However, it's important to know the entire definition of both as an employer, and make sure you are choosing the option that's best for your company and the work you need completed. Here are some surprising things to also consider:
There are laws for both at the state level, too, so be sure to check your state's website.
Contractors can work for other people, including your competitors (unless they sign an exclusivity agreement, if it's legal in your state)
You can't dictate the tools + processes your contractors use to complete the work.
You still have to file with the IRS during tax time (1099-NEC).
And, the most important thing to note is that the IRS and the contractor can penalize you if you misclassify the type of employment, so it's important to talk to your legal or accounting partners to ensure that you're selecting the correct type for the scope of work you have.
More tips are just a few clicks away in our free guide for a social media management agency guide on 7 steps to scaling your business.