6 ms·

A Middle Ground Between Contract Worker and Employee

40 points by hvo 11y ago

mrfusion 11y ago
What's the disadvantage of w2? Wouldn't the costs be about the same?
- Retric 11y ago
  If you pay someone 10$/h as a w2 for even 5 hours a week, the government wants you to contribute an extra 6.2% for social security and 1.45% for Medicare. Plus a range of other benefits which don't show up on there paystub, but still cost you money.
  - toomuchtodo 11y ago
    ie "cost of doing business" Shlep yourself to Somalia if you don't want to pay taxes.
    - UK-AL 11y ago
      They are stupidly corrupt, and require bribes to get anything done in goverment. So the actual tax rate is a lot higher. Probably country like Hong Kong, which has low corruption and a incredibly low tax rate.
  - debacle 11y ago
    The costs, though, are actually about the same, because you're likely paying that contract worker more than an actual employee would be making.
    - Retric 11y ago
      It depends on how you slice it. You can sometimes get away with paying contract workers less than a w2 worker at minimum wage. Don't include expenses, lot's of wait time is 'off the clock' even if they can't leave etc. Many employees also don't realize just how many benefits they are giving up. New Uber drivers for example often drastically overstate what there earning are. PS: I fell into this trap even as a w2. 52$/hour and zero benefits is significantly worse than I initially thought.
    - mrfusion 11y ago
      That was my point. I guess I wasn't clear.
- raincom 11y ago
  If you are an independent contractor, you need to pay the "employer" share of taxes, which is 7.6% (social + medicare). This is hidden if you are on W2, as W2 employees pay the "employee" share of 7.6%. The other benefit of being on W2: disability & unemployment. Often times, many service workers get injured. If one is on W2, the employer's disability insurer covers the treatment and recovery of employees. I have seen many cases where many service workers are gravely injured. Unemployment: if you are on 1099, you won't get unemployment benefits, when your contract ends after 12 months. Health Insurance: W2 does not guarantee that. I worked as a security guard for two companies in 2002. One provided decent health insurance; the other provided super crappy health insurance (like max benefits of $20K per year, if you paid $50 per month)
roymurdock 11y ago
Here's the original paper by Kreuger and Harris that this article is built around: http://www.brookings.edu/research/papers/2015/12/09-modernizing-labor-laws-for-the-independent-worker-krueger-harris http://www.brookings.edu/research/papers/2015/12/09-moderniz... The authors propose a new employment category: Independent Worker. The authors calculate that there are currently ~600,000 independent workers in the US (0.4% of total employment). In our proposal, independent workers — regardless of whether they work through an online or offline intermediary — would qualify for many, although not all, of the benefits and protections that employees receive, including the freedom to organize and collectively bargain, civil rights protections, tax withholding, and employer contributions for payroll taxes. Because it is conceptually impossible to attribute their work hours to any single intermediary, however, independent workers would not qualify for hours-based benefits, including overtime or minimum wage requirements.
- spacecowboy_lon 11y ago
  The elephant in the room is "minimum wage requirements." here ie finding away around paying minimum wage. Ask Sports Direct in the UK how fiddling the minimum wage is working out for them.
  - J-dawg 11y ago
    Sports Direct are a vile, abusive organisation. I'm not sure how the owner can sleep at night knowing that his riches are the direct result of exploiting desperate people. This is the story that the parent comment is referring to: http://www.theguardian.com/business/2015/dec/09/how-sports-direct-effectively-pays-below-minimum-wage-pay http://www.theguardian.com/business/2015/dec/09/how-sports-d... Their shares rose 4% after the Conservatives won the general election, because the market didn't expect them to reform zero-hours contracts. (It seems the market was correct). http://www.independent.co.uk/news/business/news/election-2015-sports-direct-share-price-up-4-per-cent-after-zero-hours-relief-on-conservative-win-10235628.html http://www.independent.co.uk/news/business/news/election-201...
- mrfusion 11y ago
  What happens if 1099s try to collectively bargain? Aren't they allowed to. What specific freedom do they need?
jobu 11y ago
There are a couple great bits in that article, but this is one I've seen as a trend: "Under an employment model, by contrast, the company has a much more reliable and knowledgeable workforce, one that can be held to a specific standard of quality and a more consistent schedule." Home Depot learned a similar lesson in the 2000's - http://archive.fortune.com/2008/09/18/magazines/fortune/fortune500/reingold_homedepot500.fortune/index.htm http://archive.fortune.com/2008/09/18/magazines/fortune/fort... Employee morale is critical in service-oriented jobs.
- Retric 11y ago
  Companies often learn the same lesion over and over. Reliable workers are more in demand so they can more easily find higher paying work for someone else. If you cut pay or increase workload things can look ok for just long enough that all your good people leave.
jacquesm 11y ago
Middle ground as in: you (the contract worker) have none of the benefits of an employee and all of the downsides of an independent contractor and the company has all the benefits of having employees but none of the downsides. That's nicely spread, 50/50.
- godzillabrennus 11y ago
  They also have the benefits of being a contractor. No worry about working for multiple companies at the same time. You own your creative work that you get paid to build unless you sign it away with a contract.
  - mrfusion 11y ago
    And set your own schedule right?
zkhalique 11y ago
Here's the thing. If there is a marketplace where you set your own rates, you can still be a contractor. That's one of the tests that marketplaces like Uber failed.
alex_m 11y ago
There's no market need for these absurd legal employment classifications. Let people contract with other, and stop creating elaborate arbitrary categorizations as a means of applying complex taxes and regulations.
- hmahncke 11y ago
  In all of these situations, one of the "people" is an abstract legal entity already operating under the protection of a set of legal codes that provide advantages to the actual (human) people who set it up. It seems reasonable that as part of those codes, they work with/employ actual "people" (humans :-) in specific ways.
- untog 11y ago
  That's a lovely, idealistic premise. But one half of this negotiation has considerably more power than the other, and many would argue the less powerful side needs to have certain rights protected.
  - ryandvm 11y ago
    No, that's the beauty of dissolving these long term employment relationships. You don't need protections from your abusive employer because you can very easily find a better employer.
    - untog 11y ago
      So these changed employment relationships guarantee employment for every citizen in the US? Interesting concept.
      - ryandvm 11y ago
        Nope. A fluid labor market means just means that contracts and labor have a much easier time finding each other. I'm not particularly interested in guaranteeing employment for anyone, let alone everyone.
crdoconnor 11y ago
>Alan B. Krueger, a former chief economist to President Obama, and Seth D. Harris, a former deputy labor secretary, argued in a paper released this week that many workers in the so-called online gig economy should have more rights and protections than most do now. At the same time, they wrote, “forcing these new forms of work into a traditional employment relationship could be an existential threat to the emergence of online-intermediated work.” It would be brutal to Uber's profitability, titanic valuation and possibly even their existence, but online-intermediated work is here to stay. Since their profitability is largely predicated on maintaining the current upward transfer of wealth (from drivers who create the wealth to shareholders who don't), they would, of course, prefer to keep treating their drivers as independent contractors who can be kept precariously employed.
- ProAm 11y ago
  > but online-intermediated work is here to stay Here to stay but may be soon regulated.
- UK-AL 11y ago
  If it was transferring wealth from drivers to shareholders, they wouldn't do the job. They chose to do the job, so it is at least better than the alternative options they could do.
  - cryoshon 11y ago
    The "wealth" that is getting transferred is a bit more abstract than money going directly from the worker's pocket into the shareholder's. Instead, it looks more like the worker's personal vehicle being worn down over time by work done for the purposes of the company rather than personal purposes. The worker's capital is depreciating more rapidly than during personal use, and the profits generated by this erosion of asset are going to the shareholders, not the worker. The worker receives pay for his labor, but receives nothing for the gradual depreciation of his capital that results from the terms of the gig labor.
    - UK-AL 11y ago
Spooky23 11y ago
"Middle ground" here is going to be devastating to technology employees, especially IT. Welcome to the Service Request, piecework economy.
fraserharris 11y ago
At the heart of the divide between contractor and employee is America's idiotic healthcare bargain between Democrats and Republicans: employers provide private healthcare and the public system is only for the destitute and old. Obamacare is an attempt to solve this by adding more work for individuals transitioning between jobs. A rational healthcare system would not be so dependent on your employment status.
- patrickmay 11y ago
  Health insurance being tied to employment is a result of government wage and price controls during World War II. A simple improvement would be to provide the same tax breaks associated with paying for health insurance to individuals rather than companies.

40 points by hvo 11y ago

mrfusion 11y ago

What's the disadvantage of w2? Wouldn't the costs be about the same?

Retric 11y ago
If you pay someone 10$/h as a w2 for even 5 hours a week, the government wants you to contribute an extra 6.2% for social security and 1.45% for Medicare. Plus a range of other benefits which don't show up on there paystub, but still cost you money.
- toomuchtodo 11y ago
  ie "cost of doing business" Shlep yourself to Somalia if you don't want to pay taxes.
  - UK-AL 11y ago
    They are stupidly corrupt, and require bribes to get anything done in goverment. So the actual tax rate is a lot higher. Probably country like Hong Kong, which has low corruption and a incredibly low tax rate.
- debacle 11y ago
  The costs, though, are actually about the same, because you're likely paying that contract worker more than an actual employee would be making.
  - Retric 11y ago
    It depends on how you slice it. You can sometimes get away with paying contract workers less than a w2 worker at minimum wage. Don't include expenses, lot's of wait time is 'off the clock' even if they can't leave etc. Many employees also don't realize just how many benefits they are giving up. New Uber drivers for example often drastically overstate what there earning are. PS: I fell into this trap even as a w2. 52$/hour and zero benefits is significantly worse than I initially thought.
  - mrfusion 11y ago
    That was my point. I guess I wasn't clear.
raincom 11y ago
If you are an independent contractor, you need to pay the "employer" share of taxes, which is 7.6% (social + medicare). This is hidden if you are on W2, as W2 employees pay the "employee" share of 7.6%. The other benefit of being on W2: disability & unemployment. Often times, many service workers get injured. If one is on W2, the employer's disability insurer covers the treatment and recovery of employees. I have seen many cases where many service workers are gravely injured. Unemployment: if you are on 1099, you won't get unemployment benefits, when your contract ends after 12 months. Health Insurance: W2 does not guarantee that. I worked as a security guard for two companies in 2002. One provided decent health insurance; the other provided super crappy health insurance (like max benefits of $20K per year, if you paid $50 per month)

roymurdock 11y ago

Here's the original paper by Kreuger and Harris that this article is built around: http://www.brookings.edu/research/papers/2015/12/09-modernizing-labor-laws-for-the-independent-worker-krueger-harris http://www.brookings.edu/research/papers/2015/12/09-moderniz... The authors propose a new employment category: Independent Worker. The authors calculate that there are currently ~600,000 independent workers in the US (0.4% of total employment). In our proposal, independent workers — regardless of whether they work through an online or offline intermediary — would qualify for many, although not all, of the benefits and protections that employees receive, including the freedom to organize and collectively bargain, civil rights protections, tax withholding, and employer contributions for payroll taxes. Because it is conceptually impossible to attribute their work hours to any single intermediary, however, independent workers would not qualify for hours-based benefits, including overtime or minimum wage requirements.

spacecowboy_lon 11y ago
The elephant in the room is "minimum wage requirements." here ie finding away around paying minimum wage. Ask Sports Direct in the UK how fiddling the minimum wage is working out for them.
- J-dawg 11y ago
  Sports Direct are a vile, abusive organisation. I'm not sure how the owner can sleep at night knowing that his riches are the direct result of exploiting desperate people. This is the story that the parent comment is referring to: http://www.theguardian.com/business/2015/dec/09/how-sports-direct-effectively-pays-below-minimum-wage-pay http://www.theguardian.com/business/2015/dec/09/how-sports-d... Their shares rose 4% after the Conservatives won the general election, because the market didn't expect them to reform zero-hours contracts. (It seems the market was correct). http://www.independent.co.uk/news/business/news/election-2015-sports-direct-share-price-up-4-per-cent-after-zero-hours-relief-on-conservative-win-10235628.html http://www.independent.co.uk/news/business/news/election-201...
mrfusion 11y ago
What happens if 1099s try to collectively bargain? Aren't they allowed to. What specific freedom do they need?

jobu 11y ago

There are a couple great bits in that article, but this is one I've seen as a trend: "Under an employment model, by contrast, the company has a much more reliable and knowledgeable workforce, one that can be held to a specific standard of quality and a more consistent schedule." Home Depot learned a similar lesson in the 2000's - http://archive.fortune.com/2008/09/18/magazines/fortune/fortune500/reingold_homedepot500.fortune/index.htm http://archive.fortune.com/2008/09/18/magazines/fortune/fort... Employee morale is critical in service-oriented jobs.

Retric 11y ago
Companies often learn the same lesion over and over. Reliable workers are more in demand so they can more easily find higher paying work for someone else. If you cut pay or increase workload things can look ok for just long enough that all your good people leave.

jacquesm 11y ago

Middle ground as in: you (the contract worker) have none of the benefits of an employee and all of the downsides of an independent contractor and the company has all the benefits of having employees but none of the downsides. That's nicely spread, 50/50.

godzillabrennus 11y ago
They also have the benefits of being a contractor. No worry about working for multiple companies at the same time. You own your creative work that you get paid to build unless you sign it away with a contract.
- mrfusion 11y ago
  And set your own schedule right?

zkhalique 11y ago

Here's the thing. If there is a marketplace where you set your own rates, you can still be a contractor. That's one of the tests that marketplaces like Uber failed.

alex_m 11y ago

There's no market need for these absurd legal employment classifications. Let people contract with other, and stop creating elaborate arbitrary categorizations as a means of applying complex taxes and regulations.

hmahncke 11y ago
In all of these situations, one of the "people" is an abstract legal entity already operating under the protection of a set of legal codes that provide advantages to the actual (human) people who set it up. It seems reasonable that as part of those codes, they work with/employ actual "people" (humans :-) in specific ways.
untog 11y ago
That's a lovely, idealistic premise. But one half of this negotiation has considerably more power than the other, and many would argue the less powerful side needs to have certain rights protected.
- ryandvm 11y ago
  No, that's the beauty of dissolving these long term employment relationships. You don't need protections from your abusive employer because you can very easily find a better employer.
  - untog 11y ago
    So these changed employment relationships guarantee employment for every citizen in the US? Interesting concept.
    - ryandvm 11y ago
      Nope. A fluid labor market means just means that contracts and labor have a much easier time finding each other. I'm not particularly interested in guaranteeing employment for anyone, let alone everyone.

crdoconnor 11y ago

>Alan B. Krueger, a former chief economist to President Obama, and Seth D. Harris, a former deputy labor secretary, argued in a paper released this week that many workers in the so-called online gig economy should have more rights and protections than most do now. At the same time, they wrote, “forcing these new forms of work into a traditional employment relationship could be an existential threat to the emergence of online-intermediated work.” It would be brutal to Uber's profitability, titanic valuation and possibly even their existence, but online-intermediated work is here to stay. Since their profitability is largely predicated on maintaining the current upward transfer of wealth (from drivers who create the wealth to shareholders who don't), they would, of course, prefer to keep treating their drivers as independent contractors who can be kept precariously employed.

ProAm 11y ago
> but online-intermediated work is here to stay Here to stay but may be soon regulated.
UK-AL 11y ago
If it was transferring wealth from drivers to shareholders, they wouldn't do the job. They chose to do the job, so it is at least better than the alternative options they could do.
- cryoshon 11y ago
  The "wealth" that is getting transferred is a bit more abstract than money going directly from the worker's pocket into the shareholder's. Instead, it looks more like the worker's personal vehicle being worn down over time by work done for the purposes of the company rather than personal purposes. The worker's capital is depreciating more rapidly than during personal use, and the profits generated by this erosion of asset are going to the shareholders, not the worker. The worker receives pay for his labor, but receives nothing for the gradual depreciation of his capital that results from the terms of the gig labor.
  - UK-AL 11y ago

Spooky23 11y ago

"Middle ground" here is going to be devastating to technology employees, especially IT. Welcome to the Service Request, piecework economy.

fraserharris 11y ago

At the heart of the divide between contractor and employee is America's idiotic healthcare bargain between Democrats and Republicans: employers provide private healthcare and the public system is only for the destitute and old. Obamacare is an attempt to solve this by adding more work for individuals transitioning between jobs. A rational healthcare system would not be so dependent on your employment status.

patrickmay 11y ago
Health insurance being tied to employment is a result of government wage and price controls during World War II. A simple improvement would be to provide the same tax breaks associated with paying for health insurance to individuals rather than companies.