Many organizations today understand the benefits of hiring 1099 workers, from as-needed access to specific skills to avoiding the need for tax withholdings or paying unemployment taxes. There are already more than 15 million 1099 contractors, and this count is likely to grow with the recent economic downturn caused by the COVID-19 pandemic. And the trend among younger workers (especially millennials) shows that many are choosing to pursue opportunities in addition to or instead of traditional “W2” employment.
“For many employers, this has become an important part of their workforce,” says Anita Tahmassian, East Territory Manager, PNC Organizational Financial Wellness. “This group also faces a unique set of financial stressors. Offering these employees solutions that are designed specifically around their needs can help them improve their financial well-being and provide benefits to employers at the same time.”
Financial Stressors for Independent Contractors
One of the major financial stressors for 1099 employees is managing taxes. “Maintaining receipts and tracking deductible expenses is a time-consuming and non-billable challenge,” says Stav Gil, General Manager, indi®. “And while full-time employees normally have all federal, state and local income taxes withheld from their paychecks, that isn’t the case for most independent contractors.” These workers are essentially on their own for calculating and paying quarterly estimates. Both employer and employee can run the risk of facing a large tax bill (and potential penalties) at year’s end should those payments fall short of what’s actually owed. Research shows that about 33% of 1099 employees are not aware of quarterly tax payments, and 43% fail to set money aside for taxes.
The Benefits of Banking Designed for Independent Workers
An option like indi banking simplifies taxes and expense tracking for your contract workers. This FDIC-insured account provides a Visa® debit card, along with a mobile app that helps workers calculate tax amounts and designate a percentage of each pay as tax savings. The app also provides quarterly tax payment reminders and adjusts for when employees save ahead or fall behind. The expense tracking feature delivers real-time notifications for every transaction, along with receipt capture and on-the-go expense categorization, and delivers year-end expense reports to help prepare for tax filing.
For employers, indi banking works with an organization’s existing payroll system. The direct deposit option can help to reduce the administrative time and costs associated with paying independent contractors.
Another major benefit for employers is the opportunity to build stronger relationships with this valued and vital part of the workforce. By helping to improve the financial wellness of 1099 employees, organizations may be better positioned to attract and retain the top talent whose services are most in demand.
A Key Component of Your Organization’s Overall Financial Wellness
While independent contractors may not be full-time members of the team, your organization still relies on their contributions to help drive success. As with any part of the workforce, financial stress can take a toll on 1099 workers’ contributions and, ultimately, on your company’s bottom line. Today, financial stress is taking a $500 billion toll on productivity alone each year. That’s why it’s important to choose a partner for providing independent contractor banking that also supports all aspects of financial wellness, at every level and life-stage of your workforce.
PNC Organizational Financial Wellness is helping employers attract and retain talent, reduce turnover costs and increase productivity through customized solutions for all employees. Our comprehensive offering includes an array of financial solutions, including banking, investing and retirement services, and health savings accounts, supported by online and in-person education, digital tools and ongoing communications. To learn more about our program and indi banking, visit pnc.com/wellness.