Contract vs. Full-Time Nurses: Pros and Cons

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Written by Diana Campion, MSN, APRN, ANP-C Education Development Nurse, Content Writer, IntelyCare
A hospital hallway, with nurses and other medical staff walking.

Regardless of whether the nursing industry is facing a labor shortage, the dynamic nature of the nurse workforce requires healthcare organizations to be strategic in their staffing plans to secure a reliable pool of nurses. There are different nursing employment options, such as workers hired on contract vs. full-time employees (FTEs), each with benefits and drawbacks.

Which staffing option is the best for your facility? This is an excellent question, as your decision can affect patients and staff, and can come with important legal implications. To help you answer, we’ll explore the critical differences between full-time vs. contract nurses and compare their pros and cons.

What Are Contract Nurses?

Independent 1099 nurses contract their services to a healthcare organization or staffing agency, but are not “employees” 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 will typically provide employee benefits and withhold taxes on behalf of their employees.

Can Nurses Be Classified as 1099 Contractors?

The Fair Labor Standards Act (FLSA) and IRS guidelines help determine if a nurse meets 1099 contractor criteria. The IRS recommends focusing on how much of the working relationship your facility will control and examining (then documenting) each of the following factors when deciding whether your nurses should be hired on contract vs. full-time employees.

1. Behavioral Factors: Does your organization control or have the right to control nurses’ responsibilities? If your facility controls a nurse’s role, it’s more consistent with W2 status.

2. Compensation Aspects: Will your facility manage the financial aspects of the nurse’s job? Regular hourly wages, as opposed to flat fees, are more aligned with W2 employees.

3. Facility-Worker Relationship: What type of worker relationship is defined by its characteristics? Is the relationship ongoing? Can a contract job become permanent? For instance, multiple contract renewals can change the status of a 1099 contractor to that of a W2 employee.

4. Uncertain: If you’re still wondering whether contract vs. full-time classification is appropriate for your facility’s nursing services, the IRS recommends filling out Form SS-8 to determine the appropriate designation.

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 W2 workers since 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 agency.

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. Part-time employees work less than these hours, including per-diem nurses, who only work on an as-needed basis.

Contract vs. Full-Time Nurses: Pros and Cons

Now that you’ve gained some insight into nurse employment classifications, it’s time to examine the advantages and disadvantages of independent contract vs. full-time (W2) employment.

Contract Nurses: Pros

1. Increased Scheduling Options

Staffing agencies increase your pool of nurses with temporary staff bolstering your scheduling flexibility and strategies. This can be a practical way to test scheduling solutions and determine your staffing needs without over-hiring.

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, a contract nurse is an excellent way to bridge the gap until their return without burdening your current staff. Also, if a 1099 nurse isn’t suitable for your facility, you can work with their agency to have them reassigned or opt not to renew their contract.

Contract Nurses: Cons

1. Decreased Commitment to Contract Assignment

Some 1099 nurses don’t feel the same dedication toward your facility and values as your W2 employees, who have a longer term commitment. A contract nurse’s lack of interest and investment in their assignment can disrupt the work environment and negatively impact your facility’s culture.

2. Decreased Oversight

The 1099 nurse isn’t subject to your nursing leadership’s supervision, training, or remediation. This will compromise safety when your contract nurses receive different training than your staff, and management can’t oversee how well (or poorly) the contract nurse performs their job. This is a significant factor when considering contract vs. full-time employees.

3. Increased Liability

Some states don’t require 1099 contractors to carry workers’ comp 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 contract vs. full-time misclassification when an organization treats a 1099 nurse like a W2 nurse by controlling their responsibilities, finances, and schedule. The facility risks legal and financial penalties and is responsible for paying benefits, back pay, and delinquent taxes if found liable in a lawsuit.

Full-Time (W2) Employment: Pros

1. Improved Recruitment

A facility attracts and retains top talent when they provide their nurses with security of regular wages, employee benefits, and investment in their professional growth. When nurses have their basic needs met, they’re more invested and 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 you can manage quality and standards, leading to patient safety and improved outcomes.

3. Improved Patient Outcomes

Having reliable and dedicated staff improves patient continuity and quality of care. Permanent staff providing routine care to patients 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 is a longer process as your facility needs to conduct background checks, credentialing, and training for your nurses. Often, new hires are allowed to begin training once credentialing is complete, which can cause a delay in helping with any short-staffing issues.

2. Increased Benefit and Operations Costs

The combined cost of a comprehensive employee package and teams to onboard, train, and manage your nurses can be prohibitive. This investment can cause constraints in meeting your staffing needs.

3. Legal W2 Employee 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.

Looking for the Benefits of a Full-Time Nurse With the Flexibility of a Contract Nurse?

Need additional staff to supplement your nursing team short-term but want to avoid a contract vs. full-time misclassification lawsuit? At IntelyCare, we hire all of our nursing professionals as W2 per-diem employees with benefits, but they support our facilities with the same flexibility as 1099 contractors. Partner with us to start safely filling shifts with quality nurses today.