7 ms·

Unemployment tax or $20000 reasons not to hire someone

70 points by georgecmu 17y ago

jrockway 17y ago
Wow, this is pretty conservative for the Times. I think that if an employee is fired for cause, they should be forced to sell their organs to pay back the debt (and cost of finding a replacement worker) to their company. This would make small businesses more profitable, and it would be an incentive for people to work harder. It would also lower the cost of organs, allowing the ultra-rich business owners to get a replacement kidney AND own a vacation home. What I meant to say is that I think business owners whine too much about money. If your business is not profitable, then it's time to do something else... not whine about how your fired employees shouldn't get unemployment benefits. (I worked at a small company once, and all I ever heard about was how everything was too expensive. Health insurance is too expensive. Salary is too expensive. Taxes are too expensive. Guess what then, you aren't charging the clients enough.)
- hga 17y ago
  Errr, I haven't Read The Fine Article, but I know from nasty experience that if you're fired for cause in Massachusetts or Virginia you can't collect unemployment (both times this was relevant, my employer tried to claim that and failed miserably). After reading the fine article: in Illinois, for cause == no unemployment, no taxes for the employer down the road.
- brc 17y ago
  Maybe you should read this article http://www.paulgraham.com/gap.html http://www.paulgraham.com/gap.html It might be convenient to paint all business owners as 'ultra-rich' but the majority of employment happens through smaller businesses, which generally aren't in a position to 'charge clients more money'. Ask someone who is getting a start-up off the ground why they can't just pay everyone more money.
  - jrockway 17y ago
    And ask an average person who might work for you why they should subsidize your likely-to-fail startup with their own health. It seems like the general consensus on HN is that The Government should subsidize startups and small-businesses Just Because, but that it's evil when the same government subsidizes the employee that didn't work quite hard enough and needs to eat food and live in a house while they look for a job they can do better. I don't get it. (I bet if I wasn't so sarcastic when I made the organ-harvesting reference, I would have been upmodded!)
    - deleted 17y ago
      [deleted]
    - brc 17y ago
      I can't speak for the rest of HN, but in my case I want no subsidies from the Government. What I want the goverment to do is get out of the way so I can get on with creating wealth for me, my family and any employees I hire. Having small companies grow into big ones is a net win for the government. 'subsidize your likely-to-fail startup with their own health' Not sure how to respond to that statement, but all paid employees are offered to exchange their time and effort for cash compensation. It's up to those individuals if the exchange is worth it or not. If there is a chance of a detriment to their health, then they'd need to factor this in. I think you'll find that your downvotes are because you disagree with the majority of readers of this site, not because of tone or sarcasm.
      - jacoblyles 17y ago
        >"I think you'll find that your downvotes are because you disagree with the majority of readers of this site, not because of tone or sarcasm." If he argued that the article author was wrong in a civil tone with a thoughtful manner, I doubt he would have downvotes. There are highly upvoted comments on this very thread that disagree with the article author.
      - ytinas 17y ago
        This isn't reddit. Disagreement doesn't equal downvote. Having unemployment benefits is not optional. Even 3rd world countries have this. However, I don't know that charging the companies directly for the unemployment is the best. Where I live workers pay an "unemployment insurance". The employer pays it, but it's part of the compensation like vacation etc. So when an employee is let go he draws from this insurance, the company is out of it.
- yummyfajitas 17y ago
  If your business is not profitable, then it's time to do something else... Yes, the best thing for the economy right now would be if all marginally profitable businesses tanked and their workers become unemployed. That'll fix things right up.
- anamax 17y ago
  > Guess what then, you aren't charging the clients enough. Clients have a choice too....
donw 17y ago
Maybe I'm just inexperienced, but can't you get around this with contract-to-hire? E.g., bring your prospective salesguy in for a 90-day contract, and if they cut the condiment of choice, keep them?
- hga 17y ago
  All things being equal, if someone is offered a full time position and a contract-to-hire, which will they take? And if that became the norm, I'm not sure the ploy would stay legally viable. Added after reading the fine article: I'd really wonder if it would fly in Illinois. Surely the author has considered it?
  - Imprecate 17y ago
    I would gladly take such a position so long as the system seemed fair (e.g., seeing several long-term non-owner/management employees working there). The terms are spelled out clearly, and I'd rather work somewhere that I add value. If I can't make serious contributions in a couple months, then it's a bad deal for both me and the employer. However, you might have trouble getting people with families to take the job, especially if they're relocating.
    - hga 17y ago
      But that's not the proposition I posed, it was one with two offers from two different companies, only the starting terms were different. I noted in another reply that I'd done this as the direct report of an employee---and for that matter, for the one we hired that didn't work out at all (wanted to try to solve a programming problem by reinstalling NT!!!) it worked out very well (I hate firing people). And, yeah, I'd forgotten about relocation, that makes it a non-starter for a lot of people and types of jobs.
- shrike 17y ago
  A contractor is a very different thing than an employee. In most circumstances employees and contractors are not interchangeable [1]. Companies that hire Permatemps [2] can get bit hard. As a regular contractor I work hard to keep that line very clear. [1] http://www.irs.gov/businesses/small/article/0,,id=179115,00.html http://www.irs.gov/businesses/small/article/0,,id=179115,00.... [2] http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft
patio11 17y ago
This is another example of perverse, unintended consequences of "pro-worker" initiatives biting their intended beneficiaries in the hindquarters. Take a look at France for the endgame to that: between generous benefits and legally guaranteed protection from firing that makes Japanese salaryman positions look unstable, the economy is structurally incapable of employing a huge percentage of the work force. The young and immigrants, who are the worst affected by this (not surprising: the lowest skilled/lowest educated/poorest always catch the worst of every systemic economic issue), have little to do but sit on the dole or riot, and few prospects for ever doing anything else. My impression is that similar issues cause the massive underemployment of the non-salaryman strata of Japanese twenty-somethings. Many of the freeters (people who bounce from part-time job to part-time job) are cut out for entry level work, but hiring someone is a lot like marrying them, so if you don't have the appropriate credential and a resume which looks like exactly what the company wants, they generally pass.
- Imprecate 17y ago
  It also has negative effects for experienced workers: http://www.bloomberg.com/apps/news?pid=20601109&sid=a3Esvz92Fko4 http://www.bloomberg.com/apps/news?pid=20601109&sid=a3Es... Instead of being fired or laid off, employees are put into "Milton" type roles where they are made to feel useless, or intimidated into quitting/committing suicide. There's a line between workers' rights & social safety nets and making the employment market extremely inefficient. I think it's fair to use public funds to retrain employees who have spent years contributing to society, or even to provide them a temporary income so they don't have to worry for their family's future. Still, people generally want to do useful work, and keeping unproductive workers employed hurts them, other candidates, and the nation as a whole.
  - eru 17y ago
    Shouldn't you be able to buy unemployment insurance privately? (Okay, I know that may be a market for lemons because of the information asymmetries.. And you can't let people starve who haven't bought their insurance.)
brc 17y ago
This covers one big point that a lot of 'workplace rule making' types never quite understand. Most policies designed to protect people from losing their jobs actually increase either the chance they will lose their job, or their chance of getting another job. If there are penalties for firing an employee, with an associated 'trial period', then the employee stands a greater chance of getting fired before that period is up, even if there was a chance that any issues could have been worked out. If an employer knows they may lose money from claims of unfair firing, then they will resist hiring employees until they have sufficient funds to cover the cost of losing someone. Anecdote in point : a member of my family runs a business. A new hire didn't work out, and after counselling them several times, they decided the person had to go. They waited until after Christmas, fired the employee, who said that they understood the reasons. The former employee found representation, came back and successfully won compensation for an unfair dismissal. The reason was that some paperwork had not been completed correctly during the firing process. The resulting legal costs and compensation meant that the position will remain unfilled for several months until the balance sheet position is restored. It's the same law of unintended consequences that means rent controlled apartments actually decrease housing affordability in cities (apart from the lucky few). Employment policies like this decrease employment (apart from the lucky few). In both cases the results are the direct opposite for what they are intended. In terms of a social policy : governments should cover minimum wages, working conditions and other safety issues. Compensation for unfair dismissal should be capped regardless of salary and paid out of a central fund taken from company income taxes. That might be tough but that is life.
- smanek 17y ago
  I have trouble believing your story (assuming it takes place in the states ...) - do you have any more details? It's (thankfully) really hard to win an unfair dismissal suit since we're all 'at will' employees by default. You can fire someone because you don't like their shoes, don't like that they smoke, or even no reason at all (the handful of exceptions are 'protected categories', like race/religion).
  - jbellis 17y ago
    > we're all 'at will' employees by default IIANM this depends on your state in the USA.
jakewolf 17y ago
This post makes no sense. From Illinios State site http://www.ides.state.il.us/employer/uitax.asp http://www.ides.state.il.us/employer/uitax.asp Rates for 2010 are max 7.250% min 0.650% base $12,520 (you don't pay into unemployment insurance for wages over $12520/yr) The rate you pay is based on past claims not to exceed 7.250%. How does he get $20000?
- ratsbane 17y ago
  One successful claim against you changes the rate you pay for each employee. If your rate is set at 7.25% then for one employee you might pay 7.250% * $12,520=$907.70. You pay that much for EACH employee, e.g. 10 employees yields a bill for $9,077.
  - ajross 17y ago
    Except that the headline quite clearly tells us that the charge is 20x higher than that (it's a $20k reason not to hire "someone", not "$20k reason not to fire 21 people"). Surely the headline would lie for the purposes of exploiting partisan anger?
grellas 17y ago
As a U.S. startup or small business, when you hire your first employee, among other things: (1) you start having to pay employer-related payroll taxes to federal, state and possibly local governments; (2) you need to hire a payroll service to handle the myriad reports to be filed with the taxing authorities; (3) you can get dinged for unemployment insurance claims (the point of this piece); (4) you need to take out a workers' comp insurance policy; (5) you are at risk for claims of wrongful discharge; (6) ditto for claims of sexual harassment; (7) ditto for claims of illegal discrimination; (8) you can face waiting-time penalties if you are slow to meet payroll; (9) you can face the so-called 100% penalty if you fail to remit withheld payroll taxes to the government; (10) you must pay at least a minimum wage for services rendered; (11) you must pay overtime for work in excess of 8 hours per day or 40 hours per week; (12) you must post some bureaucratic notices of workplace rights about your premises; (13) you may have to fund your employee's retirement along with your own; (14) you may have to pay for your employee's rehab if it is deemed a disability; (15) you can be vicariously liable for the acts of your employee that damage others (e.g., if he runs someone over while driving on company business); and (16) add here any of many other possible oddball consequences, such as possibly increasing your business license tax, requiring you to register as a foreign corporation (if you are such) in a state other than your state of domicile, etc. No doubt you can others. While there may good and valid reasons for each of these requirements under law, is it a wonder (when you consider their cumulative impact) that startups will typically have x reasons of their own "not to hire," at least early in the company's history?
- tptacek 17y ago
  These reasons pretty much all pale compared to "will I be able to make payroll?", though.
DenisM 17y ago
And you know what that means? If you are a salaried worker this money is coming out of your pocket! Think about that! Everybody should plan for occasional unemployment and there are two ways to go about it: 1. You save a year worth of expenses all by yourself, and live on that when hard times come. 2. You don't save, but the government saves for you (directly via payroll tax or indirectly via unemployment tax). On the surface the two approaches are equal as far as worker is concerned. And yet! In the first case once you save enough you could stop saving and enjoy the surplus, but in the latter case you can't stop saving no matter how much you "saved" already. Just one more benefit of working for yourself. Employment is such an archaic concept.

70 points by georgecmu 17y ago

Wow, this is pretty conservative for the Times. I think that if an employee is fired for cause, they should be forced to sell their organs to pay back the debt (and cost of finding a replacement worker) to their company. This would make small businesses more profitable, and it would be an incentive for people to work harder. It would also lower the cost of organs, allowing the ultra-rich business owners to get a replacement kidney AND own a vacation home. What I meant to say is that I think business owners whine too much about money. If your business is not profitable, then it's time to do something else... not whine about how your fired employees shouldn't get unemployment benefits. (I worked at a small company once, and all I ever heard about was how everything was too expensive. Health insurance is too expensive. Salary is too expensive. Taxes are too expensive. Guess what then, you aren't charging the clients enough.)

hga 17y ago
Errr, I haven't Read The Fine Article, but I know from nasty experience that if you're fired for cause in Massachusetts or Virginia you can't collect unemployment (both times this was relevant, my employer tried to claim that and failed miserably). After reading the fine article: in Illinois, for cause == no unemployment, no taxes for the employer down the road.
brc 17y ago
Maybe you should read this article http://www.paulgraham.com/gap.html http://www.paulgraham.com/gap.html It might be convenient to paint all business owners as 'ultra-rich' but the majority of employment happens through smaller businesses, which generally aren't in a position to 'charge clients more money'. Ask someone who is getting a start-up off the ground why they can't just pay everyone more money.
- jrockway 17y ago
  And ask an average person who might work for you why they should subsidize your likely-to-fail startup with their own health. It seems like the general consensus on HN is that The Government should subsidize startups and small-businesses Just Because, but that it's evil when the same government subsidizes the employee that didn't work quite hard enough and needs to eat food and live in a house while they look for a job they can do better. I don't get it. (I bet if I wasn't so sarcastic when I made the organ-harvesting reference, I would have been upmodded!)
  - deleted 17y ago
    [deleted]
  - brc 17y ago
    I can't speak for the rest of HN, but in my case I want no subsidies from the Government. What I want the goverment to do is get out of the way so I can get on with creating wealth for me, my family and any employees I hire. Having small companies grow into big ones is a net win for the government. 'subsidize your likely-to-fail startup with their own health' Not sure how to respond to that statement, but all paid employees are offered to exchange their time and effort for cash compensation. It's up to those individuals if the exchange is worth it or not. If there is a chance of a detriment to their health, then they'd need to factor this in. I think you'll find that your downvotes are because you disagree with the majority of readers of this site, not because of tone or sarcasm.
    - jacoblyles 17y ago
      >"I think you'll find that your downvotes are because you disagree with the majority of readers of this site, not because of tone or sarcasm." If he argued that the article author was wrong in a civil tone with a thoughtful manner, I doubt he would have downvotes. There are highly upvoted comments on this very thread that disagree with the article author.
    - ytinas 17y ago
      This isn't reddit. Disagreement doesn't equal downvote. Having unemployment benefits is not optional. Even 3rd world countries have this. However, I don't know that charging the companies directly for the unemployment is the best. Where I live workers pay an "unemployment insurance". The employer pays it, but it's part of the compensation like vacation etc. So when an employee is let go he draws from this insurance, the company is out of it.
yummyfajitas 17y ago
If your business is not profitable, then it's time to do something else... Yes, the best thing for the economy right now would be if all marginally profitable businesses tanked and their workers become unemployed. That'll fix things right up.
anamax 17y ago
> Guess what then, you aren't charging the clients enough. Clients have a choice too....

donw 17y ago

Maybe I'm just inexperienced, but can't you get around this with contract-to-hire? E.g., bring your prospective salesguy in for a 90-day contract, and if they cut the condiment of choice, keep them?

hga 17y ago
All things being equal, if someone is offered a full time position and a contract-to-hire, which will they take? And if that became the norm, I'm not sure the ploy would stay legally viable. Added after reading the fine article: I'd really wonder if it would fly in Illinois. Surely the author has considered it?
- Imprecate 17y ago
  I would gladly take such a position so long as the system seemed fair (e.g., seeing several long-term non-owner/management employees working there). The terms are spelled out clearly, and I'd rather work somewhere that I add value. If I can't make serious contributions in a couple months, then it's a bad deal for both me and the employer. However, you might have trouble getting people with families to take the job, especially if they're relocating.
  - hga 17y ago
    But that's not the proposition I posed, it was one with two offers from two different companies, only the starting terms were different. I noted in another reply that I'd done this as the direct report of an employee---and for that matter, for the one we hired that didn't work out at all (wanted to try to solve a programming problem by reinstalling NT!!!) it worked out very well (I hate firing people). And, yeah, I'd forgotten about relocation, that makes it a non-starter for a lot of people and types of jobs.
shrike 17y ago
A contractor is a very different thing than an employee. In most circumstances employees and contractors are not interchangeable [1]. Companies that hire Permatemps [2] can get bit hard. As a regular contractor I work hard to keep that line very clear. [1] http://www.irs.gov/businesses/small/article/0,,id=179115,00.html http://www.irs.gov/businesses/small/article/0,,id=179115,00.... [2] http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft

patio11 17y ago

This is another example of perverse, unintended consequences of "pro-worker" initiatives biting their intended beneficiaries in the hindquarters. Take a look at France for the endgame to that: between generous benefits and legally guaranteed protection from firing that makes Japanese salaryman positions look unstable, the economy is structurally incapable of employing a huge percentage of the work force. The young and immigrants, who are the worst affected by this (not surprising: the lowest skilled/lowest educated/poorest always catch the worst of every systemic economic issue), have little to do but sit on the dole or riot, and few prospects for ever doing anything else. My impression is that similar issues cause the massive underemployment of the non-salaryman strata of Japanese twenty-somethings. Many of the freeters (people who bounce from part-time job to part-time job) are cut out for entry level work, but hiring someone is a lot like marrying them, so if you don't have the appropriate credential and a resume which looks like exactly what the company wants, they generally pass.

Imprecate 17y ago
It also has negative effects for experienced workers: http://www.bloomberg.com/apps/news?pid=20601109&sid=a3Esvz92Fko4 http://www.bloomberg.com/apps/news?pid=20601109&sid=a3Es... Instead of being fired or laid off, employees are put into "Milton" type roles where they are made to feel useless, or intimidated into quitting/committing suicide. There's a line between workers' rights & social safety nets and making the employment market extremely inefficient. I think it's fair to use public funds to retrain employees who have spent years contributing to society, or even to provide them a temporary income so they don't have to worry for their family's future. Still, people generally want to do useful work, and keeping unproductive workers employed hurts them, other candidates, and the nation as a whole.
- eru 17y ago
  Shouldn't you be able to buy unemployment insurance privately? (Okay, I know that may be a market for lemons because of the information asymmetries.. And you can't let people starve who haven't bought their insurance.)

brc 17y ago

This covers one big point that a lot of 'workplace rule making' types never quite understand. Most policies designed to protect people from losing their jobs actually increase either the chance they will lose their job, or their chance of getting another job. If there are penalties for firing an employee, with an associated 'trial period', then the employee stands a greater chance of getting fired before that period is up, even if there was a chance that any issues could have been worked out. If an employer knows they may lose money from claims of unfair firing, then they will resist hiring employees until they have sufficient funds to cover the cost of losing someone. Anecdote in point : a member of my family runs a business. A new hire didn't work out, and after counselling them several times, they decided the person had to go. They waited until after Christmas, fired the employee, who said that they understood the reasons. The former employee found representation, came back and successfully won compensation for an unfair dismissal. The reason was that some paperwork had not been completed correctly during the firing process. The resulting legal costs and compensation meant that the position will remain unfilled for several months until the balance sheet position is restored. It's the same law of unintended consequences that means rent controlled apartments actually decrease housing affordability in cities (apart from the lucky few). Employment policies like this decrease employment (apart from the lucky few). In both cases the results are the direct opposite for what they are intended. In terms of a social policy : governments should cover minimum wages, working conditions and other safety issues. Compensation for unfair dismissal should be capped regardless of salary and paid out of a central fund taken from company income taxes. That might be tough but that is life.

smanek 17y ago
I have trouble believing your story (assuming it takes place in the states ...) - do you have any more details? It's (thankfully) really hard to win an unfair dismissal suit since we're all 'at will' employees by default. You can fire someone because you don't like their shoes, don't like that they smoke, or even no reason at all (the handful of exceptions are 'protected categories', like race/religion).
- jbellis 17y ago
  > we're all 'at will' employees by default IIANM this depends on your state in the USA.

jakewolf 17y ago

This post makes no sense. From Illinios State site http://www.ides.state.il.us/employer/uitax.asp http://www.ides.state.il.us/employer/uitax.asp Rates for 2010 are max 7.250% min 0.650% base $12,520 (you don't pay into unemployment insurance for wages over $12520/yr) The rate you pay is based on past claims not to exceed 7.250%. How does he get $20000?

ratsbane 17y ago
One successful claim against you changes the rate you pay for each employee. If your rate is set at 7.25% then for one employee you might pay 7.250% * $12,520=$907.70. You pay that much for EACH employee, e.g. 10 employees yields a bill for $9,077.
- ajross 17y ago
  Except that the headline quite clearly tells us that the charge is 20x higher than that (it's a $20k reason not to hire "someone", not "$20k reason not to fire 21 people"). Surely the headline would lie for the purposes of exploiting partisan anger?

grellas 17y ago

As a U.S. startup or small business, when you hire your first employee, among other things: (1) you start having to pay employer-related payroll taxes to federal, state and possibly local governments; (2) you need to hire a payroll service to handle the myriad reports to be filed with the taxing authorities; (3) you can get dinged for unemployment insurance claims (the point of this piece); (4) you need to take out a workers' comp insurance policy; (5) you are at risk for claims of wrongful discharge; (6) ditto for claims of sexual harassment; (7) ditto for claims of illegal discrimination; (8) you can face waiting-time penalties if you are slow to meet payroll; (9) you can face the so-called 100% penalty if you fail to remit withheld payroll taxes to the government; (10) you must pay at least a minimum wage for services rendered; (11) you must pay overtime for work in excess of 8 hours per day or 40 hours per week; (12) you must post some bureaucratic notices of workplace rights about your premises; (13) you may have to fund your employee's retirement along with your own; (14) you may have to pay for your employee's rehab if it is deemed a disability; (15) you can be vicariously liable for the acts of your employee that damage others (e.g., if he runs someone over while driving on company business); and (16) add here any of many other possible oddball consequences, such as possibly increasing your business license tax, requiring you to register as a foreign corporation (if you are such) in a state other than your state of domicile, etc. No doubt you can others. While there may good and valid reasons for each of these requirements under law, is it a wonder (when you consider their cumulative impact) that startups will typically have x reasons of their own "not to hire," at least early in the company's history?

tptacek 17y ago
These reasons pretty much all pale compared to "will I be able to make payroll?", though.

DenisM 17y ago

And you know what that means? If you are a salaried worker this money is coming out of your pocket! Think about that! Everybody should plan for occasional unemployment and there are two ways to go about it: 1. You save a year worth of expenses all by yourself, and live on that when hard times come. 2. You don't save, but the government saves for you (directly via payroll tax or indirectly via unemployment tax). On the surface the two approaches are equal as far as worker is concerned. And yet! In the first case once you save enough you could stop saving and enjoy the surplus, but in the latter case you can't stop saving no matter how much you "saved" already. Just one more benefit of working for yourself. Employment is such an archaic concept.