Upside to hiring independent contractors
Published 11:13 am Thursday, June 24, 2010
It could turn out to be a good thing. According to CNNMoney.com, the traditional full-time job with benefits is being displaced by temporary or contract positions.
With unemployment high, you see, employers have their pick of skilled workers. Why hire full-timers and fund costly benefits when they can pay a flat hourly or monthly rate instead?
Few full-time employees are aware of it, but their benefits package — health, life, dental and disability insurance, “free” college tuition, workers’ compensation insurance, 401(k) matching, etc. — is income.
An employee who earns $70,000 in annual salary is probably costing his employer closer to $100,000 total.
Employers also must pay half of the 15.3 percent FICA tax (Social Security and Medicare combined). Though half of that 15.3 percent is paid by the employer and half by the employee, many employees have little idea that all of the FICA tax is, in reality, coming out of their pockets.
Employers also must comply with a multitude of government mandates — such as providing health insurance under President Obama’s new plan — that make them wary of hiring full-timers.
Firing an unproductive employee, for instance, could open them up to a host of costly lawsuits.
Why bother with such burdens and risks when they can simply hire a contractor?
They can part with the contractor if work slows — part with him if his work is poor — and not have to worry about getting sued.
To be sure, government meddling has caused employers to prefer contractors over employees — but wouldn’t the country be better off if every worker were a self-employed contractor, if only for a little while?
I’ve been self-employed for many years. For the past 11 years, in addition to this column, I’ve contracted my communications services to a large technology firm in Virginia.
I manage my own invoicing and taxes. I know to the penny — once my CPA explains it to me — how high my income taxes are.
I manage my own health care. That’s why I shopped around for the best policy — a high-deductible policy. Since I pay the first $500 out of my own pocket, I also shop around when I need medicine or treatment — you’d be shocked at how much costs vary.
If all Americans had health plans such as mine — if all Americans shopped around and managed their employer’s health care dollars as though they were their own dollars — our health costs would surely be less than they are.
If Americans knew the real costs of health care, taxes and the burdens of hiring full-timers, they’d be more appreciative and sensible about the way they manage their affairs — certainly more sensible about which politicians they put into office.
CNNMoney.com says the percentage of contract workers is soaring. In 2005, roughly 31 percent of U.S. workers made their income as self-employed contractors. Experts say that number could increase to well beyond 40 percent in the next 10 years.
Which would do our country good.
Imagine a country rife with opportunity – one in which the majority of workers ask for nothing but the opportunity to compete and produce.
Imagine a country in which the harder you work, the more you earn.
Imagine a country in which the majority of citizens fully comprehend how government policy affects the economy — fully comprehend how bad government will cost them.
If only we could create a country like that — again.
In such a country, our companies might become so prosperous, again, that they’ll finally start hiring full-timers!
Tom Purcell is a humor columnist for the Pittsburgh Tribune-Review. Visit Tom on the web at www.TomPurcell.com or e-mail him at Purcell@caglecartoons.com.
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