--- title: How Do Worker Classifications Affect My Business? description: Employers with W-2 employees are required to pay Social Security and Medicare taxes (FICA), unemployment taxes (FUTA and SUTA), workers’ compensation insurance, as well as withholding and remitting an employee’s portion of income taxes.  image: https://www.kuzneski.com/hubfs/classification-1.png --- - [724-717-6004](tel:7247176004) [![Getting Started is Easy](https://no-cache.hubspot.com/cta/default/6680537/4daca9d5-4d43-4aac-bdcd-30d781af3c89.png)](https://cta-redirect.hubspot.com/cta/redirect/6680537/4daca9d5-4d43-4aac-bdcd-30d781af3c89) [tel:7247176004](tel:7247176004) [![](https://www.kuzneski.com/hs-fs/hubfs/Kuzneski%20Logo.%20Final-2.jpg?width=1441&height=282&name=Kuzneski%20Logo.%20Final-2.jpg)](https://www.kuzneski.com) - [ARE WE A FIT?](https://www.kuzneski.com/are-we-a-fit) - [EMPLOYEE BENEFITS](https://www.kuzneski.com/services/employee-benefits) - [HR & COMPLIANCE](https://www.kuzneski.com/services/hr-compliance) - [PAYROLL & HRIS](https://www.kuzneski.com/services/payroll-hris) - [BUSINESS INSURANCE](https://www.kuzneski.com/services/business-insurance) - [ABOUT](https://www.kuzneski.com/about-kuzneski-insurance-group) - [ABOUT US](https://www.kuzneski.com/about-kuzneski-insurance-group) - [CAREERS](https://www.kuzneski.com/careers) - [INTERNSHIPS](https://www.kuzneski.com/internships) - [LEARN](https://www.kuzneski.com/blog) - [BLOG](https://www.kuzneski.com/blog) - [Compliance Webinars](https://www.kuzneski.com/compliance-webinars) - [ARE WE A FIT?](https://www.kuzneski.com/are-we-a-fit) - [EMPLOYEE BENEFITS](https://www.kuzneski.com/services/employee-benefits) - [HR & COMPLIANCE](https://www.kuzneski.com/services/hr-compliance) - [PAYROLL & HRIS](https://www.kuzneski.com/services/payroll-hris) - [BUSINESS INSURANCE](https://www.kuzneski.com/services/business-insurance) - [ABOUT](https://www.kuzneski.com/about-kuzneski-insurance-group) - [ABOUT US](https://www.kuzneski.com/about-kuzneski-insurance-group) - [CAREERS](https://www.kuzneski.com/careers) - [INTERNSHIPS](https://www.kuzneski.com/internships) - [LEARN](https://www.kuzneski.com/blog) - [BLOG](https://www.kuzneski.com/blog) - [Compliance Webinars](https://www.kuzneski.com/compliance-webinars) [HR & Compliance](https://www.kuzneski.com/blog/tag/hr-compliance), [Payroll & HRIS](https://www.kuzneski.com/blog/tag/payroll-hris), [Employee Benefits](https://www.kuzneski.com/blog/tag/employee-benefits) # How Do Worker Classifications Affect My Business? [Jason Levan](https://www.kuzneski.com/blog/author/jason-levan) / November 11, 2021 ![](https://www.kuzneski.com/hubfs/classification-1.png) [![Share on facebook](https://7528309.fs1.hubspotusercontent-na1.net/hub/7528309/hubfs/raw_assets/public/mV0_d-web-default-modules_hubspot/img/facebook-color.png?width=24&name=facebook-color.png)](http://www.facebook.com/share.php?u=) [![Share on linkedin](https://7528302.fs1.hubspotusercontent-na1.net/hub/7528302/hubfs/raw_assets/public/mV0_d-web-default-modules_hubspot/img/linkedin-color.png?width=24&name=linkedin-color.png)](http://www.linkedin.com/shareArticle?mini=true&url=) [![Share on twitter](https://7528304.fs1.hubspotusercontent-na1.net/hub/7528304/hubfs/raw_assets/public/mV0_d-web-default-modules_hubspot/img/twitter-color.png?width=24&name=twitter-color.png)](https://twitter.com/intent/tweet?original_referer=&url=&source=tweetbutton&text=) [![Share on pinterest](https://7528311.fs1.hubspotusercontent-na1.net/hub/7528311/hubfs/raw_assets/public/mV0_d-web-default-modules_hubspot/img/pinterest-color.png?width=24&name=pinterest-color.png)](http://pinterest.com/pin/create/button/?url=&media=) The U.S. government estimates there are more than 10 million independent contractors, or “1099 employees.” But what are the ramifications of hiring these “gig workers” for your business?  There are a myriad of differences between adding someone to the payroll and hiring an independent contractor. The biggest, of course, is cost. The Bureau of Labor and Statistics estimates that hiring a contractor can save about 30 percent of total employee costs.  Employers with W-2 employees are required to pay Social Security and Medicare taxes (FICA), unemployment taxes (FUTA and SUTA), workers’ compensation insurance, as well as withholding and remitting an employee’s portion of income taxes. Then there are the benefits, including medical, dental, vision, disability insurance and, perhaps, a retirement plan such as a 401(k).  While employers and employees split the 15.3% tax rate (6.2% for Social Security and 1.45% for Medicare), independent contractors are responsible for the full amount. Because 1099 employees pay their own taxes and insurance, their hourly rate tends to be higher (much higher in some cases) than a salaried employee.  Independent contractors can be a good solution for work that is a short-term project, specialized, outside of the scope of the business, and doesn’t require set hours. They are also easier to terminate than a payrolled employee.  Employees, on the other hand, may be a better option if the work is ongoing, central to the business operations, collaborative and requires set hours.   ### HIDDEN COSTS  While 1099 employees may cost less, they can be more of a hassle to deal with. Because they are allowed by law to dictate their own hours and to work with other clients, their availability may not be suitable. A contractor may jump ship or put your project on hold if they get a better offer.  What’s more, contractors are limited to 1,040 hours of work per year for a single employer. So, if a project isn’t done in that timeframe, you may find yourself having to bring another contractor up to speed just to finish a job.  Employers typically either pay for an employee’s supplies and equipment needed for the job or reimburse the employee. The issue of training and development must also be considered.  If you’re not sure which way to go, it often makes sense to start a worker out as a 1099 employee, says Janice Fritz, HR specialist at Kuzneski Insurance Group, because “it is easier to move from an independent contractor to an employee than the other way around.”   ### [Jason Levan](https://www.kuzneski.com/blog/author/jason-levan) Jason Levan joined Kuzneski Insurance Group in 2021 as Director of Communications and Content after his first career as a newspaper reporter and editor. In Act II, he oversees the content marketing for the company, with the goal of making the insurance world easier to understand and navigate for our clients. When he’s not at work, you can often find him “banging and clanging” in the gym, or spending time with his family. [Follow me on Facebook](https://www.facebook.com/jason.levan.1) [Follow me on LinkedIn](https://www.linkedin.com/in/levanjason/) ### Share Your Thoughts ## You may also like [Health Insurance](https://www.kuzneski.com/blog/tag/health-insurance), [FAQs](https://www.kuzneski.com/blog/tag/faqs), [ICHRA](https://www.kuzneski.com/blog/tag/ichra) ## [How Does an ICHRA Work?](https://www.kuzneski.com/blog/how-does-an-ichra-work) [Jason Levan](https://www.kuzneski.com/blog/author/jason-levan) / March 29, 2022 [Read more](https://www.kuzneski.com/blog/how-does-an-ichra-work) [HR & Compliance](https://www.kuzneski.com/blog/tag/hr-compliance), [Payroll & HRIS](https://www.kuzneski.com/blog/tag/payroll-hris), [Employee Benefits](https://www.kuzneski.com/blog/tag/employee-benefits) ## [Contractor or Employee: Tax Forms You'll Need](https://www.kuzneski.com/blog/contractor-or-employee-tax-forms-youll-need) [Jason Levan](https://www.kuzneski.com/blog/author/jason-levan) / November 11, 2021 [Read more](https://www.kuzneski.com/blog/contractor-or-employee-tax-forms-youll-need) ## Subscribe to our freshest ideas ## Headquarters 27 North Sixth Street Indiana, PA 15701 Phone: (724) 349-1919 [Contact Us](https://www.kuzneski.com/contact-us) ## Pittsburgh 6401 Penn Ave., 3rd Floor Pittsburgh, PA 15206 Phone: (724) 349-1919 [Contact Us](https://www.kuzneski.com/contact-us) ## Solutions - [Are We A Fit?](https://www.kuzneski.com/are-we-a-fit) - [Employee Benefits](https://www.kuzneski.com/services/employee-benefits) - [HR & Compliance](https://www.kuzneski.com/services/hr-compliance) - [Payroll & HRIS](https://www.kuzneski.com/services/payroll-hris) - [Business Insurance](https://www.kuzneski.com/services/business-insurance) ## About - [About Us](https://www.kuzneski.com/about-kuzneski-insurance-group) - [Careers](https://www.kuzneski.com/careers) ## Learn - [Blog](https://www.kuzneski.com/blog) - [COVID-19 Response](https://www.kuzneski.com/covid-19) - [COVID-19 Webinars](https://www.kuzneski.com/covid-19-webinars) ### Subscribe to our freshest ideas ## Follow [Follow us on Facebook](https://www.facebook.com/kuzneskigroup/) [Follow us on LinkedIn](https://www.linkedin.com/company/kuzneski-financial-group/) [Follow us on Twitter](https://twitter.com/KuzneskiGroup) [Follow us on Instagram](https://www.instagram.com/kuzneskiig/?hl=en) --- [![Kuzneski Logo](https://www.kuzneski.com/hs-fs/hubfs/Kuzneski%20Logo.%20White.png?width=250&height=143&name=Kuzneski%20Logo.%20White.png "Kuzneski Logo")](https://www.kuzneski.com/) Copyright © 2026 Kuzneski Insurance Group - [Legal Stuff](https://www.kuzneski.com/legal-stuff) - [Privacy Policy](https://www.kuzneski.com/privacy-policy-kuzneski)