War on the 1099 Independent Contractors & Gig Workers
You’ve been brainwashed well to be fair battling. Misinformation is something that we all have to deal with on a daily basis, But I won’t hold it against you. What I’m referring to is the American obsession with employment specifically being a W2 employee for the sake of job security and better benefits. You’ve been conditioned your entire life. To think that the best-case scenario was to graduate high school go to university and get a salary job at a large corporation When in actuality, the most secure jobs, best benefits and perks are found on the complete opposite end of the employment spectrum.
You find people who are self-employed and those employed as independent contractors. There have been countless layoffs at some of the largest most successful and well-recognized companies in the world. Meta McDonald’s, Disney Amazon, Tyson Foods are just a handful of the many companies who made layoffs in 2023. Yet the gig economy, which encompasses Realtors financial advisers, actors models, influencers, cosmetologists and all other independently contracted or self-employed individuals, has seen a compound annual growth rate of 17.4 %.
Where, in 2018, the gig economy was worth roughly
$ 204 billion, it exceeded $ 455 billion in 2023, And thanks to companies like Uber, Upwork, DoorDash and many more freelancers are expected to account for over half of the US workforce by 2027. Even the ROI for universities, whose original purpose was to prepare students for a position in their given field of study, is on the rocks 56 % of participants in a poll from NOC at the University of Chicago said. They thought a four-year college. Education is not worth the cost, because people often graduate without a specific job skill and with a large amount of debt to pay off. It’s quite possible that no one got the memo from over four years ago, when Harvard Business Review pleaded with universities to begin incorporating studies and practices of the gig economy into their curriculum. Specifically noting the paradoxical nature of the issue. Considering universities heavily rely on independent contractors and encourage professors to have side gigs.
And much like those participating in the gig economy, almost every university has begun migrating to online education, Still not convinced. Well, let’s look at the most recent stress test. Our economy has been through COVID-19, Countless businesses shut down employees taken off payroll and so on. Contrary to that, gig work became a lifeline for many through the volatile times of the pandemic. Warranting comments from the likes of senior officials at the Chamber of Commerce, thanking companies like Uber, Lyft, DoorDash, and many more for not only keeping the economy alive but delivering critical meals and transportation to those in need.
So, while big corporations that were using W2 employees closed their doors and waited for government bailouts, companies that were using independents were keeping our nation’s economy alive. It’s clearly evident how reliable and necessary gig work is for our economy, So the government must be making great strides to empower and protect independent workers, right?Wrong. The US Department of Labor is actually in the final stages of completely reclassifying all Social Security-based independents into W2 employees.
That means anyone who is being paid via a 1099 and it’s addressed to them as an individual and not a business will be required to become a W2 employee If it wasn’t obvious how bad that is from a national economic standpoint, let’s break down what that means. For the business using the independent contractor and the independent contractor themselves.
After the proposed change, employers will have to pay FICA taxes on their employees’ wages. They’ll also have to include them in workers’ compensation and provide costly benefits. Packages to employees that qualify And for the independent they’ll lose the freedoms of being an independently contracted person, as well as the funds associated with qualified business income deductions also known as QBI
Let’s be realistic here too, Most companies that use a large majority of Social Security-based 1099s like real estate agencies, driver and courier companies, construction and contractor-heavy. Blue-Collar companies simply cannot afford to migrate their employees to be entirely W2 And knowing what you do now, you understand that neither the independent contractor nor the one employing them would benefit from the reclassification. It’s highly likely that when the reclassification happens, neither will have a job, and our economy as a whole will be severely negatively impacted, Not that it really matters. But if you’re curious, why the government would attempt such a reclassification. Their official reasoning is to protect the rights of workers.
But what they are really trying to fix is the 57 % of US households that paid no federal income taxes back in 2021. For the government, this issue was never about protecting American independence, but it was always about Uncle Sam looking for his cut, That’s also the reason why most people still think that being a W2 employee is the best-case scenario for them. The US propaganda machine is working hard to convince Americans of this, so they can successfully capture their hard-earned wages, And you know what
It’s completely working for them. What you should be asking yourself is: how do we protect ourselves against this? When the reclassification happens, there just aren’t enough professionals and services available to cover the large amount of independents who need some sort of business entity formation. So, in short, the answer is proactively looking at options to help independents structure themselves as a business, so that way they remain unaffected by the new rule.
One of if not the best solution to this issue is appropriately named. Gig Worker Solutions.
A first-of-its-kind professional employer organization that is specifically made for independents, gig workers and the self-employed PEOs allow small and medium-sized businesses to outsource their employees regarding payroll benefits and HR-related tasks. For example, a chef running their own restaurant might want to focus more on the food and running the restaurant rather than shopping around for benefits and cutting checks. So they decide to use a PEO That way their employees are still well cared for.
And since other businesses are using the PEO, they become part of a larger group And, generally speaking, the bigger the group, the better the benefits PEOs have been around for a few decades now. But none of them have been able to effectively serve companies of one because they think it’s too much of a hassle to deal with those who are self-employed. That is until now,
Thanks to Gig Worker Solutions.
Herne’s how it works, An independent takes just a few short minutes to enroll in our platform And if they aren’t structured as an S-Corp or an LLC with Subs election, we give them the option to get their entity set up and optimized for the PEO enrollment right. There, in the application Most people understand, the purpose of an LLC is to separate one’s personal and business assets to protect themselves if their business were under any legal scrutiny and so on. But very few understand the significance of creating a payroll relationship with their business. When the independent creates a payroll relationship with their business, instead of splitting their assets in a way they’re splitting themselves,
One version of themselves being the business owner and the other the employee, which they can then outsource to the PEO. The business owner version of themselves is paid the exact same way from those employing them, but now they’re being paid as a business and not a Social Security number, So they’re protected from the reclassification On top of that they are paying themselves the highly coveted W2 income And maintaining their QBI as a business owner, Not to mention that the employee version of themselves is in a giant group of other independents, so they’re getting group-rated benefits as well.
Now that traditional employment isn’t all that it’s hyped up to be and that Gig Workers Solutions is the only place for independents to get group-rated benefits, but maybe you think the efforts of the Department of Labor will come up short. If that’s you, I’ve got one final question for you: If you’re using independent contractors, or maybe you’re an independent contractor yourself, why take the risk?
