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IANALL (labor lawyer): This is a very rough estimate, but I think of a W2 employee as about 20% more expensive than a 1099 contractor: +7% Social Security +2%

IANALL (labor lawyer): This is a very rough estimate, but I think of a W2 employee as about 20% more expensive than a 1099 contractor: +7% Social Security +2% Medicare +1% Unemployment +5% Works comp (this varies though) +5% Medical benefits (varies a LOT) If someone is better informed than I, please let me know :)

jeffasinger 11y ago
Social Security is 6.2% and Medicare is 1.45%. However, these taxes are currently being paid for by the contractors in the form of self employment tax, so it's not really a huge change there though. Worker's comp is going to range depending on the industry, I doubt the courier's would have especially high workers comp numbers
joshjkim 11y ago
That's right - one thing I would add that is actually very non-negligible for on-demand logistics are (1) reimbursement for mileage (2) more robust insurance policies. IRS calls for $0.56/mile - if you assume an average delivery in SF is around 2 miles, that throws an additional $1+ per delivery cost to the business. For insurance, I know that Lyft currently charges about $1.50 for a "safety fee" which I would assume covers their insurances. However, those insurance policies are still built on the gray contractor status and probably depend to a certain extent on driver's having personal insurance (which is a fraught relationship - most personal insurance has a commercial use exception, which means driving for work is not covered). I would assume that when they re-classify, the insurance providers will use it as an excuse to push premiums up. There's also a chance that the clarify will bring premiums down (volatility = risk, and the current classification is highly volatile), so that may be a possibility as well. Most likely though, you give an insurance company a reason to charge more and they'll take it =)
- dublinben 11y ago
  The IRS safe harbor rate ($0.575/mile for 2015) is just the maximum that can be reimbursed tax free. It isn't meant to be a recommended amount to reimburse drivers, and it does not take a driver's actual costs into account.
joshjkim 11y ago
I would also add administration and execution cost - this is a LOT of paperwork to file. There are businesses the help you do this, but for now it's pretty expensive.
pbreit 11y ago
Should also take into account that the different employee types might be paid differently. For example, W2 employees might get paid flat minimum wage instead of trip-based and thus actually could be _less_ expensive.
- jsprogrammer 11y ago
  You'd need to also take out surge pricing when riding in a W2 vehicle.
  - pbreit 11y ago
    The passenger would still pay surge pricing. W2 employees would be giving up inflated fares for steady work & benefits at a fixed (low) wage.
    - jsprogrammer 11y ago
      Ok, but then what is the justification for increasing the fares? So Uber can further pad their marketing budget?
      - pbreit 11y ago
        Draw out the contractors and decrease demand.
prostoalex 11y ago
> +5% Medical benefits (varies a LOT) That's for a full-time gig, what of this applies if you cap the working hours at 30 a week to comply with Obamacare requirements?

jeffasinger 11y ago

Social Security is 6.2% and Medicare is 1.45%. However, these taxes are currently being paid for by the contractors in the form of self employment tax, so it's not really a huge change there though. Worker's comp is going to range depending on the industry, I doubt the courier's would have especially high workers comp numbers

joshjkim 11y ago

That's right - one thing I would add that is actually very non-negligible for on-demand logistics are (1) reimbursement for mileage (2) more robust insurance policies. IRS calls for $0.56/mile - if you assume an average delivery in SF is around 2 miles, that throws an additional $1+ per delivery cost to the business. For insurance, I know that Lyft currently charges about $1.50 for a "safety fee" which I would assume covers their insurances. However, those insurance policies are still built on the gray contractor status and probably depend to a certain extent on driver's having personal insurance (which is a fraught relationship - most personal insurance has a commercial use exception, which means driving for work is not covered). I would assume that when they re-classify, the insurance providers will use it as an excuse to push premiums up. There's also a chance that the clarify will bring premiums down (volatility = risk, and the current classification is highly volatile), so that may be a possibility as well. Most likely though, you give an insurance company a reason to charge more and they'll take it =)

dublinben 11y ago
The IRS safe harbor rate ($0.575/mile for 2015) is just the maximum that can be reimbursed tax free. It isn't meant to be a recommended amount to reimburse drivers, and it does not take a driver's actual costs into account.

joshjkim 11y ago

I would also add administration and execution cost - this is a LOT of paperwork to file. There are businesses the help you do this, but for now it's pretty expensive.

pbreit 11y ago

Should also take into account that the different employee types might be paid differently. For example, W2 employees might get paid flat minimum wage instead of trip-based and thus actually could be _less_ expensive.

jsprogrammer 11y ago
You'd need to also take out surge pricing when riding in a W2 vehicle.
- pbreit 11y ago
  The passenger would still pay surge pricing. W2 employees would be giving up inflated fares for steady work & benefits at a fixed (low) wage.
  - jsprogrammer 11y ago
    Ok, but then what is the justification for increasing the fares? So Uber can further pad their marketing budget?
    - pbreit 11y ago
      Draw out the contractors and decrease demand.

prostoalex 11y ago

> +5% Medical benefits (varies a LOT) That's for a full-time gig, what of this applies if you cap the working hours at 30 a week to comply with Obamacare requirements?