1099 vs. W2

A W2 employee has payroll taxes withheld by the employer, who also pays the employer share of those taxes and typically offers benefits. A 1099 contractor is self-employed, responsible for their own taxes (including the self-employment tax an employer would otherwise share), and receives no employer-provided benefits.

Comparing a 1099 rate against a W2 salary fairly requires normalizing for this gap — a 1099 rate that looks higher than an equivalent W2 salary may not actually be a better deal once the contractor's own tax and benefits burden is accounted for.