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James Serra's Blog

James is currently a Senior Business Intelligence Architect/Developer and has over 20 years of IT experience. James started his career as a software developer, then became a DBA 12 years ago, and for the last five years he has been working extensively with Business Intelligence using the SQL Server BI stack (SSAS, SSRS, and SSIS). James has been at times a permanent employee, consultant, contractor, and owner of his own business. All these experiences along with continuous learning has helped James to develop many successful data warehouse and BI projects. James has earned the MCITP Business Developer 2008, MCITP Database Administrator 2008, and MCITP Database Developer 2008, and has a Bachelor of Science degree in Computer Engineering. His blog is at .

Forcing a contractor to go W2

I have had a few questions like this: “I was wondering if there is a reason the vendor/broker/head hunter forces a contractor to go on W2?  As per many vendors, lots of big banks are insisting that contractors should be on vendors W2 and NOT have a sub-contracting relationship through an s-corp or 1099.”  To see the difference between W2 and 1099, check out Consultants: 1099 or W-2?.

So I asked my recruiter friend, and his reply:

I just landed a client a few months ago and per their MSA (Master Service Agreement), any candidate that I put on contract with them MUST be a W2’d employee of my staffing company.  It basically comes down to showing that the vendor (my staffing company) has control over the employee and that there aren’t a bunch of layers between the vendor and other sub-contractors.  By eliminating the potential for multiple sub-contracting layers it does two things: (1) reduces the margin between what the contractor “actually” costs and what that person is being billed to the client and (2) it shows that the vendor has control over the contractor (meaning that the vendor has a direct relationship with the candidate and the vendor isn’t getting the person from a sub of a sub of a sub).  I’m sure relative to the “banking” scenario listed in your question, there are also some federal regulations that have to be followed since dollars are involved in that industry.  It mostly comes down to ownership/accountability.  How well do you know a candidate if they come from a sub of a sub of a sub?  It is better for everyone involved there is a “direct” relationship between the vendor and their employee.

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