Also written: Tax term · Employment type
What is a W2 contract?
The consultant is an employee of the staffing agency for the duration of the assignment. The agency withholds income tax, pays the employer share of payroll taxes, and usually offers some benefits. The consultant receives a W2 at year end.
It is the simplest arrangement for the worker and the most expensive per billed hour for the agency, because burden is carried on the agency’s side of the rate.
What is a C2C contract?
Corp-to-corp: one company invoices another for the consultant’s services. The consultant is an employee or owner of the billing company — their own entity, or an agency that employs and, where relevant, sponsors them.
This is the dominant structure in US IT staffing because the layered vendor chain is a sequence of company-to-company contracts, and because H1B sponsorship requires a sponsoring employer.
What is a 1099 contract?
The consultant is an independent contractor paid as an individual, responsible for their own income and self-employment taxes. No withholding, no benefits, and no employer relationship.
It is the least common of the three in IT staffing, partly because worker-classification risk sits with the payer and partly because it cannot be used for sponsored workers.
Why do rates differ so much between them?
Because each term puts the burden — payroll taxes, benefits, insurance, overhead — in a different place. A C2C rate has to absorb costs a W2 rate does not, so identical take-home pay produces materially different headline rates.
Comparing a C2C number to a W2 number without adjusting is the single most common rate error on a bench-sales desk, and it is why tax term belongs in the structured fields of a parsed requirement rather than in a free-text note.
Related on this site
More terms
- Submittal-to-interview ratio — The submittal-to-interview ratio is the share of candidate submissions that convert to a client interview — a quality signal for matching and packaging, not a measure of desk output.
- Prime vendor — A prime vendor holds the direct contract with the end client and distributes that client’s requirements to subcontracting vendors, sitting one layer from the hiring decision.