7 ms·

EA has the same problem. It's a US legal system thing. I don't know the law by name, but a contractor can only be kept on for a period of 6 months to a year.

EA has the same problem. It's a US legal system thing. I don't know the law by name, but a contractor can only be kept on for a period of 6 months to a year. After that, they must be made full-time or removed. After a cool-down period, they can be rehired. Some companies are getting around this legally but hiring companies to outsource, and yet embed, contractors into the client's office under a managed service agreement.

joelhaasnoot 15y ago
Wouldn't it also be a tax thing? Here in the Netherlands we have tax laws to prevent this kind of things, where if you can't choose your own hours/days/work and are essentially employed, but pretend to be a contractor, for all tax purposes the company is your employer, even in hindsight. Makes hiring people as contractors pretty tricky for startups sometimes.
- typicalrunt 15y ago
  We have a saying here used by the IRS and CRA (Canadian-equivalent) for determining if contractors are employees, that if it walks like a duck, and talks like a duck, then it is a duck. Basically, a contractor (by the nature of its name) is supposed to be hired for a fixed-length period of time. I would guess that's what the tax laws are trying to enforce.
  - jrockway 15y ago
    All the government cares about, though, is that they are W2 and not 1099. Then there are no rules. The IRS just wants to make sure that a big entity is responsible for payroll taxes instead of some individual. That way, it's cheaper to collect if there is a problem. (Where I work, all contractors come in through third-party companies that pay the employees as W2s. They limit being a contractor to 18 months because then people can start suing to get benefits, like an invite to the Christmas party and healthcare. Or so I've been told.)
  - joelhaasnoot 15y ago
    Right, but it gets trickier than that because even though you give someone a fixed-length period, if you're the only job a contractor does, and you pick the days they work, here you are essentially becoming the employer. Don't know what the US employment taxes are, but it was prohibitively expensive for us as a startup. The total employee costs run about 1.4-1.6x net base salary, even if we would outsource through a temp/payrolling agency.
jolan 15y ago
There isn't a law. Each company has their own policy as a result of so-called Permatemps at Microsoft filing a class action: http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft
- tsotha 15y ago
  Where I work we had contractors that were contractors because they didn't fit into company wage scales, i.e. they made too much money. Some of them had been here more than ten years. After that suit all of them were let go or converted to employees at substantially lower wages. Thanks, Microsoft permatemps. Litigious bastards.
  - Klinky 15y ago
    Sounds like your company needs to rethink their wage scales instead of using contracting as a way to loophole out of their own policies.
    - tsotha 15y ago
      Maybe. The point of hiring top dollar people is the skills that can get you a job are not the same as the skills you need to actually do the job. We would tell them straight out - "Look, we're paying you top dollar, and we expect you to produce." But no matter how careful you are occasionally a lemon slips through the hiring process. If he's a contractor you call up his agent and he's gone the next day. Employees? Not so much. So when contractors aren't an option management switches gears and says "We're providing all these benefits and growth potential. Hire the best people you can get in this salary range." And what you get, instead of superstars, is plodders.
- nirvdrum 15y ago
  In Massachusetts you can't hire someone as a contractor that is in effect an employee. It's really tricky to get right. But they're extremely strict about it so employers can't evade payroll taxes, workers' comp., etc.
thomasgerbe 15y ago
"I don't know the law by name, but a contractor can only be kept on for a period of 6 months to a year. After that, they must be made full-time or removed. After a cool-down period, they can be rehired." Is that true? I know of contractors from other countries who have worked in the U.S. for the same company for more than five years. And these companies are Fortune 500 so I assume they have a pretty rigid legal team.
- OstiaAntica 15y ago
  It isn't true. There's no limit on the length of time a legitimate contractor can be engaged, but if you are a business walking up to the line of the law defining employees or contractors, one way to limit your risk is to engage the contractors for a limited duration.
  - typicalrunt 15y ago
    What's not true? An independent contractor can only work 6 to 12 months before being let go? Absolutely true. I saw it with my own eyes. An independent contractor returning after a few months of break? Absolutely true. I also saw this. But a US law? You're right, it may not be a real law. However, when the legal department comes down and says that contractors cannot stay longer than X months because of a previous lawsuit at a company, I'm going to rightly assume that they don't want to break a law. And the way you said "if you are a business walking up to the line of the law", I'd guess that you agree that there is some sort of law that may be broken if companies aren't careful. I was merely pointing out the real problems that companies face by employing contractors, instead of giving a blanket "Untruth!" statement.

joelhaasnoot 15y ago

Wouldn't it also be a tax thing? Here in the Netherlands we have tax laws to prevent this kind of things, where if you can't choose your own hours/days/work and are essentially employed, but pretend to be a contractor, for all tax purposes the company is your employer, even in hindsight. Makes hiring people as contractors pretty tricky for startups sometimes.

typicalrunt 15y ago
We have a saying here used by the IRS and CRA (Canadian-equivalent) for determining if contractors are employees, that if it walks like a duck, and talks like a duck, then it is a duck. Basically, a contractor (by the nature of its name) is supposed to be hired for a fixed-length period of time. I would guess that's what the tax laws are trying to enforce.
- jrockway 15y ago
  All the government cares about, though, is that they are W2 and not 1099. Then there are no rules. The IRS just wants to make sure that a big entity is responsible for payroll taxes instead of some individual. That way, it's cheaper to collect if there is a problem. (Where I work, all contractors come in through third-party companies that pay the employees as W2s. They limit being a contractor to 18 months because then people can start suing to get benefits, like an invite to the Christmas party and healthcare. Or so I've been told.)
- joelhaasnoot 15y ago
  Right, but it gets trickier than that because even though you give someone a fixed-length period, if you're the only job a contractor does, and you pick the days they work, here you are essentially becoming the employer. Don't know what the US employment taxes are, but it was prohibitively expensive for us as a startup. The total employee costs run about 1.4-1.6x net base salary, even if we would outsource through a temp/payrolling agency.

jolan 15y ago

There isn't a law. Each company has their own policy as a result of so-called Permatemps at Microsoft filing a class action: http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft

tsotha 15y ago
Where I work we had contractors that were contractors because they didn't fit into company wage scales, i.e. they made too much money. Some of them had been here more than ten years. After that suit all of them were let go or converted to employees at substantially lower wages. Thanks, Microsoft permatemps. Litigious bastards.
- Klinky 15y ago
  Sounds like your company needs to rethink their wage scales instead of using contracting as a way to loophole out of their own policies.
  - tsotha 15y ago
    Maybe. The point of hiring top dollar people is the skills that can get you a job are not the same as the skills you need to actually do the job. We would tell them straight out - "Look, we're paying you top dollar, and we expect you to produce." But no matter how careful you are occasionally a lemon slips through the hiring process. If he's a contractor you call up his agent and he's gone the next day. Employees? Not so much. So when contractors aren't an option management switches gears and says "We're providing all these benefits and growth potential. Hire the best people you can get in this salary range." And what you get, instead of superstars, is plodders.
nirvdrum 15y ago
In Massachusetts you can't hire someone as a contractor that is in effect an employee. It's really tricky to get right. But they're extremely strict about it so employers can't evade payroll taxes, workers' comp., etc.

thomasgerbe 15y ago

"I don't know the law by name, but a contractor can only be kept on for a period of 6 months to a year. After that, they must be made full-time or removed. After a cool-down period, they can be rehired." Is that true? I know of contractors from other countries who have worked in the U.S. for the same company for more than five years. And these companies are Fortune 500 so I assume they have a pretty rigid legal team.

OstiaAntica 15y ago
It isn't true. There's no limit on the length of time a legitimate contractor can be engaged, but if you are a business walking up to the line of the law defining employees or contractors, one way to limit your risk is to engage the contractors for a limited duration.
- typicalrunt 15y ago
  What's not true? An independent contractor can only work 6 to 12 months before being let go? Absolutely true. I saw it with my own eyes. An independent contractor returning after a few months of break? Absolutely true. I also saw this. But a US law? You're right, it may not be a real law. However, when the legal department comes down and says that contractors cannot stay longer than X months because of a previous lawsuit at a company, I'm going to rightly assume that they don't want to break a law. And the way you said "if you are a business walking up to the line of the law", I'd guess that you agree that there is some sort of law that may be broken if companies aren't careful. I was merely pointing out the real problems that companies face by employing contractors, instead of giving a blanket "Untruth!" statement.