6 ms·

The illegal bit isn’t the pay structure but the treatment of a contractor as an employee. Both the European and US laws make this distinction with similar crite

The illegal bit isn’t the pay structure but the treatment of a contractor as an employee. Both the European and US laws make this distinction with similar criteria. This is to make sure companies aren’t avoiding their obligations to employees. And just from a moral perspective if you’re expecting someone to act like an employee you should treat them in kind.

csmpltn 4y ago
> "The illegal bit isn’t the pay structure but the treatment of a contractor as an employee." What's illegal here exactly? 1. US Business Entity conducts business with EU Business Entity. 2. The person (let's call them a contractor) is employed as a full-time employee for the EU Business Entity. They also function as the owner of the EU Business Entity. 3. US Business Entity, EU Business Entity and the contractor - all pay their respective taxes as required by the laws in their jurisdictions. This is the very foundation of how consultancies operate, for example: 1. The consultancy is the employer, the consultant the employee. 2. The consultant gets hired out to different clients, to work on different projects. 3. The consultant's salary gets paid by the consultancy, not the client. 4. The client only ever conducts business with the consultancy.
- meheleventyone 4y ago
  If the company contracting allows the contracting entity to maintain the autonomy and flexibility required then nothing. Just wrapping people in shell companies doesn’t usually avoid the legal tests for whether someone is being treated as an employee or contractor AFAIK.
  - csmpltn 4y ago
    > "Just wrapping people in shell companies doesn’t usually avoid the legal tests for whether someone is being treated as an employee or contractor AFAIK." What does "wrapping people in shell companies" mean? As a person, you're either employed for a "shell company", in which case you've signed a contract and you get paid a salary - or you're the owner of a "shell company", in which case you get to choose how to manage the company's funds. You can also be both, simultaneously. You'll be paying taxes either way. Paying yourself a salary is a taxable event. I'm still not sure what's illegal here?
    - Luc 4y ago
      https://en.wikipedia.org/wiki/False_self-employment https://en.wikipedia.org/wiki/False_self-employment
      - bitL 4y ago
        That's within a single country. There is a qualitative difference between cross-border business relationships and intra-country ones.
        deleted 4y ago
        [deleted]
      - csmpltn 4y ago
        > "False self-employment is a situation in which somebody registered as self-employed, a freelancer, or a temp is de facto an employee carrying out a professional activity under the authority and subordination of another company. Such false self-employment is often a way to circumvent social welfare and employment legislation, for example by avoiding employer's social security and income tax contributions." Could you kindly explain how this definition of "false self-employment" is in any way relevant to the situation I just described in my original comment? I'm struggling to see it myself. What about the specific situation I described implies circumvention of social welfare, or employment legislation, for example?
        sarchertech 4y ago
        A company wants an employee, they plan on treating this person as an employee. However the company doesn’t want to pay the additional costs required by regulation. Payroll taxes, unemployment insurance, dealing with tax withholding, overtime where applicable, family leave requirements etc… So they hire a contractor instead and pay them as a 1099 contractor, or the contractor sets up an LLC and they pay the LLC, or an S-corp. Doesn’t matter how they pay them, if they treat them as an employee (there’s a 20 part test) they are a de facto employee and it’s false self-employment.
gwnywg 4y ago
Contractors have no rights nor protections under employment law, they need to contribute to social system by themselves, they are selling their services and expect they can be released with short notice.

csmpltn 4y ago

> "The illegal bit isn’t the pay structure but the treatment of a contractor as an employee." What's illegal here exactly? 1. US Business Entity conducts business with EU Business Entity. 2. The person (let's call them a contractor) is employed as a full-time employee for the EU Business Entity. They also function as the owner of the EU Business Entity. 3. US Business Entity, EU Business Entity and the contractor - all pay their respective taxes as required by the laws in their jurisdictions. This is the very foundation of how consultancies operate, for example: 1. The consultancy is the employer, the consultant the employee. 2. The consultant gets hired out to different clients, to work on different projects. 3. The consultant's salary gets paid by the consultancy, not the client. 4. The client only ever conducts business with the consultancy.

meheleventyone 4y ago
If the company contracting allows the contracting entity to maintain the autonomy and flexibility required then nothing. Just wrapping people in shell companies doesn’t usually avoid the legal tests for whether someone is being treated as an employee or contractor AFAIK.
- csmpltn 4y ago
  > "Just wrapping people in shell companies doesn’t usually avoid the legal tests for whether someone is being treated as an employee or contractor AFAIK." What does "wrapping people in shell companies" mean? As a person, you're either employed for a "shell company", in which case you've signed a contract and you get paid a salary - or you're the owner of a "shell company", in which case you get to choose how to manage the company's funds. You can also be both, simultaneously. You'll be paying taxes either way. Paying yourself a salary is a taxable event. I'm still not sure what's illegal here?
  - Luc 4y ago
    https://en.wikipedia.org/wiki/False_self-employment https://en.wikipedia.org/wiki/False_self-employment
    - bitL 4y ago
      That's within a single country. There is a qualitative difference between cross-border business relationships and intra-country ones.
      - deleted 4y ago
        [deleted]
    - csmpltn 4y ago
      > "False self-employment is a situation in which somebody registered as self-employed, a freelancer, or a temp is de facto an employee carrying out a professional activity under the authority and subordination of another company. Such false self-employment is often a way to circumvent social welfare and employment legislation, for example by avoiding employer's social security and income tax contributions." Could you kindly explain how this definition of "false self-employment" is in any way relevant to the situation I just described in my original comment? I'm struggling to see it myself. What about the specific situation I described implies circumvention of social welfare, or employment legislation, for example?
      - sarchertech 4y ago
        A company wants an employee, they plan on treating this person as an employee. However the company doesn’t want to pay the additional costs required by regulation. Payroll taxes, unemployment insurance, dealing with tax withholding, overtime where applicable, family leave requirements etc… So they hire a contractor instead and pay them as a 1099 contractor, or the contractor sets up an LLC and they pay the LLC, or an S-corp. Doesn’t matter how they pay them, if they treat them as an employee (there’s a 20 part test) they are a de facto employee and it’s false self-employment.

gwnywg 4y ago

Contractors have no rights nor protections under employment law, they need to contribute to social system by themselves, they are selling their services and expect they can be released with short notice.