The Fedex Case

[Bronzeage]

They get paid by the person driving the truck. It is Fedex who dodges them.

They don't dodge them. They have to pay enough to make it worth it to the drivers net of taxes. If they paid the taxes they would pay the drivers less. Since the total taxes paid in the transaction are the same either way its hard to imagine tax avoidance is the motive.

In my business experience, when a worker is labeled a contractor and treated like an employee, it's always a tax dodge. When a contractor is really a contractor, the tax burden is more equitable.

 

[coloradoatheist]

They don't dodge them. They have to pay enough to make it worth it to the drivers net of taxes. If they paid the taxes they would pay the drivers less. Since the total taxes paid in the transaction are the same either way its hard to imagine tax avoidance is the motive.

In my business experience, when a worker is labeled a contractor and treated like an employee, it's always a tax dodge. When a contractor is really a contractor, the tax burden is more equitable.

The benefits to a company using the contractors are not directly paying the FICA taxes, workman's comp, unemployment insurance, and it's easier to let go of independent contractors. So the question will be in the end is what FedEx will do both short and long term.

 

[Bronzeage]

In my business experience, when a worker is labeled a contractor and treated like an employee, it's always a tax dodge. When a contractor is really a contractor, the tax burden is more equitable.

The benefits to a company using the contractors are not directly paying the FICA taxes, workman's comp, unemployment insurance, and it's easier to let go of independent contractors. So the question will be in the end is what FedEx will do both short and long term.

A company benefits from contract labor when the work needed does not justify hiring an employee. Janitorial work is a common example. The work may be less than 2 hours per day. A contractor can come in anytime during the night and complete the job. The company cuts one check a month and avoids all the hassle of managing a 10 hour a week employee, whose actual work has nothing to do with the goods or service the company provides.

Whether to hire a true employee or use a contractor is a business decision, based on many factors. Whatever management decides to do, the decision must be justified based on IRS regulations, not on what costs the least.

 

[coloradoatheist]

The benefits to a company using the contractors are not directly paying the FICA taxes, workman's comp, unemployment insurance, and it's easier to let go of independent contractors. So the question will be in the end is what FedEx will do both short and long term.

A company benefits from contract labor when the work needed does not justify hiring an employee. Janitorial work is a common example. The work may be less than 2 hours per day. A contractor can come in anytime during the night and complete the job. The company cuts one check a month and avoids all the hassle of managing a 10 hour a week employee, whose actual work has nothing to do with the goods or service the company provides.

Whether to hire a true employee or use a contractor is a business decision, based on many factors. Whatever management decides to do, the decision must be justified based on IRS regulations, not on what costs the least.

You are right, they have to follow the law. I don't think it makes the law right, but that's a different discussion.

 

[Bronzeage]

A company benefits from contract labor when the work needed does not justify hiring an employee. Janitorial work is a common example. The work may be less than 2 hours per day. A contractor can come in anytime during the night and complete the job. The company cuts one check a month and avoids all the hassle of managing a 10 hour a week employee, whose actual work has nothing to do with the goods or service the company provides.

Whether to hire a true employee or use a contractor is a business decision, based on many factors. Whatever management decides to do, the decision must be justified based on IRS regulations, not on what costs the least.

You are right, they have to follow the law. I don't think it makes the law right, but that's a different discussion.

There are some people and some companies which will always try to skirt and evade the law when it is to their advantage. They think this is shrewd business practice, but it fosters a company culture which believes rules are made for other people. It's never a surprise to find their employees engaged in anything from petty theft, to payroll fraud, to outright embezzlement. It's very difficult to keep employees honest when dishonest acts are part of their daily work.

The labor and tax laws which dictate who is a contractor and who is an employee are the same laws which say your employer must pay you for the work you do and can't require you to risk life or limb to do it.