“The centerpiece of the American Jobs Act is an extension and expansion of the cut in payroll taxes, worth $240 billion, under which the tax paid by employees would be cut in half through 2012. Smaller businesses would also get a cut in their payroll taxes, as well as a tax holiday for hiring new employees.” Also: $4k to any business that hires an employee that has been looking for a job for six months.
Beyond the fact that those proposals aren’t actually in place yet, I wanted to share the basic, common reasons for why independent contractors and freelancers are still the way of the world, particularly in publishing.
*Note, I am far from a financial planner. These are just commonplace words of wisdom and direct advice from professionals.
Benefits of independent contractors:
- Save 12-15 percent of expected money paid to the individual, in employer-matched payroll taxes, worker’s compensation and related costs
- Be absolved from worker liability and many workplace expectations
- More easily trial individuals and work on short-term projects with a clear end
- Simply collect a W9 for all individuals and then file a 1099 for those paid more than $600.
- Avoid expectations for health insurance, retirement plans and other additional benefits not already providing early in your business.
Benefits of full-time employees:
- Encourage work from a central office, to foster collaboration and connectivity
- Encourage similar working hours to foster better communication.
- Allow employees to use tools and resources provided by your company (computers, equipment, paid tools)
- Pay them through payroll, instead of paying a variable, monthly invoice
- Dictate all or the majority of the assignments and work projects for the individual
- Independent Contractor (Self-Employed) or Employee? [IRS]
- Is This An Employee or Independent Contractor?
- Independent Contractor definition [Wikipedia]
- W2 for full-time employees, 1099 for independent contractors
- W9 and 1099 forms for independent contractors
- 1099 vs W2 at around $60k/yr: How much actual difference? [ars technica forum]