HR Management & Compliance

Hourly Workers Do Not Understand the Difference Between W-2 and 1099 Classifications

Late last year, California passed Assembly Bill 5—otherwise known as AB5—that makes it harder to classify workers as independent contractors. The new law, which is currently on hold pending on the outcomes of several lawsuits filed by California businesses, would move some gig workers to employees and entitle them to benefits like sick leave, unemployment benefits, overtime pay, and more.Gig

While this law would only impact California employers, other states may follow suit depending on the results of these litigations. For example, a New York state senator is advocating new legislation that would extend protections to gig workers. Worker advocacy groups are pushing for even more protections and benefits for New York workers who have been labeled independent contractors until now.

Classic Classification Confusion

What’s interesting is the fact that most hourly workers still don’t understand how they are classified. According to Bluecrew—an on-demand staffing technology platform exclusively for flexible W-2 work—has released results from a new survey which revealed a substantial number of hourly workers still don’t understand the distinction between independent contractors with 1099 status and W-2 employees.

Strikingly, when asked what benefits an independent contractor is eligible for, more than half of the hourly workers (57%) surveyed either didn’t know or were unable to accurately identify the distinctions.

According to the data, despite the confusion over worker classification laws, 84% of hourly workers favored worker protections and benefits (such as workers’ compensation, guaranteed minimum wage, overtime, sick pay, and health insurance) as more important than flexibility or considered flexibility and worker protections equally important. Overwhelmingly, 72% of hourly workers would rather be a W-2 employee than a 1099 contractor.

The report further revealed that nearly three-quarters of hourly workers (71%) were unaware of upcoming regulations, like California’s AB5, that would ensure gig workers are treated as W-2 employees and so receive a comprehensive set of worker protections and access to benefits.

Even though the majority of hourly workers were unable to correctly identify or unsure of what benefits gig workers were eligible for, half (48%) believed there should be a law which requires gig workers to receive protections and benefits.

“It’s abundantly clear that flexibility without worker protections and access to benefits can have a devastating impact on American workers who depend on workers’ comp, guaranteed minimum wage, sick pay, and health insurance among others to maintain their livelihood,” says Adam Roston, CEO of Bluecrew—in a press release. “Flexibility and worker protections can and should co-exist. As proof over the past five years, Bluecrew has provided the flexibility hourly workers want and worker protections they need. AB5 and other emerging legislation will ensure more employers do the right thing for the American workforce.”

Highlights among all the respondents:

  • Two-thirds of Americans (63%) would rather be an employee with worker protections and benefits than a gig worker.
  • The majority (53%) either didn’t know or were unsure of what benefits and protections gig workers were eligible for.
  • A quarter (27%) were unsure what benefits and protections W-2 employees were eligible for.

Highlights among gig workers:

  • Two-thirds of gig workers (67%) knew there was a difference between W-2 and 1099 worker classification, and 60% believed they should receive benefits and protections.
  • 41% believed worker protection and flexibility are equally important.
  • One out of four (23%) stated they aren’t getting access to the benefits and protections they need.

Highlights among salaried employees:

  • Two-thirds (65%) knew the difference between being a W-2 employee and an independent contractor, and the overwhelming majority (75%) would rather be an employee over an independent contractor.
  • Flexibility is less important to salaried employees than worker protections and benefits, but nearly half (46%) ranked both as equally important.
  • Nearly three-quarters (70%) were unaware of state regulations like AB5.

Survey Methodology

The survey was conducted via SurveyMonkey between December 5-6, 2019 among a national sample of 1,087 American adults ages 18 and up. In addition to looking at the overall sentiment, the survey was categorized into those who identified as hourly workers (34%), salaried workers (28%), gig workers (7%), and those who were unemployed (31%). To learn more, click here.

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