If you’re a fast-growing company scaling across states or borders, one of the first hiring questions you’ll face is: should you bring someone on as a 1099 contractor or a W-2 employee?

This decision impacts everything — from how you manage payroll and benefits, to how much control you have over someone’s work, to whether you’re exposed to legal or tax risks down the line.

In this article, Remote breaks down the essentials of the 1099 vs W-2 comparison, explains why getting it right is so important, and shares how to make compliant, strategic hiring decisions as your team expands.

What is a 1099 contractor?

A 1099 contractor is an independent, self-employed worker who provides services to a business under a contract. They typically work on a project or freelance basis, invoice for their time, and are responsible for paying their own taxes. Businesses do not withhold payroll taxes or offer employee benefits to 1099 contractors.

What is a W-2 employee?

A W-2 employee is a full-time or part-time worker who is formally employed by a company. They receive a salary or hourly wage, and the employer is responsible for withholding income taxes and providing legally required benefits. W-2 employees are protected by federal and state labor laws, including minimum wage, overtime, and leave entitlements.