Global HR Glossary

What is a W-2 Employee? 

A W-2 employee is someone who is employed by a company on a permanent or semi-permanent basis and whose income tax and payroll taxes are withheld by their employer. These employees receive a W-2 form annually that details their earnings, including wages, tips, and other compensation, along with the taxes withheld throughout the year.

Characteristics of W-2 Employees

• Tax Withholding: Employers automatically deduct federal, state, and other taxes, which simplifies tax filing for employees.

• Benefits: Typically eligible for benefits such as health insurance, retirement plans, and paid leave.

• Employment Rights: Covered under labor laws that provide protections like minimum wage, overtime pay, and workplace safety.
  

Employer Responsibilities

• Tax Reporting: Must provide W-2 forms to employees each year for tax reporting purposes.

• Compliance with Labor Laws: Must comply with all applicable labor and employment laws, including those relating to minimum wage, overtime, and workers’ compensation.

• Proper Classification: Accurately classifying workers as W-2 employees to avoid penalties associated with misclassification.