“If you live for weekends or vacations, your shit is broken.”
– Gary Vaynerchuk
Did you know that the difference between W2 employees and 1099 contractors isn’t only about how they get paid? Many people assume the key difference is financial or legal, but the truth is, the way each approaches work, responsibility, and autonomy is vastly different.
In today’s flexible and evolving workforce, the distinction between W2 employees and 1099 independent contractors is more vital than ever. With the self-employed workforce at 30% and growing, the transition is happening – ready or not – and by 2034 your 9-to-5 job will be extinct. This is the prediction of Reid Hoffman, the CEO of LinkedIn, and the man who also predicted the rise of social media in 1997, the share economy (e.g. Airbnb), and the rise of AI before you began using ChatGPT.
On a deeper note, Americans are coming to realize how infantilized their corporate-built systems can be. Workers are beginning to witness how they or their co-workers have parentified their employers – looking to them for guidance before every action and unquestioned obedience regardless of how their choices might negatively impact themselves or those around them. We see this all too often, most recently after Hurricane Helene where workers were not permitted to leave in the face of a hurricane. Some are still missing, others were tragically confirmed dead. An entirely preventable outcome stemming from the abuse of authority in the absence of leadership.
A big part of this is simply survival. With roughly 78% of Americans living paycheck to paycheck in the back of our minds there’s that little voice – “If I don’t do what I’m told I could lose my job, my financial foundation.” With this level of financial strain, many are hesitant to embrace self-employment, despite the potential for more control over their careers and incomes.
The bottom line remains: if you’re good at what you do, self-managing, self-accountable, results focused, and growth-centered it’s very likely that you’ll eventually become a self-employed independent contractor. However, if you want to be ahead of the curve it’s important to be aware that in your transition from W2 to 1099 the shift is less about paperwork and more about mindset.
While clients hire contractors for their expertise and independence, a common problem arises when contractors are treated like employees. Conversely, issues also occur when contractors themselves still carry an employee mindset—particularly the infantilized/parentified mindset that American corporate settings are beginning to outgrow. This dysfunctional framework can blur the lines between authority and leadership, resulting in a contractor looking to their clients to be managers, mentors, or role models rather than collaborators. These misaligned perspectives can lead to misaligned expectations and can quickly result in strained relationships. It can also eventually lead to financial and legal risks like misclassification.
The key challenges from every angle are clear. When clients attempt to manage contractors like employees, it limits the contractor’s ability to bring fresh insights and creativity to the table. On the flip side, contractors who haven’t fully embraced the shift from follower to self-leader may find themselves relying on clients for direction, ultimately losing the autonomy that sets them apart. This disconnect in mindset can result in unmet goals, scope creep, and dissatisfaction on both sides of the partnership; a disaster waiting to happen.
So, how do we avoid this? What key mindset shifts are necessary for both clients and contractors to succeed in these partnerships? How do we create more effective, empowering, and mutually beneficial working relationships?
First, what are some of the key discerning differences between a W2 vs 1099 worker?
Taxes: An employer withholds and pays taxes (income, Social Security, Medicare). An employer covers part of Social Security/Medicare.
Benefits & Protections: Employees are entitled to benefits like health insurance, paid time off, unemployment benefits, and protection under labor laws (e.g., overtime, minimum wage, anti-discrimination).
Taxes: Contractors are responsible for paying self-employment taxes (includes Social Security/Medicare). Must make quarterly estimated tax payments.
No Benefits or Labor Law Protections: Contractors are not entitled to employee benefits or protections like overtime, the minimum wage, or unemployment benefits. They rely on contract agreements for work terms.
Misclassification
Violation of Labor Laws
Supervision & Control: The employer controls the employee’s schedule, methods, and processes. Employees are expected to follow company rules and policies.
Long-Term Relationships: Employment relationships tend to be ongoing, with the employee working indefinitely or for a long period within the company’s structure.
Growth Within Structure: Employees often grow by advancing within a predefined career path or hierarchy. Their development is usually tied to promotions, raises, or training opportunities provided by the employer.
Limited Financial Upside: Employees typically have a capped income potential based on salary structures, overtime rules, or company budgets. Increases in earnings depend on promotions or raises.
Autonomy & Flexibility: Contractors maintain control over how and when they perform the work, focusing on delivering the agreed-upon results rather than following client instructions on how to do the work.
Project-Based Relationship: Contractor-client relationships are typically short-term, based on specific projects or deliverables, though repeat engagements are common.
Self-Directed Growth: Contractors tend to focus on growing their expertise, skill set, and client base independently. They constantly seek new opportunities, learning avenues, and niches to remain competitive and offer more value.
Unlimited Earning Potential: Contractors have more control over their rates, can take on multiple clients, and can raise their fees as their expertise grows, allowing them to scale their income beyond a fixed salary.
Erosion of Contractor Autonomy
Confusion About Expectations
Loss of Flexibility
Task-Oriented: Employees generally wait for tasks to be assigned and execute them based on employer expectations. They’re focused on completing tasks within their role and may have a more reactive approach.
Security & Stability: Employees often prioritize job security and stable income, with the tradeoff being less flexibility and more control from the employer.
Follower: Employees often follow the direction set by management and may rely on supervisors to guide their day-to-day priorities. They focus on contributing to the team or company vision as directed.
Work-Life Separation: Employees may have a clearer boundary between work and personal life, with fixed hours and less responsibility outside of those hours. The job typically stays within a certain time frame.
Fixed Role: Employees are generally hired for a specific role and tend to stick to that job description, with a focus on deepening their expertise in one area.
Results-Oriented: Contractors are focused on providing value, solving problems, and delivering results. They often take initiative and offer consultative advice to clients, looking for ways to add value proactively.
Entrepreneurial & Risk-Tolerant: Contractors are more comfortable with risk and variable income, often focusing on building a personal or business brand and taking ownership of outcomes. They enjoy flexibility and self-management.
Self-Leader: Contractors are their own bosses, guiding their work and decision making. They set their own priorities, establish their own processes, and are accoutable to themselves for results.
Work-Life Intengration: Contractors often blend work with personal time, especially when managing multiple clients. Since they have more control over their schedule, they may find themselves working at odd hours or balancing personal errands with professional responsibilities.
Adaptable & Multi-Role: Contractors frequently wear multiple hats, adapting to client needs across different projects. They’re more likely to shift between taks like consulting, marketing, administration, or project management depending on client demands.
Unclear Payment Structure
Blurring of Roles
Burnout
It’s essential for clients to understand that a contractor is not an employee, as the foundation of the contractor-client relationship is built on autonomy and expertise. Contractors are hired for their specialized skills and the value they bring to a project, not to follow day-to-day direction or supervision like employees. By recognizing this distinction, clients empower contractors to work independently, focusing on delivering results rather than managing processes. This fosters more efficient, innovative, and high-quality outcomes while also helping clients avoid potential legal risks tied to misclassification.
Equally important is the contractor’s understanding of this mindset shift. Many contractors, particularly those transitioning from W2 roles, may still view themselves as needing management, direction, or delegation. This undermines their role as self-leaders. For a contractor to thrive, they must step into self-leadership—taking full ownership of their work, guiding the engagement, and proactively setting expectations with clients. This includes clearly communicating deliverables, timelines, boundaries, and even educating clients on best practices for working with a 1099 contractor. By leading engagements in this way, contractors can foster stronger partnerships, deliver better results, and maintain the professional autonomy that defines independent contracting.
At the end of the day, whether you’re a W2 employee or a 1099 contractor depends on the process of your work, the level of skill you bring, and the type of relationship you have with the people you’re creating deliverables for.
The common-law test is often used to determine whether someone is an employee or contractor, regardless of their current tax filing status. While this test is somewhat subjective, ultimately the key distinction is this: both employers and clients have control over the agreed-upon result or product. However, a client has limited, if any, control over the process to achieve that result, whereas an employer typically controls most aspects of how the work gets done.
Final Note: Setting Clear Expectations for Clients and Contractors
For clients, successfully working with contractors requires a shift from the typical employer-employee mindset. Here are a few tips to ensure a productive relationship:
For contractors, embracing the 1099 mindset means stepping into self-leadership and taking charge of your work and client relationships:
By understanding these expectations and embracing the mindset of the role you’re in—rather than the role you may be accustomed to—both clients and contractors can create more effective, collaborative, and successful working relationships.