If you own or manage a med spa, I’d imagine you’ve faced this question many times: should we bring on our providers as W-2 employees or 1099 independent contractors?

Maven works with multiple medical and aesthetic practices, and we can tell you this decision truly impacts much more than just your payroll. It affects your company’s compliance, its culture, scheduling, and even your bottom line.

Let’s break down the pros and cons of each, so you can make an informed decision as to your best step forward:

W-2 Employees:

Pros:

1. Fewer Compliance Risks: The IRS and specific state agencies are much less likely to question this classification for its validity.

2. Consistency for Your Brand: This employee can be trained in your processes and fully invested in the client experience that you want to deliver.

3. More Control Over Work: You have the ability to set specific schedules, require certain procedures to be performed a specific way, and have a greater ability to enforce protocols and best practices within your organization.

4. Retention & Loyalty: Employees who receive benefits such as health insurance, 401k match, and other ancillary benefits are more likely to stay with you for a longer period of time and be more loyal to your company.

Cons:

1. Higher Administrative Costs: You will be responsible for paying the employer side of payroll taxes, workers compensation premiums, unemployment insurance, and offered benefits such as health insurance, PTO, and 401k.

2. Less Flexibility in Scheduling: It’s much more complex to reduce the hours of a provider or your staff if demand changes suddenly.

3. Cost to Hire: This may not be an outward expense in terms of your cash flow, but the time, effort and training you and your team spend with this new employee can add up quickly, especially if they leave quickly or you have high turnover.

1099 Independent Contractors:

Pros:

1. Low Overhead: This obviously flips for 1099 independent contractors. You now have no obligation to pay payroll taxes, provide benefits, or pay for unemployment insurance. You pay for what they provide you, and that’s it.

2. Scalability: It’s much easier to bring on additional help during busy seasons or when others are on PTO without committing long-term.

3. Specialized Expertise: Independent contractors may be able to bring a niche of skills or services you might not currently offer.

4. Attract Top Talent: Providers who prefer the 1099 model and who are efficient with their time may increase your profitability. This is a huge Key Performance Indicator, or KPI, that we measure here at Maven. Whether it’s production per appointment, or production per hour, a good provider may be able to help you reach those production and revenue goals you are striving for.

Cons:

1. Less Control Over How They Work: By law, you can’t dictate their schedule, training requirements, or methods the same way you can with W-2 employees.

2. Compliance Risk: Misclassifying or treating someone who is functionally an employee as an independent contractor can result in huge penalties and back taxes. Before you make any decision, ensure you fully understand the compliance requirements between these two types. This knowledge is vital to protecting your business from state agencies and the IRS.

3. Lacking Brand Loyalty: Independent contractors can often prioritize their own clientele over yours, and they may not market your business in the way an employee would.

4. Integration and Instability: Because these independent contractors are just that, independent, they may not be willing to attend staff meetings, company events, or fit well into your company culture. This can cause disruption to your actual employees and create instability in who your clients see on a regular basis.

Bottom Line:

Where your business is and where you want to be can influence the decision you make when hiring. It is important to weigh these pros and cons and look at this hire not only as an expenditure, but what they would do to your revenue and operations as a whole. We love to review these metrics with our clients and help utilize all the data and resources to make these informed decisions. Contact us today to learn more about how we can help your business.

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