Engaging W-2 and 1099 temporary workers in the US

A Guide for UK Recruiters

Expanding recruitment operations from the UK to the US brings a whole new set of acronyms and employment classifications. Understanding the distinctions between W-2 and 1099 workers is pivotal for UK recruiters venturing into the US job market. In this blog, we will unravel the intricacies of these classifications and shed light on how they differ from the familiar landscape of recruitment in the UK.

Understanding the Basics

W-2 Workers

In the US, W-2 workers are individuals who work for a company as regular employees. They receive Form W-2 at the end of the year, summarising their earnings and tax withholdings. W-2 workers are entitled to employer-sponsored benefits such as health insurance and are subject to income tax withholding, Social Security, and Medicare taxes.

1099 Independent Contractors

On the other hand, 1099 workers are considered independent contractors or freelancers. They receive income on a Form 1099-NEC, which reflects the total payments made to them during the tax year. Independent contractors are not employees; they operate as separate businesses and are responsible for their own taxes, benefits, and insurance. 1099 Independent contractors who are incorporated are generally referred to as “corp to corps” whereas independent contractors who operate as sole traders or freelancers are simply referred to as “1099s”.

Navigating the Legal Landscape

Legal and Compliance Considerations

• W-2 workers: Like traditional PAYE workers in the UK, the employer is responsible for compliance with labour laws, tax regulations, and employment standards in relation to W-2 workers in the US.

• 1099 Contractors: Individuals working under the 1099 structure are responsible for their own compliance, and the client is generally not liable for their tax obligations.

Choosing the Right Classification

Factors to Consider

1. Duration of Engagement: For short-term or project-based work, engaging contractors might be more suitable. For long-term or ongoing roles, hiring W-2 workers may provide stability.

2. Nature of Work: The level of control and supervision required for the work can influence the classification. More control may lean towards W-2 employment, while greater independence may suit 1099 contracting.

3. Budgets: The financial implications of employee benefits and tax obligations should be factored into the decision-making process.

Understanding US Employment Classification is Key

As UK recruiters embark on the journey of expanding operations to the US, understanding the nuances between W-2 and 1099 engagement t is essential. The US system offers flexibility but also requires careful consideration of legal, tax, and compliance implications. By navigating these distinctions with clarity, UK recruiters can strategically engage with the diverse American workforce, aligning their operations with the expectations and regulations of the US employment landscape.

We can help

WTT Legal has extensive experience in both the UK and US recruitment market. As an APSCO Trusted Partner, we are well placed to advise on transacting business in the US and using your UK entity to engage with US clients.

Are you a recruitment agency considering your US expansion plans? Get in touch to arrange a free legal consultation with our specialist advisors. Email us at info@wttlegal.co.uk or call us on +44 (0)20 3468 0000 for more information.