Strange Hiring Provision from an I-Bank

I have an interview for an Associate role at an investment bank and when the recruiter came back to me, there were two provisions that they mentioned in their email that I have never seen before:

As a newly formed entity, you must be willing to work on an independent contractor (1099) basis. We anticipate offering employee status starting in 2015.
Compensation will be highly driven by your direct contribution to the team and the overall success of the business. (Note: you are NOT expected to do cold calling)

What does a 1099 status vs. W-2 mean for me in practical terms? Has anyone seen anything like this before? I have been out of the country for a few years so I am not sure if this is how things are done now or this is some kind of boiler room scheme?

Comments (22)

Mar 27, 2014 - 10:20am

You would be an independent contractor meaning you will file quarterly and be fully responsible for all taxes / healthcare costs associated with that. Because taxes are much higher as a contractor since you pay the full payroll tax you should expect to be paid above street just to offset the increased costs. One way to offset this is to set yourself up as an LLC and then pay yourself as an employee out of the venture (if the bank will let you).

I had a consulting firm offer me a similar set up and I turned it down since after doing the math it was a raw deal (mostly because of the cost of liability insurance as a contractor).

Mar 27, 2014 - 10:24am

Most of my friends who have worked as contractors (all in sales positions) have set up S corps for tax purposes. It's gone well for them so far. Depending on what state you're in, being a contractor also means you are eligible for OT.

"I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant."
Mar 27, 2014 - 12:08pm


For clarification purposes, the company would be in NYC and I live in White Plains now. I guess my other question on the whole thing is would anywhere reputable offer this kind of a scheme? Is this the new normal? The OT thing is very interesting, I will have to bring it up at some point to them.

It is not new normal. Some boutiques have been using this business model for I don't know how long to keep the costs down. Not only the firm can outsource (at no cost) all the admin but also they don't have to pay their employees when the business is slow. So a lot of these firms didn't pay their employees at all the last few years when the business dried up.

What these firms want to do is to build up the client base and then if everything works out the way they believe it could, they want to hire salaried employees (or put you on their payroll). Start-up boutiques use this business model. I don't know if you can motivate your employees enough this way. Employees would be result-orientated, but closing deals takes months, so employees would go months without pay.

Outside the advisory boutique, a lot of service companies have representatives across the country. They get paid when they make the sale and they pay a lot from that sale to the corporate HQ (for allowing them to use the brand).

For anyone who lives pay cheque to pay cheque to cover the expenses, this business model is not suitable at all.

Just to add,

Junior bankers end up not getting much of the share. These firms have a strict pecking order. Did you ask them how they measure your "contributions"? If you bring in a buyer (that actually bites), your contribution should be the biggest, but I can't imagine any boutique (or owners of these) that are happy to pay a big commission to analysts and associates.

Mar 27, 2014 - 12:47pm


Junior bankers end up not getting much of the share. These firms have a strict pecking order. Did you ask them how they measure your "contributions"? If you bring in a buyer (that actually bites), your contribution should be the biggest, but I can't imagine any boutique (or owners of these) that are happy to pay a big commission to analysts and associates.

Once again you seem to prove you have no idea what you are talking about. Senior bankers' contributions are measured by the clients they bring in, not the buyers. If you split a buyer list 50/50 with another banker on the team, no one gives a shit who made the call/sent the email to the eventual buyer. Junior employees are measured by the quality and quantity of work they produce.

I feel like you got burned doing an internship for some shitty chop shop, and if that's the case, sorry. But because you had one shitty experience, it doesn't make you an expert on boutique i-banking.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
Mar 27, 2014 - 10:40am

I was paid like this (1099) for the first six months in my current role while I was still considered a trainee/intern. The shittiest part about it is having to always take slices out of your paychecks to set aside for your taxes at the end of the year. I can say from my experience, it is SO MUCH nicer getting paid the standard W-2 way and knowing that every bit of your paychecks is take home cash money. That being said, if you like the firm, the people are beauties and you consider this to be a great opportunity in every other aspect, I would not let this be the determining factor of accepting/rejecting the offer. It is not ideal, but not a deal breaker, either.

Hope that helps, and congrats on the interview!

Mar 27, 2014 - 12:32pm

If you're getting paid well, then it's good. If you're not, use this position as leverage towards a better deal.

Get busy living
Mar 28, 2014 - 6:47am

"As an analyst (the most junior position in an investment bank) working in a trading role, Kreil says you'll make up to £50k in your first year and will effectively be a contractor for two to three years with limited job security (he says that only 20% of an analysts get an offer of a full time place). You won't be able to live in Central London and you won't be able to pay off your student debts."

Know you're doing an associate role but thought it'd be useful info..

Mar 28, 2014 - 7:04am

I really wonder if that Institute of Trading education is as good as it get's promoted, as usual lots of testimonials saying "It is the best" and none saying that they actualy made money after taking it.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.
Mar 28, 2014 - 9:10am

bank-on-this brings up the big point here. Instead of paying 7.5% for SS and the firm matching it for the other 7.5%, you would be on the hook for all of it. Has anybody done this, set up an LLC, and was able to write off some of their expenses as work expenses? Work attire might be a stretch, but any money commuting and any technology used for work (cell phone, laptop, etc.) might be able to be written off. Just wondering.

"Decide what to be and go be it." - The Avett Brothers
Mar 28, 2014 - 10:08am

Definitely don't try and write off your clothing. IRS is very specific on that. Get a good accountant to help you set up your company and tell you what you can and can't write-off as a part of your new gig. The only caveat I have is that you shouldn't try and get too fancy with the set up because they are planning on getting you to W-2 status in the next year or so.

"Everybody needs money. That's why they call it money." - Mickey Bergman - Heist (2001)
Mar 28, 2014 - 11:59am

In practical terms it means you need to pay self-employment tax. That is, add about 7% to your tax rate (some of it is deductible).

You also don't get UI and health benefits.

I'd discount whatever they're offering you by 15-20%. If they're offering $100k, that's about equal to an $80k-$85k job with benefits.

Large banks do hire contractors. I haven't seen it that much in the front office but it was fairly common in technology roles.

Start Discussion

Popular Content See all

This Fucking Sucks
+49OFFby Prospective Monkey in Investment Banking - Mergers and Acquisitions">Prospect in IB-M&A
Why would any associate+ banker choose a BB over EB?
+31IBby Intern in Investment Banking - Mergers and Acquisitions">Intern in IB-M&A
PE isn’t the best way to get into b-school
+27BSCHby 2nd Year Associate in Private Equity - LBOs">Associate 2 in PE - LBOs
Share a day that looked like a Suits/Billions episode
+21IBby Intern in Investment Banking - Generalist">Intern in IB - Gen
What's Wrong with Warburg Industrial & Business Services?
+16PEby 1st Year Analyst in Investment Banking - Mergers and Acquisitions">Analyst 1 in IB-M&A

Total Avg Compensation

February 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (31) $349
  • Associates (158) $231
  • 2nd Year Analyst (97) $151
  • Intern/Summer Associate (92) $144
  • 3rd+ Year Analyst (23) $145
  • 1st Year Analyst (366) $131
  • Intern/Summer Analyst (304) $82

Leaderboard See all

LonLonMilk's picture
Jamoldo's picture
Secyh62's picture
CompBanker's picture
redever's picture
frgna's picture
Addinator's picture
NuckFuts's picture
bolo up's picture
bolo up
Edifice's picture