Independent Contractor Nurse vs. Full-Time: Pros and Cons
The dynamic nature of the nurse workforce requires healthcare organizations to be strategic in their staffing plans to secure a reliable pool of nurses. Each nursing employment option — independent contractor nurses, full-time employees, or per-diem staff — comes with its own unique benefits and drawbacks.
Deciding which staffing option is best for your facility can be challenging, as the decision you make comes with important legal implications that affect patients and staff. To help you answer this question, we’ll explore the critical differences between hiring full-time vs. contract nurses and compare the pros and cons of each option so you make an informed staffing decision that works for your facility.
What Is an Independent Contractor Nurse?
An independent nurse contractor provides services to a healthcare organization or staffing agency, but is not considered an “employee” in the legal sense. This is an important distinction, as they pay Social Security, Medicare, and income taxes themselves and typically don’t receive benefits. They’re often referred to as “1099 workers” due the Nonemployee Compensation 1099-NEC Form organizations submit to the IRS to report payments for their nursing services performed.
In contrast, FTE nurses, also referred to as W2 nurses, have an employer of record that typically provides employee benefits and withholds taxes on behalf of their employees.
Can Nurses Be Classified as 1099 Contractors?
The Fair Labor Standards Act (FLSA) and IRS guidelines help determine whether a nurse meets 1099 contractor criteria. Examining each of the following factors can help you decide whether you should hire independent contractor nurses or full-time employees:
| Behavioral Factors | Does your organization control or have the right to control your nurses’ responsibilities? If your facility provides input on its nursing roles and responsibilities, your workers are more aligned with a W2 employment status. |
| Compensation Variables | Will your facility manage the financial aspects of a nursing professional’s job? Regular hourly wages, as opposed to flat fees, are more aligned with W2 employees. |
| Facility-Worker Relationship Conditions | What type of relationship does your facility establish with your workers? Is the relationship ongoing or temporary? Can a contract job become permanent? If there is a sign of a long-term relationship between workers and employers, it’s safest to classify them as full-time employees. |
| Unclear Roles and Boundaries | If your worker relationships and management strategies are unclear, the IRS can help you decide whether to hire independent contractor nurses or full-time staff. Filling out Form SS-8 can help employers determine the appropriate worker status of their nursing professionals. |
What Are Full-Time (FTE) Nurses?
FTE nurses are employees of the organization that hired them, whether they work part-time or full-time hours. They’re considered W2 workers because employers submit a Form W2 to the IRS for the wages, benefits, and taxes paid to their employees or on their behalf. Your facility can hire W2 nurses directly or through a W2 staffing partner.
The Fair Labor Standards Act (FLSA) doesn’t define part-time or full-time employment. However, the IRS recognizes nurses working an average of at least 30 hours per week or 130 hours per month as full-time employees. Workers classified as part-time employees work less than 30 hours. Per-diem nurses, who only work on an as-needed basis, are considered part-time employees for tax purposes.
What Are the Pros and Cons of Independent Contractor Nurses vs. Full-Time Nurses?
Now that you’ve gained some insight into nurse employment classifications, it’s time to examine the advantages and disadvantages of contract employment vs. full-time (W2) employment.
Contract Nurses: Pros
1. Increased Scheduling Options
Staffing agencies can help you expand the size of your nursing pool by temporarily bolstering staff and adding flexibility to your scheduling strategies. This can be a practical way to test different staffing solutions and determine your facility’s needs without over-hiring and over-spending.
2. Decreased Benefit and Operational Costs
Contract 1099 nurses’ rates are higher than W2 nurses to compensate for the lack of benefits. However, there can be cost savings by not paying or supplementing their Social Security, taxes, insurance, etc. Contract nurses also don’t participate in onboarding and training and are not supervised since they aren’t employees, decreasing the costs and workload of your operations staff.
3. Temporal Agreements
If an employee will be away on leave, hiring a contract nurse is an excellent way to bridge the gap until their return without burdening current staff. Also, if a 1099 nurse turns out to be unsuitable for your facility, you can work with their agency to have them reassigned or choose to opt out of renewing their contract.
Contract Nurses: Cons
1. Decreased Commitment to Contract Assignment
Some 1099 nurses don’t feel the same dedication toward your facility and organizational values as do your W2 employees, who have a longer term commitment and are more invested in the company’s success. A contract nurse’s potential lack of interest and investment in their assignment can disrupt your work environment and negatively impact your facility’s culture.
2. Decreased Oversight
A 1099 nurse isn’t subject to your nursing leadership’s supervision, training, or remediation. This can compromise patient safety as contract nurses receive different training than your staff and can’t be directly managed by your leadership team. This is a significant factor to consider when hiring independent contract nurses vs. full-time employees.
3. Increased Liability
Some states don’t require independent nurse contractors to carry workers’ compensation insurance, which covers their medical bills, damages, and loss of income when injured at work. If a nurse doesn’t have insurance and gets hurt at your facility, they can sue your organization to recoup their costs.
Another form of liability is employee misclassification. When an organization treats a 1099 nurse like a W2 nurse by controlling their responsibilities, finances, and schedule, they risk legal and financial penalties. If they’re found liable in a lawsuit, they may be required to pay benefits, back pay, and delinquent taxes.
Full-Time (W2) Employment: Pros
1. Improved Recruitment
A facility attracts and retains top talent when they provide their nurses with the security of regular wages, employee benefits, and investment in their professional growth. When nurses have their basic needs met, they’re more committed to their workplace.
2. Ability to Lead Your Staff
Your nursing leadership will be able to lead their staff efficiently and cohesively through training, scheduling, and supervision. This is a considerable advantage for full-time vs. contract nurses, as having managerial control over quality and standards optimizes patient safety and satisfaction.
3. Improved Patient Outcomes
Having reliable and dedicated staff improves patient continuity and quality of care. Permanent staff providing routine care to patients are able to detect and act upon changes quickly. Consistent care also improves the patient experience by allowing the nurse to be part of their healthcare journey.
Full-Time (W2) Employment: Cons
1. Longer Onboarding
Hiring a full-time W2 employee requires a longer onboarding process as your facility conducts background checks, credentialing, and training for your nurses. Often, new hires must wait to begin training until credentialing is complete, which can delay the improvement of any short-staffing issues.
2. Increased Benefit and Operations Costs
The combined costs of a comprehensive employee package and onboarding training can be prohibitive. This investment can cause constraints in meeting your staffing needs.
3. Full-Time Contract Benefits and Protection Implications
Organizations must also be mindful of the legal implications of hiring W2 nurses. As employees, W2 nurses have certain benefits and protections required by law. For example, your organization might be covered by the federal Family and Medical Leave Act or state laws like California’s paid family leave, which can impact the types of benefits organizations must offer.
Want the Benefits of Full-Time Staff but Need Additional Flexibility?
Understanding the risks and benefits associated with hiring independent contractor nurses is essential to running a successful healthcare organization. At IntelyCare, we hire all of our nursing professionals as W2 employees while allowing them to support our facilities with flexibility of 1099 contractors. Partner with us to start safely filling shifts with quality nurses today.
Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.
IntelyCare education development nurse and writer Diana Campion, MSN, APRN, ANP-C, contributed to the writing and research for this article.