Xjyuk

I've been working as a 1099 employee for about 2.5 years on a side gig for $20/hr and now the company has to switch me to W2 at the same $20/hr rate.

Shouldn't there be about a 20% change between 1099 and W2 for tax purposes? Either my W2 hourly should be much higher than $20 or it means I've been working for $16/hr since I've been on 1099 factoring in taxes?

I asked my manager his response was...

"You have always been 20 per hour as a 1099. It's the same. When you do your taxes at the end of the year you pay the same taxes with 1099. With w2 the taxes are taken out beforehand"

Is his statement correct?

Prior to this conversion they were paying a flat $20.00 per hour for your services. Now they're paying $20.00 per hour and additionally paying things like workers compensation, health insurance, 401k, payroll taxes, etc. None of these costs come out of your $20.00 per hour pay rate.

The cost to them is greater than the $20.00 per hour they had been paying you up to this point. The end result is that they're paying more for you now than they were previously. You're still getting the same $20.00 per hour.

As for your taxes, those will now come out of your paycheck rather than you paying them yourself quarterly or yearly. The net result to you should be largely the same.

As for things like healthcare, retirement, etc. The difference is in where those costs have moved. Prior to this you were paying for these things on your own. Now you'll see some of those costs as deductions to your total paycheck. The net result to you, again, should be largely the same.

So, are you being paid fairly? I'd say yes. They left you at the $20.00 per hour rate even though they have additional costs. They could have easily reduced your hourly rate to compensate for those additional costs.

It costs more to W2 someone at $20.00 per hour then it does to 1099 them at $20.00 per hour.

There is a difference, but it typically goes the other way. When you are a 1099 you pay both halves of the FICA and Medicare taxes. When you are a W-2 your employer pays half. Additionally, you typically don't get much by way of benefits as a 1099, but you do as a W-2.

Whenever I've looked at doing work under a 1099 agreement, I've asked for 25-30% more than as a W-2. If you kept the same hourly rate, and you are receiving just about any benefits (like, paid vacation, health insurance, etc.) you got yourself a raise.