What if your company has a "no 1099 policy?"
A reader recently told me that his company, Booz Allen, now has a blanket policy of not sub-contracting to solo 1099s, particularly to employees who are trying to convert.
On paper, Booz is trying to avoid getting sued for misclassifying employees as contractors. The IRS has some guidelines for determining a contractor's status. You can find them here:
I advised the reader to offer Booz evidence that he would be a true contractor (e.g. showing LLC documentation, intent to provide services to other clients, etc.) and to walk if they don't budge (the reader has another opportunity).
We'll see what Booz does in this case, but these kind of bureaucratic obstacles are the rule, not the exception.
Generally speaking, most companies do NOT want 1099s. They make more money off of you as a W2. So what they'll try to do is either persuade you to stay on as a W2 for any reason they can throw at you. Here are some examples:
- It's company policy to not allow 1099s
- It's difficult to add another team member to the contract
- You need a Facility Clearance to be a sub
- It's risky going 1099. You're not ready for it
- We have a big raise and promotion for you if you stay as an employee
- If you join us as a W2 we have a great company culture, compensation, PTO, etc.
There may be some legitimate reasons why a company can't allow a 1099 on the contract. The most common legitimate one is that the company is itself a sub-contractor and 2nd tier sub-contracting is prohibited.
But most of the time it's just because they don't want to.
How do you get around this?
Just get a better option. If you're converting your job, get another job offer and give your notice if they won't budge.
If you have a decent W2 set up now and are talking with another company, just decline the offer and move on to another opportunity/stay at your current job.
Once a prime realizes you won't fall for their tricks, they all of a sudden become more flexible in what they're able to do (assuming they want you).
Funny how that works.