W2, the IRS Test, and Who Do I Work For?
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@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
And that's why the the everyman hates the idea of consulting - they expect to be the first ones put out to pasture.
And often it is. I wouldn't guess that what we had was the norm in all industries, but it is certainly common. Basically the "fodder" are stuck as FTEs and the elite that need special benefits, pay, and protection have to be kept away from the masses in some manner. In giant companies, seeing employees as expendable cogs is common and mass, blind layoffs are common. If you have people who are actually necessary (or highly critical) that you'd struggle to replace and losing them would disrupt the business or just be insanely costly to replace, you have to do something.
Basically, in a large company, the FTE pool is treated a lot like a union. And sometimes actually is a union. Unions mean that no one with any real value will consider working there. Unless you have a workaround. Consulting is the workaround to actual unions or just union-like employment pools. Giving people the power to negotiate based on their value, rather than just being a generic butt in a seat.
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So - if consultants aren't the first gone in layoffs - why are they paid so much more?
I mean you explained a bits:
FTE might equal better healtcare plan
FTE has paid vacation
FTE has paid holidays
FTE participates in company functions
401K
etcSo as a consultant you'd want the company to make up for these things, and that's generally done with a higher wage... but you said 50%-300% more - holy crap - WHY?
Does part of the answer come from the fact that the super high paid employees they don't want on the payroll books because that affects top compensation vs bottom for federal reporting? So it's better to keep those high earners off payroll and on operational costs? (seems like a loophole)
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@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
So - if consultants aren't the first gone in layoffs - why are they paid so much more?
I mean you explained a bits:
FTE might equal better healtcare plan
FTE has paid vacation
FTE has paid holidays
FTE participates in company functions
401K
etcSo as a consultant you'd want the company to make up for these things, and that's generally done with a higher wage... but you said 50%-300% more - holy crap - WHY?
Does part of the answer come from the fact that the super high paid employees they don't want on the payroll books because that affects top compensation vs bottom for federal reporting? So it's better to keep those high earners off payroll and on operational costs? (seems like a loophole)
You budget consultants based off projects which means you can pay them substantially more.
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@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
So - if consultants aren't the first gone in layoffs - why are they paid so much more?
Because they are the senior people. The ones that you couldn't hire at FTE rates, because they aren't fodder.
In small shops, this problem doesn't happen. Every new hire is a unique situation. But in a normal F500, the FTE pool is effectively a loose union with pay caps, strict vacation and benefit rules, etc.
Hiring a consultant means you can pay beyond the FTE cap, you can negotiate any terms that make them happy... such as...
- Higher Pay
- Foreign Pay
- 1099 Options (sometimes)
- Corp to Corp
- Any vacation they want
- Work from home
- Allowed to moonlight / side gig
- Whatever health benefits they want (including none)
- Guaranteed holidays or times
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@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
Does part of the answer come from the fact that the super high paid employees they don't want on the payroll books because that affects top compensation vs bottom for federal reporting? So it's better to keep those high earners off payroll and on operational costs? (seems like a loophole)
Correct. This is the basic reason. They don't want their salary reported to FTEs, they don't want people able to compare, they don't want stock holders seeing the numbers, etc. But NOT for Federal Reporting, Fed reporting can't change because they are all employees just the same. It's SHAREHOLDER reporting.
So it IS a loophole, but not a loophole to the feds or IRS, they know exactly what is going on. It's a loophole to idiot investors who are attempting to sabotage their own investments by trying to manage something without knowing what they are doing.
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The bottom line isn't that consultants are better, worse, or anything in particular. They exist because companies need exceptions from the normal process. Maybe this is because a consultant is temporary, maybe because they are more permanent, maybe because they need to be paid more, maybe because they need to be paid less, maybe they just need a more flexible work arrangement. Whatever the case, the one universal factor is that consultant positions in any company are there to not be part of the general employment pool with the general employment rules and reporting.
Every company uses these differently. But nearly every large business needs them. And many small ones.
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Now, when it is used badly is when companies treat FTEs well, and consultants poorly, and advertise how great of a place they are to work at and use it to make employment there look better than it is. This is sadly common and part of the giant scam that American employment often is. No transparency and nearly everything is a lie.
In the real world, though, places that I have worked haven't done that and if anything it is the opposite. They make themselves look like much worse places because their FTE pool reports lower pay and less stability than the average actually is.
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@scottalanmiller said in W2, the IRS Test, and Who Do I Work For?:
Now, when it is used badly is when companies treat FTEs well, and consultants poorly, and advertise how great of a place they are to work at and use it to make employment there look better than it is. This is sadly common and part of the giant scam that American employment often is. No transparency and nearly everything is a lie.
Apparently that is what Google does - at least according to the few things I've heard. They hire tons of consultants so they can treat them badly - low pay, low benefits, etc.
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This is one of the many reasons why things like Glassdoor are misleading. On average, Glassdoor and anyplace like that only reports on the numbers of the "fodder pool", not the overall range. So if you look at a shop it might say that $80K is the top pay that you can get there, but there are actual people there earning much more, maybe $140K. But they aren't FTEs and they aren't going to divulge their good deals that violate the FTE rules.
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@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
Apparently that is what Google does - at least according to the few things I've heard. They hire tons of consultants so they can treat them badly - low pay, low benefits, etc.
Which makes no sense because Google already treats their FTEs badly and everyone is under NDA so none of it matters. It's famously the worst place to work in the valley and a huge black mark on your employment record as it is - no one wants to hire people who got stuck at Google. So why they'd need a pool of people to treat even worse when they could just do that to their FTEs makes little sense.
Everything coming from Google (or about it) has to be taken with a grain of salt. What we know is that it's a terrible employer and a terrible place to work and a terrible thing for your resume. What we don't know is how FTE vs. consultant works, exact details, or anything particular about what it is like inside. Likely they do have consultants and treat them badly, but this just implies that they are actually needing to hire people that are so bad, that they aren't good enough to get FTE status at a place no one should even be willing to interview at in the first place.
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@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
So - is all this shit I'm hearing nothing but lies? or are the rules different in CA? or are they just a bad company (OK we already know they are a bad company, so don't dive to deep into that).
CA is different than the rest of US like usual. They are trying to take away contractor roles, and honestly everyone is pissed about it. Contractors like being contractors and companies like paying that way. Leave it to CA to go fuck with people for no reason.
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@IRJ said in W2, the IRS Test, and Who Do I Work For?:
@Dashrender said in W2, the IRS Test, and Who Do I Work For?:
So - is all this shit I'm hearing nothing but lies? or are the rules different in CA? or are they just a bad company (OK we already know they are a bad company, so don't dive to deep into that).
CA is different than the rest of US like usual. They are trying to take away contractor roles, and honestly everyone is pissed about it. Contractors like being contractors and companies like paying that way. Leave it to CA to go fuck with people for no reason.
A major reason that top people often try to avoid CA. CA is one of the worst states for employees. I like a lot of things about CA, but I would never consider living there or working there. I've done a few weeks there at a time, and I'll put up with that, but I'll never be willing to be there long enough to be considered a resident. It's full of nice people and beautiful scenery, but the cost of living and the insane bullshit limitations and shitty employment make it just terrible for real people to live there. I hate what it does to your life. And I'm from NY, so I'm used to heavy regulation, but CA takes it from "a lot" to "life destroying."
I know for a major software firm that we talk about on here, someone had to be stations in Silicon Valley (at insane salary of course) and it was a matter of drawing straws to see who got the shaft and had to move to CA.
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One of the reason that we choose Nicaragua as our focus country, is that we get the polar opposite of California. Not to diss on CA, but their approach is "everyone should be the same, and everything should suck for everyone." It's the worst of all options.
In Nica we are free to be as far from that as possible - free to have any mix of pay and benefits, everyone can be unique and different and we are allowed to be the best employer possible. The government doesn't step in to screw with our employees and make their lives less desirable just because someone in government is jealous of their good fortune or whatever.
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@scottalanmiller said in W2, the IRS Test, and Who Do I Work For?:
when a union gets involved and peoples' values are no longer evaluated
uh oh!
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@scottalanmiller said in W2, the IRS Test, and Who Do I Work For?:
@IRJ said in W2, the IRS Test, and Who Do I Work For?:
I got "page no longer exists."
fixed
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@JasGot said in W2, the IRS Test, and Who Do I Work For?:
@scottalanmiller said in W2, the IRS Test, and Who Do I Work For?:
when a union gets involved and peoples' values are no longer evaluated
uh oh!
It's not a secret, the point of unions was to represent the value of "breathing" rather than specific values. It is what it is, unions benefit those without skills at the expense of those with them. They only make sense in a "fodder" setting where the value of the worker isn't determined by their work individually, but the availability of the entire pool. Unions are just a nice sounding term for "collective bargaining", which of course is itself a polite way of making it crystal clear that the individuals don't have anything special to offer to can't bargain themselves.
