A W-2 employee is someone who works directly for your company with all the official paperwork, tax withholdings, and legal protections that come with it.
Here’s what makes them different from contractors or freelancers: W-2 employees are on your payroll. You withhold taxes from their paychecks (think Medicare, Social Security, federal and state income taxes), and you send them that familiar W-2 form every January so they can file their taxes.
But it’s more than just tax forms. W-2 employees get workplace protections under U.S. labor law—things like overtime pay, workers’ compensation, and unemployment benefits. They’re part of your team in the most official sense.
Why does this matter if you’re expanding internationally? Because every country has its own version of what we call “W-2 employees” in the U.S. The basic concept—direct employment with benefits and protections—exists everywhere, but the rules, forms, and requirements change dramatically once you cross borders.
In Germany, your employees get works council representation. In France, they’re entitled to meal vouchers. In Brazil, there’s a 13th-month salary requirement. Each country has its own way of defining and protecting direct employees.
The challenge isn’t understanding what a W-2 employee is—it’s figuring out how to hire and manage direct employees legally in every country where you want to grow your team. Let’s talk about what direct employment looks like in the countries where you want to grow.
What is a W-2 tax form?
Form W-2 is a tax document employers must provide to their employees, detailing their annual earnings, Social Security contributions, Medicare contributions, and federal and state income tax withholdings. Employees use this information to file their tax returns accurately with the Internal Revenue Service (IRS).
Also called a Wage and Tax Statement, Form W-2 reports an employee’s income from the year prior and how much tax their employer withheld. An employer is required to file a W-2 for any employee paid $600 or more in wages for the year or any employee from whom they withheld income, Social Security, or Medicare tax.
There are multiple W-2 copies, which include the following:
- Copy A goes to the Social Security Administration.
- Copy B is for filing with the employee’s federal tax return.
- Copy C is for the employee’s records.
- Copy D is for the employer’s records.
- Copy 1 is for the employer to file with the city, state, or locality if asked to do so.
- Copy 2 is for the employee to file with the city, state, or locality if asked to do so.
Employers must send out W-2s to employees by January 31 each year.
Differences between 1099 vs. W-2 employee
When you’re deciding how to bring someone onto your team, the W-2 vs. 1099 choice comes down to one big question: Are they an employee or a contractor?
W-2 employees work for you directly. You handle their taxes by withholding income tax, Social Security, and Medicare from every paycheck. In return, they get employee benefits—health insurance, paid time off, unemployment protection, the whole package. Come January, you send them a W-2 form that shows exactly what they earned and what taxes you withheld.
1099 contractors work with you, not for you. They’re running their own business and happen to be doing work for your company. No tax withholding, no benefits, no employee protections. They handle their own taxes and get a 1099 form instead of a W-2.
The difference isn’t just paperwork—it’s about control, commitment, and legal responsibility. Get the classification wrong, and you could face penalties, back taxes, and a very unhappy conversation with the IRS.
International hiring gets tricky because every country has its own rules about employee vs. contractor classification. What looks like legitimate contractor work in the U.S. might automatically be considered employment in Germany or France. And the penalties for misclassification can be severe.
That developer in Berlin you want to hire as a contractor? German law might say they’re your employee, which means you’re on the hook for benefits, social contributions, and local employment protections, whether you planned for them or not.
This is why getting your global hiring strategy right matters from day one. The wrong classification doesn’t just create tax headaches—it can derail your entire expansion plans.
W-2 employee benefits
W-2 employee benefits are non-monetary compensation employers provide their W-2 employees beyond regular wages. W-2 employees enjoy a range of statutory employee benefits, including the following:
- FICA (Medicare and Social Security). FICA taxes support the nation-backed retirement fund, public health insurance for people over 65, and disability and survivor benefits.
- Workers’ compensation. This provides income support and covers medical expenses and rehabilitation costs for employees who can’t work due to a job-related injury or illness.
- FUTA. FUTA, or federal unemployment taxes, provide income support for individuals who are unemployed or have lost their jobs but are willing and able to work.
- Family and Medical Leave Act (FMLA) unpaid leave. This guarantees qualifying employees up to 12 weeks of job-protected, unpaid annual leave for family and medical reasons.
- Affordable Care Act (ACA) health insurance. Organizations that employ 50 or more full-time employees are required to make affordable health insurance coverage available to their full-time employees.
U.S. employers must also adhere to state-level statutory requirements for their W-2 employees, which vary from one jurisdiction to the next.
Read more: Required Employee Benefits in the U.S.
W-2 employee FAQs
Is a W-2 employee full-time?
A W-2 employee can be full-time, part-time, or temporary. The W-2 classification refers to the employee’s tax status, not their work hours. W-2 classifies the individual as an employee for tax purposes, and they receive a W-2 form from their employer at the end of the tax year.
Is a W-2 employee salaried?
A W-2 employee can earn either a salary or an hourly wage. The W-2 classification refers to the employee’s tax status, not their pay structure.
What is a W-2 vs. W-4 vs. W-9?
There are fundamental differences and purposes between Form W-2, Form W-4, and Form W-9.
A W-2 is a form that employees receive from their employer that details their income and tax withholdings from the previous year. A W-2 is crucial for filing accurate tax returns every year.
A W-4 is a form that employees complete and submit to their employers when they begin a new job or their personal situation changes. A W-4 includes information about the employee’s filing status and withholdings to help the employer determine the appropriate amount of tax withholding on paychecks throughout the year.
A W-9 form verifies the taxpayer identification information for contractors, freelancers, vendors, and other non-employees. W-2 employees should not fill out W-9 forms, or risk employee misclassification. The W-9 collects the Taxpayer Identification Number (TIN) of the non-employee receiving payments to determine their income reporting and withholding.
Can an employee file taxes without a W-2 form?
A U.S. employee is a taxpayer and must file their tax return. If an employee does not get a W-2 from their employer or receives an incorrect form, they can use Form 4852 as a substitute when filing their taxes.
Can an employee file taxes with two W-2 forms?
An employee may file taxes with multiple W-2 forms if they receive W-2s from more than one employer from the previous tax year. For example, if three companies employed an individual in one year, the worker would receive three W-2 forms for filing their taxes that year.
An employee typically does not receive multiple W-2 forms from the same employer. The exception is if the business was acquired and the Employer Identification Number EIN changed.
Read More: The Complete Guide to Payroll Tax
Do your international team members need W-2s?
Here’s the short answer: No, they don’t get W-2s. But they do get tax forms—just different ones.
When you hire someone who lives and works outside the U.S., their tax situation gets more complex. The country where they live and work typically determines their tax residency, not where your company is based.
Foreign employees working for U.S. companies receive a Form 1042 instead of a W-2. That’s the Annual Withholding Tax Return for U.S. Source Income of Foreign Persons—which is exactly as complicated as it sounds. Some foreign employees might qualify for exemptions from federal income tax withholding thanks to tax treaties between the U.S. and their home country.
Before you start working with international talent, you’ll need them to fill out a Form W-8BEN. This form establishes their status as a non-U.S. citizen and determines the right tax reporting and withholding approach.
You’ll need a W-8BEN if your international hire:
- Isn’t a U.S. citizen
- Isn’t a U.S. resident
- Doesn’t have a green card
- Performed the work outside of the U.S.
- Is the beneficial owner of the income you’re providing
Sounds complicated? That’s because it is. And this is just the U.S. side of things. Your international employees also need to comply with their local tax obligations, which vary dramatically from country to country.
Focus on growing your team, not learning tax law
You want to build a global team, but navigating tax forms, employment laws, and compliance requirements in dozens of countries isn’t exactly why you started your business. That’s where Pebl comes in. As an Employer of Record (EOR), we handle the regulatory red tape of international hiring so you can focus on what you do best—finding amazing talent and growing your company.
Whether you’re hiring your first international employee or expanding into your tenth country, we take care of the W-8BENs, local employment laws, payroll complexity, and all those compliance details that keep growing companies up at night. Our EOR service ensures your team gets hired legally and paid correctly, no matter where they live. You get to focus on building something great instead of becoming an expert in international tax law.
Ready to turn your global hiring plans into reality? Let’s talk about what international expansion looks like for you.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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