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At 9:32 AM -0700 4/22/03, Andrew Plato wrote:
>The permatemping case was a prime example of a small group of labor activists
>destroying what was a lucrative and effective employment alternative.
>Permatemping often paid quite a bit more (on average) than a full-time
>salaried
>job. And many agencies offered basic benefit packages. However, some greedy
>people wanted even more. They didn't think it was fair that salaried
>people got
>stock options or a annual picnic (but had lower pay).
This is a bit oversimplified.
If I remember the details of the Microsoft case correctly, many of the
people involved started out as 1099 consultants. They made money, all were
happy.
Then the IRS started cracking down on consultants who worked long-term for
the same client. (1099 consultants don't do withholding - just pay
quarterly - and this may have been part of the reason. The IRS, by
reputation, really doesn't like to see self-employed people.) In any case,
the IRS was raiding large clients, declaring longterm consultants to be
"really" employees, and demanding back withholding taxes from the client,
along with penalties.
Clients became understandably skittish, and started demanding that their
consultants convert to W-2 status. The easiest way to become a W-2 employee
in this situation is to start working for a contracting firm: you are a W-2
employee of the contracting agency, which leases you to the original client
company and withholds income taxes from your pay. The contracting agency
also takes a cut.
Result: you're doing the same thing as before, for the same client as
before, under the same working conditions as before, but you're making less
money than before and you're no longer an independent business person.
People who have been put in this situation may well figure that if they're
not going to make any more money or have any more freedom than an employee,
they might as well *be* employees, and at least get the job benefits that
help make up for the salary cut.
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