The pandemic triggered a worldwide reevaluation of the ‘traditional’ 9-5 office job norm, and the effects are disruptive changes to when, where and how people are choosing to work. The result? The gig economy is more popular than ever. Data published by Statista confirms the broader trend: by 2027, 86.5 million people will be freelancing in the United States, the research firm predicts, with freelancers making up 50.9% of the total U.S. workforce.
Despite the ever-rising number of freelancers, the gig economy isn’t exempt from labor shortages. In order to retain talented workers, businesses need to up their game: the basic incentives that gig work is inherently built on (flexible work hours and greater autonomy) simply don’t cut it anymore when independent contractors have more options than ever to choose from.
In this article, we’ll explain how to reduce turnover by walking you through some simple steps to make sure you’re attracting, but most importantly retaining, quality 1099 workers—building a workforce of loyal contractors that set your business up for surefire growth and success.
How are 1099 contractors and W-2 employees different?
The differences between 1099 contractors and W-2 employees boil down to differences in legal classification. The terms ‘1099’ and ‘W-2’ actually refer to the tax forms used to report each type of worker’s income. IRS Form W-2 lists the annual earnings of full-time employees, while Form 1099 provides details of independent contractors’ wages, salaries, and tips.
What are the benefits of being a W-2 employee?
1099 contractors are technically self-employed, while W-2 employees work exclusively for your company. It follows that W-2 employees have more company privileges like traditional workplace benefits. They’re entitled to minimum wage, overtime, and paid family and medical leave. They’re also permitted health and dental insurance, and any equipment needed to carry out the functions of the job.
What are the positives for 1099 contractors?
1099 contractors might not have traditional benefits like W-2 employees, but they do enjoy more freedom. Employers have no right to exclusivity over their work, nor can they claim ownership over any discoveries their contractors may make. Essentially, independent contractors have no inherent loyalty to your company and can choose to work for other companies or leave at any time. This makes it important for any gig platform that’s looking to scale to cultivate a sense of allegiance and loyalty among your 1099 workforce.
7 Tips to boost loyalty with your 1099 workforce
Building loyalty and boosting retention among your 1099 contractors doesn’t have to cost a ton of money—or all of your time. By implementing certain tools and principles, you can validate your contractors and help them feel included in your company culture. Let’s explore how.
1. Pay your 1099 workers faster
Nothing brings down morale more than slow payments. No one likes a delay in being paid, but least of all 1099 contractors, who often deal with more pay variance than W-2 workers and rely on speedy payments to make ends meet. The best way to retain 1099 workers is to ensure fast 1099 payments.
With Branch, you can pay your 1099 workers as soon as the job is done—at no extra cost. As well as cultivating a good relationship between you and your contractors, the promise of instant payments helps ensure that the best talent in the industry keeps coming to you. Nearly 90% of workers are more likely to select one gig platform over others if they can get paid instantly without fees
You’ll also save money as ACH costs, pre-funding requirements, and other payment fees are eliminated—so everyone’s happy.
2. Make taxes as easy as possible
1099 contractors are responsible for their own taxes and, unlike W-2 employees, they don’t have an employer withholding payroll taxes from your paycheck. It’s no surprise then, that paying taxes as an independent contractor can be tricky—and very time-consuming.
One way to make their job a little easier is to create a guide or set of resources so that every 1099 worker who works with your company can use them to streamline their tax filing. You can also give helpful advice on calculating quarterly estimated tax payments. Even if they’ve got strong experience in the gig economy and have their taxes sussed, all 1099 contractors will appreciate the effort and offer of advice. It’s a sure way to encourage loyalty and make them feel valued.
3. Create feedback loops
Clear communication with W-2 employees is important, but it’s absolutely essential in order to boost loyalty with 1099 contractors. You may rarely see them, if at all, in person, so effective communication is key. Additionally, 1099 workers are often not included in internal company comms, such as company newsletters, office notice boards and company-wide slack channels, so it can be easy for them to miss out.
Feedback loops can be a great way to ensure there is constant, constructive communication between you and your contractors. What do feedback loops look like? Simply put, it’s listening to their needs and conducting ongoing surveys or questionnaires to gauge their feelings. Then, it’s taking that feedback into consideration and communicating possible solutions for any concern.
Listening to this feedback and acting on it is undoubtedly the best way to promote loyalty among contractors. By platforming their voices, you’ll show how much you value them as people—as well as their work. 1099 workers value responsiveness and constant contact. Make sure you’re always all on the same page about payments, new projects, and any company updates.
4. Make tipping easy
Tipping may not be common practice in all industries, but it’s an important element of many 1099 contractors’ work experiences. With the steady decline in cash usage, some 1099 contractors may experience friction around receiving adequate tips for their services.
As a business, you can cut some of that friction by making sure contractors receive their tips as soon as possible. Branch allows you to send instant cashless tips, travel reimbursements, or any other one-off payments to contractors after every shift or unit of work. This increases worker satisfaction and saves you significant time and energy.
5. Provide milestone incentives
Incentives of any kind are a surefire way to increase work output and quality. In order to incentivize independent contractors, you’ll need to get creative. Milestone incentives can be very effective: ask yourself what you can offer that your contractors might value the most, as well as which milestones are most important for business growth.
This is a more direct way to drive 1099 worker loyalty: you can offer rewards for a certain number of months spent with your company, articles produced, projects completed, customers served, or targets reached, to name a few.
A few milestone rewards to consider are:
- Paid leave
- Untaxed gift voucher
- Experiences
- Paid travel
- Physical gifts/equipment
- Company privileges
6. Offer perks and bonuses
Milestone incentives have their place, but there are so many more perks you can offer to all 1099 contractors to encourage them to deliver their best quality work—and boost loyalty to your company.
Some perks and bonuses to consider:
- Free WiFi is a must, and if your contractors are working from home you could go the extra mile and offer WFH subsidies. Anything that makes their working environment more comfortable and efficient will earn you significant brownie points among your 1099 workers.
- Free financial services like access to a free digital checking account and debit card for contractors can be huge, especially if they are currently unbanked (5.9 million Americans are currently unbanked!). Providing access to a free account with zero overdraft fees or minimum balance requirements can be a major incentive to work for your platform—and stay with you.
- A special bonus as a reward for hard work is a great way to show appreciation for hard-working contractors, boosting workplace morale and general happiness. Performance bonuses tend to encourage hard work: payment incentives are recognised to be among the most effective ways of increasing worker loyalty.
- Offering memberships to company-used tools or platforms will do you the double favor of encouraging your workforce (whether W-2 or 1099) to interact with each other, and making independent contractors feel that you’re actively seeking out ways to make their lives better. For example, TravelPerk is a great tool to make your workers feel included. This travel booking platform makes it easy to involve your 1099 contractors in company events, retreats, or trips.
7. Prioritize collaboration & smooth onboarding
Including contractors in decision-making processes not only ensures that everyone feels valued, but also contributes towards a more constructive work environment. This also helps to build more innovative business solutions where you gain diverse inputs from those with an external perspective yet strong product knowledge.
Make sure your contractors really feel integrated into your company culture: a robust work culture is a strong reason for contractors to remain loyal to your platform. An effective onboarding process can also set a good precedent. It’s vital to be as clear and informative as possible from day one. Set out your expectations and guidelines so there’s no room for doubt or miscommunication. This will help to establish a healthy working relationship.
Top tips on how to build a strong onboarding process:
- Welcome packs
- Departmental meets
- Checklists
- Video content
- 1-1s with peers or seniors
- Buddy systems
- Make sure your system incorporates the Four C’s that are crucial to onboarding: compliance, clarification, culture and connection
See your business succeed with your 1099 workforce
Increase loyalty by following these simple tips and investing time into the satisfaction of your 1099 workforce. Improved retention rates can positively impact your business, helping to scale your company in the long run. Building a loyal 1099 workforce helps protect your business from high churn rates and contractors leaving you for the competition—which in turn helps set you up for greater success and growth for years to come.
Read more about how to create loyalty-boosting payments here.
