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Contract, W-2, 1099: employment types decoded

"Contract" in a job title changes your taxes, your benefits, and how much of the offered rate you keep. Here's what each label actually means in the US — before you're three interviews deep and find out.

The types, in plain English

• Full-time (W-2 employee). The default. The employer withholds your taxes, pays half of Social Security/Medicare, and typically provides benefits — health insurance, PTO, maybe 401(k) match. Salary quoted is before taxes but after the employer's share of payroll tax.
• W-2 contract. You're an employee of a staffing agency, placed at the client company for a fixed period. Taxes are withheld like any job; benefits come from the agency and are usually thinner. Common in IT, healthcare, finance, and government work.
• 1099 / independent contractor. You're a business, not an employee. Nothing is withheld: you owe income tax plus both halves of Social Security/Medicare (self-employment tax, ~15.3%), usually paid quarterly. No benefits, no PTO, no unemployment insurance. Rule of thumb: a 1099 rate needs to be meaningfully higher — often 20–40% — than the equivalent W-2 salary to break even after tax and benefits.
• Contract-to-hire. A contract period (often 3–6 months) with the stated intent to convert to full-time. Real conversions happen — and so do rolling extensions that never convert. Ask directly: "What share of contractors in this role converted in the last year?"
• Part-time. Fewer hours, and often a benefits cliff: under ~30 hours/week, employers generally aren't required to offer health coverage. Two part-time roles rarely add up to one full-time role's compensation.

Red flags worth knowing

• A "1099 role" with employee expectations. Set hours, a manager, their equipment, ongoing indefinite work — that's the profile of an employee. Misclassification saves the company payroll tax at your expense; the IRS has rules about exactly this.
• Rates quoted to blur the difference. "$50/hour!" reads differently as W-2 versus 1099. Always ask which it is before comparing offers.
• Postings that never say. Plenty of listings omit the employment type entirely and let you assume full-time. Confirm it in the first conversation — it's a five-second question that reshapes the whole offer.

None of this makes contracting bad

Contract work is a legitimate strategy: faster to land, often better hourly money, a way into companies that convert contractors, and real flexibility. It just has to be priced and chosen with clear eyes — a contractor who negotiated like an employee has usually taken a hidden pay cut.