W2 vs 1099

Is your home care agency classifying you as a W2 employee or 1099 independent contractor?

If you are a 1099 Independent Contractor, that could be a problem. The Department of Labor (DOL) just released new guidance which specifies rules on when a worker should be classified as a W2 employee or 1099 independent contractor (refer to Misclassification of Employees as Independent Contractors Under the Fair Labor Standards Act | U.S. Department of Labor (dol.gov)). When workers are misclassified as 1099 independent contractors, this is called “worker misclassification” and is illegal.

The DOL wants to make sure people are receiving the compensation and benefits they are entitled to. With a 1099 model, agencies can ignore legally required benefits that must be provided to employees. As a W2 employee, you are entitled to benefits and protections that 1099 contractors do not receive. A few of the benefits you are entitled to as a W2 employee are:

Employees are entitled to earn 150% of their base rate when they work over 40 hours per week (overtime).
Employers must provide workers compensation insurance if you are injured on the job.
Employers must pay their employee’s sick time. Per Arizona law, full-time W2 employees may earn up to 40 hours of sick time per year.
If you work more than 30 hours per week, employers are required to offer you health insurance.

There are several other employee protection laws that W2 employers must provide that are not available for workers classified as independent contractors.

Taxes

If you are not making estimated tax payments as a 1099 caregiver during the year or are making estimated payments that are less than what is required by the Internal Revenue Service, you are at risk for unpaid taxes, penalties and interest.

W2 pay vs 1099 pay

Many times, 1099 agencies do pay a higher hourly rate than W2 agencies. This is because the required benefits they aren’t giving you are expensive. Examples are sick pay, overtime, and health insurance to name a few. In addition to these benefits, W2 agencies are required to pay 50% of the payroll taxes you owe. As a 1099 contractor, YOU are required to pay 100% of the payroll taxes from your earnings.

This is why W2 agencies generally have a lower base rate than a 1099 agency. However, when looking at agencies, you should compare the total compensation you’ll receive, including overtime, taxes paid on your behalf, and benefits, not just the base rate.

Click here to review a case example of 1099 contractors vs. W2 Employees

What Should I Do

If you are wondering whether to be a W2 employee or 1099 caregiver, you should ask your current agency if they have evaluated the indicators of an employee vs. an independent contractor on the DOL’s website. It is mandatory that every agency properly classify individuals providing services.

Why Arion Care Solutions?

Arion Care Solutions has been a W2 agency since 2005. We strive to be compliant with all wage and hour laws and believe that a W2 model is much better for our members and employees. Under the employee model, we can offer benefits that a 1099 company cannot offer.

We pay overtime at 150% of your regular rate when you work over 40 hours in a week;
We offer sick pay;
We offer health benefits;
We offer a 401k retirement plan; and
We offer paid training to our employees.

The additional costs to be provided by an agency that pays W2 employees can be as much as $2,000 per employee, annually. If you want the benefits you are entitled to and deserve, please call Arion Care Solutions.

I have worked with Arion Care since 2006 and have been blessed to work with some amazing families over the years. The staff and support from Arion care is AMAZING – and treat each employee as a priority. From training staff, to office assistants, or coordinators… each person responds to our needs with promptness and kindness. They continue to make me feel like a valued and appreciated employee of the Arion team.

Kathy B