As you may know, nurse employment can be broadly sorted into three main categories: full-time, part-time, and per diem.
Full-time and part-time nursing are fairly straightforward — these types of work are paid, taxed, and filed as any other full or part-time job is. In either case, you’ll be given a W-2 ahead of tax season, and you’ll pay all state and federal taxes along the way.
However, things tend to be a little more flexible when it comes to per diem nursing. Depending on the employer, nurses will either remain on a W-2 or will be considered independent contractors and be filed under a 1099 instead.
If you're looking for a new per diem nursing role, understanding the differences between these two models can help you weigh the pros and cons of each.
Here are a few of the differences between W-2 and 1099 employment for nurses.
Taxation
The most noticeable difference between 1099 and W-2 employment has to do with taxation.
On a W-2, employees and employers pay state and federal taxes on each paycheck. While that often means a lower immediate paycheck, your tax return won’t include any unpleasant surprises.
All 1099 self-employed workers will be responsible for filing their own taxes, which includes paying 15.3% of their wages to federal taxes. This consists of 12.4% for Social Security and 2.9% for Medicare. Gig workers are responsible for paying this on their tax returns, in addition to any income taxes. Contractors can pay “estimated taxes” quarterly to account for the 15.3% tax and to avoid paying a large sum at the end of tax season.
Under a W-2, this rate is halved, with employers paying for one half. Your portion is also deducted (roughly) from each paycheck. Changing employment and pay rates may still result in you owing money on taxes, but it will usually be a significantly lower amount than for a 1099.
Flexibility
Another noticeable difference between 1099 independent contracting and W-2 employment is the degree of flexibility given to the nurse.
If you’re on a W-2, that means you’re a direct employee of the business you’re working for. Direct employment means you’re part of the organizational structure of that company, so you’re more likely to be given a regular shift, have to participate in organization-wide events, and otherwise have to work beneath the management structure of the company. As a result, W-2 employees tend to have much less flexibility in their working arrangements than 1099 contractors.
1099 contractors generally have much more control when it comes to scheduling and work locations. Instead of being part of a single facility's structure, they can pick up shifts at multiple facilities, designing a schedule that works best for their situation.
Liability
In nursing, as with any other field of work, mistakes can happen. You work with hundreds (or thousands) of patients every year, and at times certain patients may feel that their care expectations are not being met or that their nursing staff has been negligent in some way.
In situations where legal liability is involved, the difference between being a W-2 employee and a 1099 contractor can have potentially serious consequences.
Without getting bogged down in the legalese, W-2 employees tend to have more protections against liability than 1099 contractors.
The reasons for this are twofold — W-2 nurses are employees of a specific organization, and malpractice liability is typically handled by that organization if the nurse is operating “in the course of employment.” Even if something goes wrong, the organization will often bear the brunt of any lawsuits.
At the same time, many large organizations — in particular, hospitals — offer blanket malpractice liability insurance to nurses and doctors. This additional layer of protection means that W-2 nurses are much less likely to be impacted by a patient’s lawsuit.
On the other hand, 1099 contractors are not part of the organizations they work with. Therefore, they can shoulder more liability risk than a direct employee would. Because of their status as independent contractors, 1099 nurses may be more likely to answer for their actions — no greater organization can take responsibility for any perceived harm they may have caused.
At the same time, per diem nurses can pick up individual malpractice insurance plans. These plans are usually very affordable and offer security against malpractice claims. And in any case, nurses are typically much less likely to face legal action than doctors.
Pay and Benefits
Both pay and available benefits vary drastically depending on whether you’re working as a 1099 contractor or a W-2 employee.
To start, 1099 nurses are generally paid a higher hourly wage. This makes 1099 nursing an attractive option when considered alongside the improved flexibility in scheduling.
Keep in mind that 1099 nurses do not receive any benefits from the organizations they work for, which is part of what the extra pay covers. Any health insurance, retirement plans, or HSAs will have to be undertaken as individual plans; however, 1099 nurses do have more autonomy in choosing their preferred plans.
On the other hand, full-time W-2 employees can opt into the company health insurance — often covering themselves and their spouses/dependents at an affordable rate.
Making a Decision: 1099 vs W-2 for Nurses
So what is the correct option for per diem nurses? Which direction should you take in your next opportunity?
Ultimately, 1099 contracting is a great option for many per diem nurses. The better pay associated with 1099 contracting can help you cover the security and benefits associated with W-2 employment. And, if you want or need additional scheduling and location flexibility for your family or yourself, 1099 offers better options along those lines.
Today, there are plenty of great nursing opportunities for nurses willing to take the 1099 route. With that said, everyone’s situation is different, so find the setup that works best for you.
At Nursa, we create content for nurses at every stage of their careers. For related content, take a look at our per diem nursing blog.
