Clients prefer W-2 because of the so called assumed "risk of liability". They don't want 1099s on their payroll because of fear from IRS that they could be tagged as employees and hence needing to pay fines and extra benefits that they don't want to. I personally think that is bullshit but that is what it is. In fact, some large clients force their vendors to only hire W-2 even if the payroll is run by the vendor company and not the client. So that is why a lot of these clients have started preferring W-2 and it is increasing difficult to find direct contracts with large clients who offer 1099 (many still do but rare these days).
Now to your question about the rate between W-2 and 1099. It depends. Generally, a W-2 rate is usually going to be less than 1099 due to factors such as Payroll tax, benefits etc. AT the end of the day, someone has to pay for those regardless but in case of 1099, you the contractor is responsible to figure that out (risk is on you) vs W-2 where the employer has to figure that out for you.
You first need to ask these questions to ANY recruiter you talk to:
1. Are you a direct/preferred vendor to the client ? This is critical because if they middleman to the actual vendor, they will take their own cut thereby reducing the size of the pie for you. They are of not use to you and never deal with 3rd party recruiters. Only deal with direct vendors who talk to clients directly.
2. If they only offer W-2, is it with Benefits or without benefits. Yes, you can get W-2 with some benefits (health insurance etc) even if you are a contractor. This is important to know because if you don't necessarily want benefits, you could potentially negotiate a higher rate even on W-2 by asking them not to pay for benefits .
Once these 2 questions are answered, then you can start playing with numbers to figure out what you should ask for at the very least to even break even. Items to consider:
- Your current salary
- Do you receive any bonus on average every year ?
- Vacation days you take in a year
- monetary value of benefits like Health insurance, 401k etc
- How much Payroll taxes are paid by your employer ? Remember, as an employee, you only pay your portion (about 7.5% SS + Medicare) but as a contractor, you will have to handle that part yourself (if 1099).
You need to figure out all these and then get to a daily/hourly rate.
MOST IMPORTANT: Your daily/hourly rate must consider the number of billable hours/day you will work in a year. You need to factor in downtime. Contracts can end quickly at times. So you need to factor the extra month or so that you may be in transition.
Finally, in Bay area, my general assumption is that $100/Hour on 1099 is low for a skilled and experienced developer.
Shameless plug: I wrote a simple calculator to convert salary to a daily rate in the US. It is a general estimate but should give you an idea:
https://codegeek1001.github.io/salary2consultantcalc/