It's comparatively much easier to just pay a contractor a higher hourly rate and let them pick their own health care, retirement, time off policy, etc.
When I was an employer as a small business, my heart would skip a beat every time I received a letter from the many local, state or federal agencies that would chime in on some requirement as an employer. For someone that wants to do it right, it's very hard to know exactly what "right" is without paying an arm and leg for professional services.
Each letter was a reminder about how easy it would be to outsource each position to another company or country.
Aren't they an asset too? A contractor doesn't really care about the long term health of your company, if your company folds, he'll go down the street and work for a competitor. He knows that you'll dump him in an instant if you want to so he has no incentive to go the extra-mile for your company.
I can see outsourcing peripheral tasks, office cleaning, etc, but for any important part of the business, outsourcing seems like a gamble. (somewhat related, I helped in-source a project that had spent 2 years outsourced off-shore which had met few of its deliverables. In 6 months the new local team got it back on track with literally 1/5th the headcount the outsourced agency used which made it cheaper to bring it back in house)
Granted if you're hiring minimum wage workers, maybe it's hard to find quality employees, but for any non-trivial position, outsourcing to contract workers seems like a short-sighted move.
Hmm. Wondering what country you are in. I'm in the USA and for "reasons.." I ended up performing all the admin tasks relating to employees (payroll, witholding, IRA, unemployment, insurance) over the past 6 months. I had to learn everything from scratch. Yes it was quite a bit of work, but I don't have the same experience you report at all. I haven't received any letters other than helpful reminders of things I need to file. Yes we have an accounting firm who have over the years educated us on what we need to do, forms to file, and so on. But nothing much changes year-to-year so once you're running the cognitive load is not too bad. None of it scares me at all. Certainly nothing in comparison to running the actual business, where you have customers who don't pay you; risk of being sued; requirement to use Node.JS -- you know -- real scary stuff ;)
But the trend to just relieve employers of the "burden" without giving more power to the employee is wrong too. For example each state or the whole country should be one risk pool where everyone can buy in. Same for 401k, disability and others. A lot of tax deductions should be moved from employer to employee.
We have to be really careful not to end up with a market where employers have all the power and the rest are just day laborers without any rights.
That doesn't have to be the employer, but if I had to choose between putting that burden on the employer and putting it on the employee, I would put it on the employer in a heartbeat.
I think this is a better argument for why it makes sense to nationalize healthcare and relieve employers of that burden too.
I can imagine that schemes exist, or will crop up, for this benefit to be passed to the contractor, as a part of compensation package which is also less expense to the "employer". E.g. doing contracting work via a shell company that only exists to hire contractors who already got a bit of contract work, and provide them the benefits of scale for a cut of them.
What it does, is it creates more busywork work for society, as a whole. Instead of a few HR persons/systems/payroll experts, in a no-employee world, everyone now needs to become at least somewhat competent at dealing with all this rubbish.
There's a reason we don't churn butter by hand anymore - dedicated creameries are much better, faster, and cheaper at it then I'll ever be.
[1] I'm not saying that you're a bad person, or that having your employees do their own paperwork is like throwing trash on the street - I am only making this analogy because of the amount of busywork that doing your own taxes/payroll/compliance entails. Busywork that most of them are not experts in.
No, it isn't. It's way harder to deal with each employee than it is for the person to deal with their stuff as a contractor.
The estimated taxes are silly though.
Is this an actual option though? I've heard this notion a few times on HN that you can simply "1099" people and all is well. Admittedly not my core competency but I have been told numerous times by experts that you can't do that because the IRS and state labor dept will make their own determination as to whether your staff are employees. They may disagree with your thinking.
Now if you run a service based business (say app development) but outsource/1099 something like design but you are building an app - does graphic design fall under the B test ("that the worker performs work that is outside the usual course of the hiring entity’s business")? Is design outside of your usual course of business? Or does it count because your app needs design?
It's really a grey area but you can see how that B rule is really open to interpretation.
We've had labor law litigators tell us to basically stop doing 1099 at all. I started doing part time hourly instead for new hires. And hiring people that live outside California including other countries.
I don't think this will work out well for most people - they'll get part time work or hourly with limited benefits and many will be pushed to work for a staffing firm.
[1] https://www.wagehourblog.com/2018/04/articles/california-wag...
If regular employees start becoming contractors on a large scale then I'd like (and expect) to see some kind of unions or employment agencies springing up to handle the paperwork for the (former) employees and use collective bargaining to get better wages, group insurance, etc.
one thing that can help are PEOs like TriNet, who handle the multi-state and international paperwork, among other things. I've used Trinet for 20 years and numerous companies - frustrating at times, but way better than DIY.
No morale issues, no HR violations, no hiring, no diversity quotas, no standup or sync meetings, no one-on-ones, no wanting a promotion, works 24/7 with no sick days or vacation time, no rivalry within the team, no need for office space, catered lunch, benefits, work visas etc.
The upside is hard to overstate. As an employer, I will do everything in my power to switch human roles to software and will never look back.
This is called a "PEO".
It seems to work, but I'm curious if there are non-obvious downsides.
This is what the wealthy class & corporations want, cheaper labor. For the majority of contractors, they're not making nearly as much as FTE's, the contractor middle-man that got you the contracting job is taking a hefty cut and while they provide benefits, they are extraordinary in cost.
I'm not talking about independent contractors, I'm talking about large firms that hire people to contract at large corporations. It's become a big thing in Seattle, and if you're not a software engineer your chances of getting FTE to start --without at least 6 months of cheap contract labor-- are slim to none.
This is the inevitable result of healthy complex adaptive systems under free market capitalism.
These systems are as effective as they can be inhumane. It's our job to inject humanity into the system.
Second, you also don't know wether humanity and capitalism are at odds. I'de wager they aren't.
What is humanity? Is humanity the ability to feed your children, to have shelter, to benefit from medicines, to possess the capability of generosity, to hope to leave a higher standard of living to your descendants?
Those correspond to the creation of wealth, yes?
Fully aided and abetted by the tech industry, don’t forget. If we aspire to be real engineers we all need to apply some ethical thinking to writing code that enables outsourcing, offshoring, zero hours contracts, surveillance/privacy invasion yadda yadda. And for working for or with companies with those practices.
Then industrialization came, and those who were skilled were contractors. They would do work for someone and get paid for the work they did. Then they would hustle for more work.
Even in factories, you would show up at the door each day and hope they had enough work for you, and then get paid as you left.
It was only very recently that factory owners thought about offering steady pay in exchange for not having to hire a staff every morning.
_Private_ regular employment was certainly less common, just because private enterprises (as we understand them now) have been a relatively new invention.
A rather large portion of factory work was carried about by unskilled children who only needed to do some very specific thing and could be paid far less than skilled craftsman.
Employment has been around since agriculture. Peasants didn’t just sit around to be forced around to do a Duke or Kings labor work by force. Guilds existed around those times and anytime there is supply and demand there is leverage and power. These guild could contract their services in exchange for currency and recognition. These feudal lords had to negotiate and bargain for steady employment. Contracts were signed for steady pay and consistent labor.
In the end, social democracy was a compromise to maintain capitalism and avoid spreading revolution. And it worked.
The various outsourced positions mentioned in the article are still employees. They're just someone else's employees.
Companies just don't want to have vertically integrated employees including janitors and cafeteria workers. (E.g. Outsource to Aramark food services and their employees.) They also don't want white-collar employees who aren't necessarily "core" to their business. (E.g. Outsource to Accenture Consulting's employees.)
Whoopsie, it looks like we were just well paid peasants all along, instead of being part of the ruling class.
If a company has fewer and fewer essential "walls" separating what they do at the core vs a possible competitor the risk goes up. If one categorizes a peripheral competency as something that should have been in-house then the company becomes at risk of getting quickly subsumed by a competition hiring contractors that the prime company originally trained. And it might not show up for a while unless some assumption shifts - in the meantime the short term profits might look pretty good.
Another risk might be the collapse or disruption at a contracted company where you have less control.
Job security is a myth. In computing, it's the subject of a familiar meme: if you're one of the few people that understands some legacy technology that is important and hard to replace, then you have job security. It's a pejorative term: oh, that <expletive> tech, that's just for job security. Nobody who is "with it" wants to touch it.
I've never seen this play out in practice. The PHB doing the firing is 3 levels up and has no idea what the legacy technology is or that the employee is hard to replace. They'll be more than happy to fire them even when it screws themselves over. Everyone left has to learn to work with or around this technology.
Many a good business idea has come from someone who felt they had something to gain from the company succeeding. Contractors have incentive to put up and shut up, after all, argue with the boss and you are replaced.
It also gives core business competency to contractors, who can turn around and give that knowledge or experience to competitors, or even open up shop themselves.
If I'm contracting a company to do X, who they get to do it could change day by day. So I can hire an agency to outsource something to for like a three year contract. That company then churns employees every 6 months under some slightly sketchy practices.
Not as worrisome with certain skilled jobs, but for unskilled jobs, it's kind of a rough deal.
Drives wages down while the contractor can still charge decent fees. That and the contractee can terminate at any time basically.
The reason to have an employee is to make sure they are available when you need them. If there are always a surplus of people willing to be there, then outsourcing is a way to reduce your costs. But, if that changes, then the downside of "it's not your problem" becomes more apparent; it still is a problem that impacts you, it's just not _your_ problem, so you can't do much about it.
Only some parts of the U.S./world are in a labor shortage situation right now, of course. But until recently, just about nowhere was, and had not been in a long time, so I wonder if this is going to be a painful lesson for some companies.
Maybe the Gig Economy Isn’t Reshaping Work After All
https://mobile.nytimes.com/2018/06/07/business/economy/work-...
Wait, what? What kind of research scientist are we talking about here? The ones that work at Google Brain, DeepMind, etc., the ones formerly known as data scientists at Lyft, or the ones employed by universities that research niche scientific fields?
A long time ago, Akio Morita, the legendary head of Sony, commented that, even if 4 out of 5 employees were mediocre or poorly behaving, there was 1 employee out of the 5 who was so good, so full of useful ideas and innovation, that he/she made up for the low efficiency of the others. So, Morita didn't want to try and cherry pick the employees. He kept everyone.
But Google appears to be pursuing a different strategy.
So there will always be integrated employees somewhere.
For employment, it's government trying to classify Uber drivers as employees to give them protections. In relationships, it's governments attempting to set up alimony when co-habitating couples split up.
State adds regulations, businesses look for areas where regulations are fewer, and try to do more business at these areas. Then the cycle repeats.
Taxi vs Uber, hotels vs AirBnB, employment vs contracting,..
This is the nature of a healthy and functioning economic system. The question is, how do humans provide for themselves a semblance of predictability and sustainability to their work and income?
These problems have been solved before. We simply need to expand our thinking a little. Collective bargaining, wage & hour laws, and various systems of education have all worked. The problem evolves as the economy evolves. One thing we should also consider fixing are laws that drive companies to want to outsource certain types of work.
I'm sure we will figure this out. What concerns me instead, is the full 10%+ of the population who have such a low IQ that the economy has no use for them. I don't mean this as a normative statement. This is a point of fact. 10% of the adult population has an IQ so low that there are no jobs you can effectively train them for. As automation increases the need for the next 10% will diminish, and so on. This is a problem we have no proven solution for.
