The Market Ticker
Commentary on The Capital Markets- Category [Market Musings]

This is one of those feel good articles that doesn't say anything revolutionary yet manages to miss the point anyway.

To explain why it's possible for a cash-flush tech start-up to have homeless workers, it helps to know that the man I hired through Homejoy wasn't a Homejoy employee at all. That's because Homejoy doesn't employ any cleaners — like many of its peer start-ups, it uses an army of contract workers to do its customers' bidding.

So let me be a bit fair here -- I worked for a job shop for a period of time.  It was a convenient means for me to hawk programming services (which I'm fairly decent at) and have someone else handle all the bull**** other than doing the work and spending the money earned.

Of course for this intermediation I paid quite a price.  In fact, I paid several prices.  Let's list the more-obvious ones:

  • I got a lower hourly rate than I would have otherwise.  Nobody works for free, you know.  The job shop paid me my ask, but what they billed me at wasn't something I was entitled to know.  I did find out, but I had no control over it.

  • I got to pay all the taxes and fees that an employee doesn't see, but is part of his pay package.  Both halves of FICA and Medicare, for openers.  That one is obvious.  What's not-so-obvious are the other ones -- like health insurance.  At the time I did this I didn't have a need for it nor was there Obamacare, so I simply ignored it.  Had I been a W2 I would have likely been offered it and wound up with it as part of my "salary" whether I used it or not (I didn't.)  So not all of this was actual expense.  There was also workman's comp and unemployment insurance tax, which an employer must pay but a 1099 individual contractor does not have to pay.  That's great right up until you get hurt on the job, then you're ****ed, and if you get laid off you're not eligible for unemployment.  I suppose a server rack could have fallen on me, but it didn't.

  • I don't have any of the alleged "protections" of an employee.  The job requires deliverables, not time put in.  Big difference.  You wind up doing 80 hours in a week?  Tough ****.  Oh, and since you're 1099 there's no overtime either; your billing rate is your billing rate.  Period.  I used to snicker when some of my staff at MCSNet would bitch about being assigned hours way beyond 40, usually during trade shows and such when it was all hands on deck!  Heh, it's a lot of extra work and it may be an imposition on your personal life but you're getting paid time and a half for it, and it's not because I want to, it's because it's the law that I must!  You work 60 hours, which is a lot, you earn double your usual wage -- and you want to bitch?  I can only say "shut up and pay me *******!" in response to those complaints, because I would have given my left ball for time and a half when I was doing 1099 work -- or when I was exempt.  Ditto on any sort of seniority or protection against a canceled project (yeah, that happens a lot too) or simply because the guy that is running the project decides one day that he wants someone with***** to look at.  You're gone, period, and good luck suing.  At will states have few protections against being fired just 'cause I wanna, but as a 1099 you have zero protection against that.  About the only thing you can do is contract blocks of billable hours, which (for a sizable discount) you can sometimes get a client to take. If they ****can you before the block is consumed they have to pay you for the rest, but trust me, the discount demanded for that isn't usually worth it.

I never did this when I ran MCSNet, although it was tempting more than once.  The reason is that it was my money on the line without having venture funds or an IPO under my belt -- and there is a significant risk of the IRS coming back at you and trying to reclassify everyone.  If that happens you're ****ed and done, and what usually perks up their eyebrows is when one of your 1099s fails to file or pay taxes and they go trying to figure out where to the get the money from.

The worst part of a reclassification is that it is retroactive for a good period of time and even if the 1099 guy filed and paid his FICA, Medicare and income tax if they win you'll get assessed it anyway, and you can't claw it back from him!  So the government basically gets to double-dip you, and what they're dipping is long, hard, and dry.  You figure out where they dip it.  Then they'll take Round #2 out of your ass for unemployment and workman's comp, retroactively as well.  This can very easily put you out of business immediately, considering that you think you transferred that cost to the 1099 guy when in fact you basically overpaid him in the amount of those assessments -- pay that likely makes your firm retroactively uneconomic and destroys it.

No thanks.

When the money isn't yours, however, then it's easy.  Go ahead and do it. If it blows up in your face who cares?  Yeah, your little startup blows sky high but you can start another one, and the payday you were really looking for was at the IPO anyway.  So, you blew it -- but you're not bankrupted by it, because it wasn't your capital -- at least not most of it.

That's the problem, in a nutshell, that exists with things like "fines" against Wall Street banks and similar -- it's not the management's money that gets taken and nobody goes to jail -- it's "someone else's" money.

Bonne chance "angels"; you have this ramjob coming and it's your own damned fault.

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