5 ms·

>> The aim was to reduce the salary gap to a 1:12 ratio – in other words to limit the salaries of top executives based on the annual minimum wage of the lowest

by smtddr 13y ago

>> The aim was to reduce the salary gap to a 1:12 ratio – in other words to limit the salaries of top executives based on the annual minimum wage of the lowest paid employee within the same company. I don't know how the law works in Switzerland, but as a hypothetical top-exec in an American company I can think of a way to screw over the little guy. I would not hire anyone below a certain salary range. I'd have those jobs filled with contractors; technically not employees. Thus defeating this law. And as an added bonus I suddenly don't owe a bunch of people health-care benefits either.

rtpg 13y ago
Actually if you have "single client" contractors a lot of labor laws will grandfather those employees as "real" employees, and you'll have a lot of back taxes and they'll end up in your employee register. It's exactly to avoid this sort of exploitation. A lot of people don't seem to know about labor protections, unfortunately employees are just as misinformed of their rights as business owners are.
- Tohhou 13y ago
  Require in the contract that you are not their only client, but lawyer it well. "We only work with contractors with a diverse set of clients as we believe that diversity promotes excellence." Create buffer companies for those contractors to also work for indirectly for you if necessary. You might still have to pay some taxes, but you won't have the same problem as the Swiss salary cap is trying to prevent if it were implemented. There will always be ways to exploit systems. You see it as exploitation, but those running the companies see it as necessary to compete.
  - rtpg 13y ago
    all those extra layers are going to end up making it more costly in some cases. Also, parts of contracts can be invalidated. Just because you put something like that in the contract doesn't mean you're not violating labor laws. Some jobs make more sense to be outsourced, in which case contractors will usually already exist and offer "reasonable" prices that will be cheaper than having a full-time employee around. Other times it doesn't make sense, but employers will try and convince employees to become contractors, so that a lot of employee taxes end up coming out of the employee's side of things. Of course, the employee thinks that this is necessary to keep their job. The construction and taxi industries are very bad at this. It's exploitation, plain and simple.
    - Tohhou 13y ago
      I agree that min/maxing is easily exploitation, but it's also what those companies see as necessary to compete, and it is what high relative fitness companies do to not fail. One company gets a competitive advantage from doing perfectly legal activities which can allow them to edge out their competition from the market. See: Walmart.
  - deleted 13y ago
    [deleted]
    - Tohhou 13y ago
      Company A wants to hire another company to do things for them based on a contract. Company A hires company B, which is completely independent - naturally occurring due to demand, to do the work. Company A is highly profitable and only has high earners in pay. Company B is barely profitable and only has lower earners in pay. How does the law have any power over this situation? You are telling me that that government would decide that an employee of another company is also your employee because they don't get paid as well as your company's average?
  - rmc 13y ago
    Require in the contract that you are not their only client, but lawyer it well. "We only work with contractors with a diverse set of clients as we believe that diversity promotes excellence." In some countries (I think UK is like this), they will actually look at the amount of work a "contracter" does for a client. Do too much (i.e. only work for them) and they (the taxman) treat you as an employee. Doesn't matter what you put in the contract. It's not nearly that simple.
- philwelch 13y ago
  The typical workaround is for their contract to "end" after nine months.
- jacobr1 13y ago
  but you could also hire a firm to do the same work. Few companies have on staff janitors any more. Instead they hire out to a general purpose janitorial firm. There are plenty of structures that incentivised people could find that would not violate or skirt any labour protection laws in a max salary scenario. How about creating a separate strategic consulting firm that hires the executives? Then contacting with that firm for the work the executives are expected to perform.
ceejayoz 13y ago
Contractor has a particular definition in the US. Having low-level employees who have the legal right to set their own hours and pick which tasks to accept doesn't sound fun for a corporation.
- corin_ 13y ago
  Fairly irrelevant if the company says "do the hours and tasks we want you to do or you get none at all".
  - icebraining 13y ago
    That won't fly in many European countries. If the worker can prove s/he had fixed hours, a manager, etc, s/he's entitled to the same rights as a salaried worker.
    - corin_ 13y ago
      Sure, but in such cases that will generally come down to employer vs. government regarding taxes etc. (and sometimes about employee rights too), it won't lead to a contractor working the hours/tasks they want to do because then they'd just lose the work immediately.
- ghshephard 13y ago
  At least in the United States, contractors at all of the companies (ranging from 50, 500, to 5000 employees) I've worked at have had the least ability to set their own hours and no ability to pick the tasks they work on. They work for third party contracting agencies, get no stock, and aren't invited to the all-hands or the company parties. On the flip side, if they work a 60 hour work week, they get paid for 60 hours. And, in mature companies, they seem to get paid a higher hourly salary than employees - but, they get few, if any, benefits like medical/vision/dental.
  - JoeAltmaier 13y ago
    Hm. I was an independent contractor for years. I got to pick every project I was on. Well, 'bid for' is a better term. I accepted only those that I was interested in, AND paid well. Once the project starts I was almost completely independent. That's the nature of a contractor vs an employee - no day-to-day supervision, just milestones to accomplish. So I'm not sure I know what kind of contractor you're talking about.
phlo 13y ago
This would be very hard to achieve in Switzerland. For one, Swiss law places a big emphasis on acting in good faith. If an employer were to hire permanent employees as "contractors", courts would be likely to reject that argument. Secondly, social security is structured a bit differently from the U.S. version: Contributions are taken out of employee's salaries (and matched by the employer). Contractors would be required to act as commercial entities and contribute themselves. This would require a fair bit of paperwork -- not something you'd expect a low-wage employee to complete. And if they'd fail to complete and submit the paperwork, social security would take action against said contractors or -- more likely, imo -- against the original employer. Thirdly, self-employed persons face some extra paperwork for their tax declarations. A big shift from employees to self-employed people would be noticable (and, going back to point 1, likely to be rejected by the courts). By the way: the proposal included language specifically prohibiting outsourcing the leadership of a company to another company.
- jdlshore 13y ago
  > Secondly, social security is structured a bit differently from the U.S. version: Contributions are taken out of employee's salaries (and matched by the employer). Contractors would be required to act as commercial entities and contribute themselves. Actually, that's exactly how social security is taxed in the U.S. People call that matching tax "self-employment tax." :-)
- ars 13y ago
  > hire permanent employees as "contractors" The company doesn't hire them directly. They hire a third party and that third party hires the contractors (or employees for that matter).
brownbat 13y ago
I'm curious why some workarounds become widespread, but others don't. For example, why don't US companies find ways to compensate all employees through some sort of interest or dividend instead of salary/wages, for the radically lower taxation?
- jonknee 13y ago
  For most employees that would be worse. Dividends are taxed (15-20%) by the recipient after at the corporate level (35%). Also the small problem of what happens when the company doesn't make money.
  - brownbat 13y ago
    > What happens when the company doesn't make money I'm not talking about company stock, I'm talking about stock in a sort of artificial vehicle used to compensate employees. I see your point, though, salaries/wages are tax deductible, so it's hard for companies to use other things besides salaries/wages. But... > If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. http://www.irs.gov/publications/p535/ch02.html http://www.irs.gov/publications/p535/ch02.html But then if it's a transfer of property, you can't turn it into a long term capital gain, unless maybe you rented it to them? Hmm... probably wouldn't work. Turns out tax law is complex and not quite as easy to game as I thought.
- gamblor956 13y ago
  For starters, interest is taxed at ordinary income rates... As for the other suggestion...it has already been around for decades. Look up ESOPs ("employee stock ownership plans," frequently aka "profit-sharing plans").
beachstartup 13y ago
the 'contractor' role would be of ambiguity illegality. however, outsourcing the job(s) to an external, possibly offshore or cross-border firm that specializes in low-wage workers with a puppet CEO who's actually a supervisor would do the trick nicely. then, of course, the 'janitorial' firm would be owned or otherwise controlled by a parent company where the execs make much more money, since they are either a) not bound by compensation rules or b) don't hire anyone under a certain salary

by smtddr 13y ago

rtpg 13y ago

Actually if you have "single client" contractors a lot of labor laws will grandfather those employees as "real" employees, and you'll have a lot of back taxes and they'll end up in your employee register. It's exactly to avoid this sort of exploitation. A lot of people don't seem to know about labor protections, unfortunately employees are just as misinformed of their rights as business owners are.

Tohhou 13y ago
Require in the contract that you are not their only client, but lawyer it well. "We only work with contractors with a diverse set of clients as we believe that diversity promotes excellence." Create buffer companies for those contractors to also work for indirectly for you if necessary. You might still have to pay some taxes, but you won't have the same problem as the Swiss salary cap is trying to prevent if it were implemented. There will always be ways to exploit systems. You see it as exploitation, but those running the companies see it as necessary to compete.
- rtpg 13y ago
  all those extra layers are going to end up making it more costly in some cases. Also, parts of contracts can be invalidated. Just because you put something like that in the contract doesn't mean you're not violating labor laws. Some jobs make more sense to be outsourced, in which case contractors will usually already exist and offer "reasonable" prices that will be cheaper than having a full-time employee around. Other times it doesn't make sense, but employers will try and convince employees to become contractors, so that a lot of employee taxes end up coming out of the employee's side of things. Of course, the employee thinks that this is necessary to keep their job. The construction and taxi industries are very bad at this. It's exploitation, plain and simple.
  - Tohhou 13y ago
    I agree that min/maxing is easily exploitation, but it's also what those companies see as necessary to compete, and it is what high relative fitness companies do to not fail. One company gets a competitive advantage from doing perfectly legal activities which can allow them to edge out their competition from the market. See: Walmart.
- deleted 13y ago
  [deleted]
  - Tohhou 13y ago
    Company A wants to hire another company to do things for them based on a contract. Company A hires company B, which is completely independent - naturally occurring due to demand, to do the work. Company A is highly profitable and only has high earners in pay. Company B is barely profitable and only has lower earners in pay. How does the law have any power over this situation? You are telling me that that government would decide that an employee of another company is also your employee because they don't get paid as well as your company's average?
- rmc 13y ago
  Require in the contract that you are not their only client, but lawyer it well. "We only work with contractors with a diverse set of clients as we believe that diversity promotes excellence." In some countries (I think UK is like this), they will actually look at the amount of work a "contracter" does for a client. Do too much (i.e. only work for them) and they (the taxman) treat you as an employee. Doesn't matter what you put in the contract. It's not nearly that simple.
philwelch 13y ago
The typical workaround is for their contract to "end" after nine months.
jacobr1 13y ago
but you could also hire a firm to do the same work. Few companies have on staff janitors any more. Instead they hire out to a general purpose janitorial firm. There are plenty of structures that incentivised people could find that would not violate or skirt any labour protection laws in a max salary scenario. How about creating a separate strategic consulting firm that hires the executives? Then contacting with that firm for the work the executives are expected to perform.

ceejayoz 13y ago

Contractor has a particular definition in the US. Having low-level employees who have the legal right to set their own hours and pick which tasks to accept doesn't sound fun for a corporation.

corin_ 13y ago
Fairly irrelevant if the company says "do the hours and tasks we want you to do or you get none at all".
- icebraining 13y ago
  That won't fly in many European countries. If the worker can prove s/he had fixed hours, a manager, etc, s/he's entitled to the same rights as a salaried worker.
  - corin_ 13y ago
    Sure, but in such cases that will generally come down to employer vs. government regarding taxes etc. (and sometimes about employee rights too), it won't lead to a contractor working the hours/tasks they want to do because then they'd just lose the work immediately.
ghshephard 13y ago
At least in the United States, contractors at all of the companies (ranging from 50, 500, to 5000 employees) I've worked at have had the least ability to set their own hours and no ability to pick the tasks they work on. They work for third party contracting agencies, get no stock, and aren't invited to the all-hands or the company parties. On the flip side, if they work a 60 hour work week, they get paid for 60 hours. And, in mature companies, they seem to get paid a higher hourly salary than employees - but, they get few, if any, benefits like medical/vision/dental.
- JoeAltmaier 13y ago
  Hm. I was an independent contractor for years. I got to pick every project I was on. Well, 'bid for' is a better term. I accepted only those that I was interested in, AND paid well. Once the project starts I was almost completely independent. That's the nature of a contractor vs an employee - no day-to-day supervision, just milestones to accomplish. So I'm not sure I know what kind of contractor you're talking about.

phlo 13y ago

This would be very hard to achieve in Switzerland. For one, Swiss law places a big emphasis on acting in good faith. If an employer were to hire permanent employees as "contractors", courts would be likely to reject that argument. Secondly, social security is structured a bit differently from the U.S. version: Contributions are taken out of employee's salaries (and matched by the employer). Contractors would be required to act as commercial entities and contribute themselves. This would require a fair bit of paperwork -- not something you'd expect a low-wage employee to complete. And if they'd fail to complete and submit the paperwork, social security would take action against said contractors or -- more likely, imo -- against the original employer. Thirdly, self-employed persons face some extra paperwork for their tax declarations. A big shift from employees to self-employed people would be noticable (and, going back to point 1, likely to be rejected by the courts). By the way: the proposal included language specifically prohibiting outsourcing the leadership of a company to another company.

jdlshore 13y ago
> Secondly, social security is structured a bit differently from the U.S. version: Contributions are taken out of employee's salaries (and matched by the employer). Contractors would be required to act as commercial entities and contribute themselves. Actually, that's exactly how social security is taxed in the U.S. People call that matching tax "self-employment tax." :-)
ars 13y ago
> hire permanent employees as "contractors" The company doesn't hire them directly. They hire a third party and that third party hires the contractors (or employees for that matter).

brownbat 13y ago

I'm curious why some workarounds become widespread, but others don't. For example, why don't US companies find ways to compensate all employees through some sort of interest or dividend instead of salary/wages, for the radically lower taxation?

jonknee 13y ago
For most employees that would be worse. Dividends are taxed (15-20%) by the recipient after at the corporate level (35%). Also the small problem of what happens when the company doesn't make money.
- brownbat 13y ago
  > What happens when the company doesn't make money I'm not talking about company stock, I'm talking about stock in a sort of artificial vehicle used to compensate employees. I see your point, though, salaries/wages are tax deductible, so it's hard for companies to use other things besides salaries/wages. But... > If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. http://www.irs.gov/publications/p535/ch02.html http://www.irs.gov/publications/p535/ch02.html But then if it's a transfer of property, you can't turn it into a long term capital gain, unless maybe you rented it to them? Hmm... probably wouldn't work. Turns out tax law is complex and not quite as easy to game as I thought.
gamblor956 13y ago
For starters, interest is taxed at ordinary income rates... As for the other suggestion...it has already been around for decades. Look up ESOPs ("employee stock ownership plans," frequently aka "profit-sharing plans").

beachstartup 13y ago

the 'contractor' role would be of ambiguity illegality. however, outsourcing the job(s) to an external, possibly offshore or cross-border firm that specializes in low-wage workers with a puppet CEO who's actually a supervisor would do the trick nicely. then, of course, the 'janitorial' firm would be owned or otherwise controlled by a parent company where the execs make much more money, since they are either a) not bound by compensation rules or b) don't hire anyone under a certain salary