In our US IT Recruitment training series, in this 3^rd post, we will discuss a few important terms which are basic and everyone must know, we can’t even imagine working in US Staffing without knowing these terms.

So let’s go through with this complete post without skipping a single point and hopefully we will be fine to move to the next step.

What are the different Tax Terms in the USA (US IT Recruitment training)

In most countries, all salaried people who fall in tax slabs pay income tax to their government, likewise in the USA, there are 3 different and most common tax terms, which are C2C, 1099, and W2.

What is W2?

W2 refers to direct payroll or direct relation between employer and employee, for an example if a candidate James is working directly on a company (Capital Bank) payroll, then we can say that James is a W2 candidate or W2 employee of Capital Bank, and this is very simple to explain that James will directly get paid from Capital Bank.

So in other words we can say when a candidate provides his services to the client directly then he will get paid directly from the client and will be called a W2 employee of that client.

In the case of W2 employment, the employer is responsible to run the payroll, providing the benefits, and paying the tax and liability of their W2 candidates.

I don’t want to mention any more information on this as I want to keep it as short as a new trainee can understand it easily, should you have any questions about the W2 tax term, kindly comment below and I will help you with that.

Services from Candidate to Client

Payment from Client to Candidate

What is C2C?

C2C refers to Corp to Corp, or Company to Company, to explain this let’s take the example of an H1B Visa holder and this is absolutely going to be the best example.

When a candidate applies for H1B VISA to work in the USA then he must have an employer who sponsors his VISA for a limited period of time.

Let’s take an example here, Vincent is a Java Developer and a Company Name XYZ Corp. from any country helps him to get H1B, Vincent will be a W2 employee of XYZ Corp., and XYZ Corp. has full rights to assign him to any project or any client across the USA.

If a client PBC Bank has a Java Developer opening and wants services for Vincent then they would need to do an agreement with XYZ Corp. for their W2 employee V incent.

PBC Bank can never hire Vincent directly, and in lieu of Vincent Services, Bank (Client) will pay the agreed salary/compensation to his employer (XYZ Corp.), and XYZ Corp will pay the salary to Vincent.

PBC Bank (Client) is a company/corporation and XYZ Corp is also a company/corporation, both are corporations., so when payment is being transferred between a corporation to another corporation in lieu of Vincent services, will be called Corp to Corp.

What is 1099?

When a candidate owns his company in the USA and wishes to get paid himself by using his own company, is known as a 1099.

1099 is basically an individually owned company or LLC (Limited Liability Company), by doing so candidate usually can save some tax, LLC is also known as a single-person corporation, so we can say the 1099 tax term is most commonly used by an individual professional in the USA.

Who can work on which Tax Term?

Let’s discuss which visa holder can work on which tax term.

C2C – C2C can be done by a professional if they wish to provide their services for such a company or client who is not their employer, like H1B , OPT EAD (if they are already associated with any employer), GC EAD, H4 EAD (if they are already associated with any employer), USC (if they have their own LLC already associated with any employer), TN VISA Holder, etc. (US IT Recruitment training)

W2- W2 can be done by anyone who doesn’t need sponsorship, like US Citizen, Green Card Holder, H4 EAD, GC EAD, Permanent Resident, OPT EAD, etc.

1099- 1099 can be done by US citizens and Green Card holders only if they have their own LLC.

What are other terms uses in the USA in terms of US IT Recruitment?

What is I-9 form or i9:

i9 is a form usually filled and signed by a consultant/professional for identification purposes, or we can say every employer needs to identify their consultant by getting the i9 form filled by their employees, this form is confidential as it contains sensitive information about the employee like his SSN Number, Passport Number etc.

What is I-94 or i94: (US IT Recruitment training)

i-94 is a travel history for all people residing in the USA, irrespective of their VISA status, when or on which date someone entered in USA or departed from the USA, can be checked or tracked by looking at their i-94 history.

How to check Travel History or How to check i94

To check I-94 history we need a full legal name as per Driver’s License, Date of Birth, Country of Birth, and Passport Number.

I94 or Travel History can be checked using this link.

What is Per Diem:

Per diem refers to the daily allowance or a specific amount of money that a client or company provides to the consultant or typically to an employee, on day to day basis to cover their living expenses when they are traveling on the employer’s site or business. (US IT Recruitment training)

A lot of people or employees in the USA use Per-diem as it helps them to save their tax on the amount they spend as their daily expenses.

What is the weekly pay term:

When an employee wants to get paid weekly basis known as Weekly pay term.

What is a Bi-weekly payment:

When an employee wants to get paid every 15^th day or twice in a month is known as a bi-weekly payment.

What is Cooling off period:

When an employee leaves any client or company or completes their assignment, then there is a cooling off period, which refers to that particular employee is not eligible to work for the same employer for a certain time of period, which is known as the cooling off period.

What is invoice or invoicing:

When a candidate/employee or its employer wants to get paid for the services they have provided, they need to submit an invoice to the respective client.

What is net30:

Net 30 refers to getting paid every 30 days or monthly basis after invoicing.

What is Net45:

Net 45 refers to getting paid every 45 days or monthly basis after invoicing.

What is Net60:

Net 60 refers to getting paid every 60 days or for two months after invoicing.

What is the Contract role:

A contract is a certain time period that is decided by the client as per their needs like if a pharmaceutical client in the USA needs a Project Manager for 6 months to handle certain needs can be understood as a Project Manager contract role that has a duration of 6 months.

The project manager, who is fulfilling their needs will be known as the contractor.

Contract duration is usually fixed, but in some cases, the client has the right to increase or decrease this contract duration.

A contractor usually gets paid on an hourly basis and their compensation is a pre-agreed amount between the client and contractor.

What is Full Time/direct hire:

A full-Time role or a Direct Hire role refers to long-term employment, for example, if a client wishes to hire an employee for a longer period i.e. 5 -10 years, etc. is known as Direct hire or Full-Time role.

In the case of Direct hire or Full-time role, the employee is usually get hired on an annual basis and get paid quarterly.

For permanent employees, employers are bounded to provide them some certain benefits and annual bonuses as well.

How do contractors get paid:

As stated earlier, A contractor is usually get paid on an hourly basis and their compensation is a pre-agreed amount between the client and contractor.

How do Permanent employees get paid:

In the case of Direct hire or Full-time role, the employee is usually get hired on an annual basis and get paid quarterly.

For permanent employees, employers are bounded to provide them some certain benefits and annual bonuses as well.

What is commission:

When a US Staffing company gets paid for its part, for placing a candidate to the client, is known as commission. When a client ABC Health wants to hire a Quality Engineer and they have a budget or Bill Rate of $40 per hour, and a Staffing company named AAA places a candidate Jacob on a pay rate $30 per hour, so the rest is $10 per hour can be considered as a Commission.

For contract roles, this commission is based on an hourly basis but in the case of permanent placement, this is usually a one-time fee provided to us staffing company by the client.

What is Net Margin / Net Profit / Gross Profit:

Net Margin can be calculated by the below formula-

Net margin = Bill Rate – Pay Rate.

What are Conversion fees:

A conversion fee is a fee usually provided to a staffing company when a client wishes to hire its staffing company’s W2 employee (Contractor) as the client’s permanent employee, in this case, the client has to give a conversion fee to that staffing company, but this happens with mutual understanding of both the parties.

What is relocation:

If a candidate has to provide his services to a client site that is far away and he has to settle down in another area can be understood as relocation.

For example, if a candidate is residing in New Jersey and he has to provide his services to a Bank which is located in Washington, then the contractor/candidate has to move to Washington.

What is relocation assistance:

Relocation assistance is an amount usually provided to the contractor by the client to help him in relocating so he can provide his onsite assistance to the client, this is one time.

What is commuting:

When a contractor decided to travel to the client site rather than relocate, can be understood as commuting, this is usually done within a radius of 50 miles.

What is telecommuting:

Telecommuting refers to Virtual or Remote assistance, if a contractor is providing his services to the client without relocation or without commuting, is known as telecommuting, nowadays we call th is work from home.

What is Partially Remote / What is Hybrid:

The hybrid role is partially remote work, in this case, the contractor doesn’t need to work all 5 days onsite, and they have some flexibility to work onsite like 2 or 3 days a week.

What is SOW:

Statement of work is simply a process to ensure an agreed-on scope of services, The SOW is usually based on duration and budget.

Master Services Agreement (MSA)

MSA is a governing document that in-lines two parties’ terms & conditions for their relationship. The SOW document typically covers details or information about belonging to a particular project or SOW.

What is RFP:

An SOW is usually based on RFP, an organization or Staffing company usually uses an RFP document to request proposals of pricing, provide requirements, and define the duration of work and performance.

RFP has enough information that the service provider will respond with an accurate bid for a project or SOW.

What is RFE:

RFE refers to a Request for Evidence and is a request usually issued by the US Citizenship and Immigration Services to contractors or petitioners for their residency, citizenship, their family visas, and employment work authorizations, an RFE is usually issued known as FormI-140, Form I-129 & Form I-130.

You may also like:

Disclaimer: The author of this post has 10+ years’ experience in US Staffing and tried his best to explain all the most important terms related to US Staffing or US IT Recruitment for training purposes, if there is any mistake can be a typo or misunderstanding, so if you have any doubt of query kindly comment below and we will respond back in a timely manner.