OT: W-2 to 1099 Employee

[SpiritYogi]

Greetings! I am hoping I can get some feedback on a situation I am facing right now. I have been in the administrative field for almost my entire career (Administrative Assistant, Executive Assistant, Office Administrator, etc.). I have been unsatisfied / unfulfilled in my position with my current employer for quite some time and have been looking for a new job, preferably a remote (work at home) job.

Many jobs I see posted for my field would be 1099 contract jobs. I have always been a W-2 employee. I currently make a decent hourly wage and have great benefits (health insurance, dental insurance, PTO, paid vacation, 401(k)). I know that if I'm a 1099 contract employee, I have to pay all taxes, and (usually) get no employer sponsored benefits.

Has anyone here gone from a W-2 employee to a 1099 contract employee? Have you regretted it? What obstacles / changes did you face? How much more did you have to make an hour to ensure you had enough to cover the 'extras' your W-2 employer paid and ensure you were able to maintain your level of (comparable) income. Any feedback would be greatly appreciated!!

[SEV]

Basically, to receive the same take home pay you have been getting the new employer would need to pay you the same as your gross pay now. If you will be getting paid on the same schedule as now then you can go by a check stub, if not then you can adjust accordingly.

The safe thing then to do (so you're not shocked at tax time) is to take out your own withholdings and save that money. You want to save back 15.3% for Social Security and Medicare (FICA), then you can find a withholding chart online for Fed and State to show what you should be withholding. Or, you can use what was on your latest check stub (just remember for FICA you have to double what is being withheld now).

Also, if you are getting a 1099, you have to be the one setting the hours and days. If an employer is setting them for you then technically you should be on a W-2.

Hope that helps!

Suasn

[Gams]

I think the biggest issue would be health insurance. I’m guessing with your current employer, your share of your health insurance premium isn’t too high, but out on your own, finding a reasonably priced plan with good coverage could be very difficult.

[SpiritYogi]

Thank you for the tax information, Susan. I'll do some research and calculations.

Yes, Gams, one of my biggest concerns is getting good, affordable health coverage. I'm not on any prescriptions and am a very healthy person, but that is one thing I don't want to worry about or skimp on, just in case... I have a very good, affordable health plan right now, but I've heard of others who are healthy and have monthly premiums of $400 or more per month for a 'decent' plan. I'm beginning to think I'll have to make (at least) $5K more per year just to cover the higher taxes and health insurance being a 1099 contract employee would entail.

[bee]

Yes, I would think you'd need to bump your pay quite a bit to compensate for giving up the benefits of employment. There's often a lot that goes into non-monetary compensation. What about sick days and vacation days, for instance? And the health insurance issue is huge. Many companies also have some sort of small life insurance/disability policy for their employees. I would not make the trade off if your pay isn't bumped substantially.

The other thing to consider is that I believe you'll have to file your taxes quarterly if you're not already doing so.

[BigBadBetty]

I haven't. However, I have heard you need to double your hourly wage to make up for lack of insurance, sick days, vacation days, paid holidays 401K, taxes, etc. My boyfriend briefly considered it so we did the research.

[bzar]

if you're not quite ready to make the complete leap, you might consider temping.

there are many "temping" organizations that provide temp services from administrative, professional (engineer, CPA, nurse, IT), to executive (VP, superintendent) that serve a variety of industries from utilities, construction, medical, banks, shipping, etc. you're an employee with benefits, essentially, and get to work in a variety of industries both small and large.

our company uses a variety of temp agencies, and many of these organizations offer 401K, medical, vacation, etc. you can check out maybe 3-5 of these to see what type of clientele they have. like i said, some specialize in certain industries.

[Scorpio6]

Don't do it. You will lose a significant amount of money, and for administrative, nobody is going to pay you well enough to make up for not being a full time employee. Unless you are going through physical abuse and having to take valium or antidepressants to remain functional on the job, don't do it. And don't even get me started on the medical insurance.

[Leonana]

My husband is an independent contractor for a moving company. He makes less than he did as an employee because he doesn't get consistent work. They give out work to their employees first, and he's last. If he had five days a week of work, it would pay more, but there's the rub. Also, his expenses for labor, truck and insurance are very high, and eat up half of what he makes.

He's covered by the VA, so that isn't an expense. However, I don't work, so I buy my insurance through the marketplace. That's the one benefit of him making less, I get a subsidy for my insurance and it's more affordable.

But his dream has always been to have his own company, and he doesn't want to be an employee again. That's another consideration I suppose, how much do you want your own business.

[SpiritYogi]

Originally Posted by bee

Yes, I would think you'd need to bump your pay quite a bit to compensate for giving up the benefits of employment. There's often a lot that goes into non-monetary compensation. What about sick days and vacation days, for instance? And the health insurance issue is huge. Many companies also have some sort of small life insurance/disability policy for their employees. I would not make the trade off if your pay isn't bumped substantially.

The other thing to consider is that I believe you'll have to file your taxes quarterly if you're not already doing so.

That is what I'm finding / thinking, bee. I did have a side gig as a Property Manager a few years ago so filing taxes quarterly would not be new to me, at least.

Originally Posted by BigBadBetty

I haven't. However, I have heard you need to double your hourly wage to make up for lack of insurance, sick days, vacation days, paid holidays 401K, taxes, etc. My boyfriend briefly considered it so we did the research.

I ran some figures and it seems I would need to, if not double, at least add 75% on to my current rate. I can't imagine anyone paying me the hourly rate that equals!

Originally Posted by bzar

if you're not quite ready to make the complete leap, you might consider temping.

there are many "temping" organizations that provide temp services from administrative, professional (engineer, CPA, nurse, IT), to executive (VP, superintendent) that serve a variety of industries from utilities, construction, medical, banks, shipping, etc. you're an employee with benefits, essentially, and get to work in a variety of industries both small and large.

our company uses a variety of temp agencies, and many of these organizations offer 401K, medical, vacation, etc. you can check out maybe 3-5 of these to see what type of clientele they have. like i said, some specialize in certain industries.

Thanks for the tip. We do have a temp agency in town. I'll contact them and see what they offer.

Originally Posted by Scorpio6

Don't do it. You will lose a significant amount of money, and for administrative, nobody is going to pay you well enough to make up for not being a full time employee. Unless you are going through physical abuse and having to take valium or antidepressants to remain functional on the job, don't do it. And don't even get me started on the medical insurance.

Yes, I'm coming to this realization. I don't like my job and my supervisor is toeing the line when it comes to verbal, emotional and mental abuse and although I almost cry when I have to go into to work, I haven't reached the point where I've sought treatment for depression. I'm just trying to avoid reaching that pinnacle.

Originally Posted by Leonana

My husband is an independent contractor for a moving company. He makes less than he did as an employee because he doesn't get consistent work. They give out work to their employees first, and he's last. If he had five days a week of work, it would pay more, but there's the rub. Also, his expenses for labor, truck and insurance are very high, and eat up half of what he makes.

He's covered by the VA, so that isn't an expense. However, I don't work, so I buy my insurance through the marketplace. That's the one benefit of him making less, I get a subsidy for my insurance and it's more affordable.

But his dream has always been to have his own company, and he doesn't want to be an employee again. That's another consideration I suppose, how much do you want your own business.

After doing my own research and getting feedback here, I really don't understand how so many people can own their own business and/or be self employed and earn a decent living (unless they have a dual income household). I am not a high-wage earner so it's not like I need to make a lot of money to live comfortably, but according to my calculations, if I made the same hourly rate I do now and switched to self employed, my annual (take home) income would be little more than what the retail clerks at the stores in my town make.

Thank you all for your feedback. Unless some amazing contract position comes along, I will continue to focus on employers looking for FT (W-2) employees.