4 ms·

I am pretty sure contractors have to pay payroll taxes. It is one of the reasons that companies are increasingly classifying employees as contractors, the burd

by pyoung 13y ago

I am pretty sure contractors have to pay payroll taxes. It is one of the reasons that companies are increasingly classifying employees as contractors, the burden of the payroll tax falls on the contractor entirely (normally it is split 50/50 between employee/employer).

philwelch 13y ago
That doesn't make much sense--payroll tax is roughly 15% either way, so with employees you just pay them 7.5% less than a contractor for the same benefit. The real reason for contracting is that the paperwork is much simpler. You don't need an HR department. And the guy gets automatically laid off after a few months without the incident reflecting on either you or him, so there's less risk. There's another side to it where you can hire a "contractor" on an n-month term, but instead of paying the contractor directly you go through a middleman who hires the contractor as an employee and provides (shitty) benefits and takes care of taxes.
- g4m8i7 13y ago
  Or you pay them the same, and skip out on benefits as well as payroll taxes and your ROI is much higher.
nazgulnarsil 13y ago
you can not "split" taxes between employer and employee. The employer cares only about how much the total cost of employing someone is. The makeup of the cost is irrelevant.
- pyoung 13y ago
  The point is that employers are classifying employees as contractors because they can get away with offering the same 'salary', but avoid paying payroll taxes and benefits. We can get pedantic about 'who is really paying what', but in the end, companies are using this tactic to screw over their employees. There are many cases where taking work as a contractor makes sense (mainly, short-term/part-time work), but people need to be aware of the costs, and take them into consideration when comparing job offers.

4 ms·

I am pretty sure contractors have to pay payroll taxes. It is one of the reasons that companies are increasingly classifying employees as contractors, the burd

by pyoung 13y ago

philwelch 13y ago
That doesn't make much sense--payroll tax is roughly 15% either way, so with employees you just pay them 7.5% less than a contractor for the same benefit. The real reason for contracting is that the paperwork is much simpler. You don't need an HR department. And the guy gets automatically laid off after a few months without the incident reflecting on either you or him, so there's less risk. There's another side to it where you can hire a "contractor" on an n-month term, but instead of paying the contractor directly you go through a middleman who hires the contractor as an employee and provides (shitty) benefits and takes care of taxes.
- g4m8i7 13y ago
  Or you pay them the same, and skip out on benefits as well as payroll taxes and your ROI is much higher.
nazgulnarsil 13y ago
you can not "split" taxes between employer and employee. The employer cares only about how much the total cost of employing someone is. The makeup of the cost is irrelevant.
- pyoung 13y ago
  The point is that employers are classifying employees as contractors because they can get away with offering the same 'salary', but avoid paying payroll taxes and benefits. We can get pedantic about 'who is really paying what', but in the end, companies are using this tactic to screw over their employees. There are many cases where taking work as a contractor makes sense (mainly, short-term/part-time work), but people need to be aware of the costs, and take them into consideration when comparing job offers.