In recent weeks many businesses/corporations have been taken to task for misclassifying employees in order to find loopholes in taxation. On one hand I commend these CFO’s for creativity and I commend the various peoples who work for these companies in order to put food on the table and a roof over their head. What I worry about is the peril with which so many people work under a status that is not only deceptive for taxation, but even more malicious for unemployment.
Corporations pay into the state and federal pool of unemployment taxes. This fund was made to help people when times are rough and tough (2007-?) and assist them until such time they can find reasonable employment where they can afford food and rent and quite possibly squeeze in some health insurance. Independent contractors, while paying tons in taxes with few write offs, have to also save up for their own rainy day fund as unemployment is not available for them in between ‘gigs’, which, as a sometimes independent contractor myself, has been more often than not lately.
Most people do not understand that not only do corporations get a tax boost by misclassifying employees, they get a boost in not having to pay out on unemployment. The problem is that while taxes may affect the corporate bottom line and its investors, independent contractors who lose out end up effecting everyone when they can not pay bills. There is no back up plan/plan B/safety net and this is bad for everyone. Unfortunately, most people did not realize the problem until it was too late – until they were let go from their independent contractor status.
Not only does independent contractor status do everything mentioned above, imagine what it does to the unemployment statistics……so, while the corporate bigs were having their day on the backs of other, we were all hoping the economy would reach bottom. I personally think we have not reached bottom merely because there are so many unknowns falling around us and no one knows how to get out of the way or build a net.