Hacker News Reader

Comment by philiphodgen | Hacker News Reader

1. I run a business. Therefore I make jobs. Or don't.

2. If I fire an employee, a portion of the cost of that person's unemployment claims is charged back to me. The employer. It isn't government largesse that funds unemployment claims. It's me.

3. Will this program be yet another potential cost to me? Hard to tell from the PR and press-gab. We'll have to see the law and how it is implemented. Devil in the details, etc.

4. My payroll is suddenly $100K/year lighter than it was. Am I going to replace that guy with another full-timer? Fuck, no. Hello, independent contractors.

5. By the way. I pay 100% of the medical costs for all my employees.

View on HN

Hi Phil, I've been following your blog about US taxes, but didn't know you post at HN. Small world.

I also have my doubts about this program. Employers are humans, and humans never associate "quality" with "discount".

Right now, the people who are unemployed face the real risk of exiting the economy altogether, along with their knowhow, and this will cost the economy as a whole in the long term.

Meanwhile, businesses are not going to hire if the consumers aren't there.

The problem with trying to restart the economy with government stimulus is that people are maxed out on their debt. The debt is acting like a sponge, sucking out any additional money that come from the government. The NPR Planet Money talked about how Japan's economy entered its longest growth period post the crash when the PM forced the banks to clean up its bad loans and recapitalize. Subsequently, government stimulus started to take effect. The government has been reluctant to do this, and it will cost the US in terms of its economic dominance as competing countries race ahead on its capital.

I believe any government money is better spent not trying to put people back in employment through incentives, but instead keep these people "engaged" in the economy. Be it through reimbursement of expenses in attending job interviews - fuel is expensive when you are out of work; Making the pool of "consultants" and "contractors" that you allude to more visible.

The mainstay of jobs post crash is going to be a small pool of permanently employed plus casualized, short term contract work. The sooner the government recognizes this, the better.

This law will be written in a week by Whitehouse interns without any experience running a business or employing individuals. And it will be constructed to be applicable across vast swaths of the US economy, or else it would not be "stimulative". And this administration's previous attempts to meddle in business resulted in the largest VC loss in history, namely Solyndra.

What could possibly go wrong?

"2. If I fire an employee, a portion of the cost of that person's unemployment claims is charged back to me."

Can you elaborate on this? It's something I've long heard and failed to grok. How can an employer, as normal business practice, have to still pay a fired employee any amount?

You have to pay for unemployment insurance. The more people who make claims against you, the higher your insurance gets. You probably aren't going to get charged 100% of the employee's unemployment, but you get charged a goodly chunk.

That's exactly right. For unemployment insurance you pay a percentage of your payroll to the government. The percentage depends upon the number of claims your ex-employees have put on the pool of money in the unemployment insurance scheme. More claims means a higher percentage.

That makes the cost of a replacement employee higher because you're paying for the cost of prior employees' unemployment claims when you are making unemployment contributions for the new employee.

You act like this was an unknown cost of having employees.

Seriously? I'm surprised anyone is still hiring at all in the US! Sheesh, what a policy. "Hello independent contractors" -- I hear you.

The IRS is very picky about what constitutes an independent contractor. This has long been abused by companies trying to skirt employment law and avoid payroll taxes. They have a litmus test of sorts to determine whether someone is an employee or an independent contractor (tl;dr: if you treat them like an employee, they're an employee). And of course, there are significant penalties for getting this classification wrong.

For more details, go to the source: http://www.irs.gov/businesses/small/article/0,,id=99921,00.h...

My lawyer (a tax attorney) said this is rarely prosecuted on independent contractors who are themselves incorporated (along with things like actually have a contract etc). From my own experience this is true as well. Think about it, the IRS would have to give back all of the matching that the contractor (agent) did when they collect from the employer (principal).

Edit: talk to your own attorney though.

What a policy? What would you do with people who get fired? It's pretty rare to lose your job at one place and pick up a new one the same day. How are they going to finance their life until they find a new job?

In other countries where employee protections are better there is usually an actual written contract in place that says employment must continue up to two months after notice is given from either party.

And yes, that does make contractors more practical but that's good because it pushes contract rates up.

It works like this:

Every year you have to pay a percentage of your total payroll as a tax, called Unemployment Insurance. If someone is fired or laid off, its from this pool their unemployment checks are drawn.

The percentage each company pay is based off a table. On this table there's 2 rates listed for each business size (its tiered, bigger businesses pay more). Rates last year for my company were around 1.7% and 3.2%, IIRC.

So, if you fired >=1 person in that year, you have to pay the higher rate. If you fired nobody, you pay the lower rate.

Note: if you fired 1 or 10 people it doesn't matter - you're paying the higher rate.

> It's something I've long heard and failed to grok.

Where do you think that the money to pay unemployment comes from?

Sorry, it was the cognitive dissonance of being required to pay someone who was terminated for the purpose of not having to pay them.

I'd like to hire people for some long term work, but cumulative BS like this makes me not bother.

You just pass the cost on to your employee. Hire them for X/(1 + expected tax rate) instead of X.

Federal Unemployment Tax (FUTA) page 29:

http://www.irs.gov/pub/irs-pdf/p15.pdf

If you are in the lower rate, i.e 0.6% of the first $7000 in wages, the FUTA tax is... a whopping $42

Any other devs (front end, back end and or mobile) here now on unemployment or are on and off Obama's payroll?

If so why?

1. Lack of experience 2. You did a start-up for long time & having trouble finding regular work (that's me). 3. Something else?

I hate being unemployed and feel working on my start-up for over four years alone in my garage has handicapped me professionally. Since the investment money ran out for my start-up, I have had two front-end dev jobs. Both positions were at local digital web agencies and both lasted under a year. Since getting laid off from the last job Ive had a hell of time getting my next job. I have 22 months of professional experience and 3 years of coding for my start-up.

I wonder if there are similar stories and experiences fellow members here faced? Also, what did you do to land your next coding job or what are you doing now?

If you fire an employee, why do you pay unemployment? I would understand if you laid them off, but firing?

Also, if you are paying for their unemployment, why is unemployment being deducted from their paycheck too?

In most states it's quite difficult to prove that you fired for cause -- performance is quite subjective. Typically the employee needs to do something dramatic & harmful for you to deny unemployment.

It's pretty easy to document poor performance. Any McJob employer can swing it and their margins are almost certainly lower than anything involving knowledge workers.

I understand that no-one likes to do the business-overhead side of things in small businesses. But either the costs of paying (undue) unemployment aren't that big of a problem, or the employer has no-one to blame but themselves for not documenting cause.

There's a big difference between McJob and software development. If someone doesn't handle N customers, fails to show up on time, or has several documented customer relationship issues: it is clear cut. You have to give the employee several opportunities, etc.

If you have an equivalent recipe for a marginally performing software developer that doesn't cost more to implement than just paying the unemployment : I'd love to hear it.

Also consider team morale. Waiting for several phases of failure to "document" your case is a great way to lose your top performers and lose a customer. I think it's less expensive just to fire -- ideally /w severance in exchange for unemployment, if your state permits it.

> "There's a big difference between McJob and software development."

Yes and no. The basics are the same: you need to document responsibilities, goals and performance. Document performance that doesn't meet the goals. Document some sort of plan by which you try to help the underperforming employee meet their goals and then document their continuing performance.

Is it potentially cheaper to just pay a modest severance or unemployment insurance? Quite possibly.

But documenting performance is not voodoo and the fact that just paying a modest severance or unemployment is cheaper than documenting performance rather undercuts the assertion that unemployment costs are onerous.

Not to mention fairer on the employee.

Not everyone is a self-starter or "rockstar". Failing to document clear responsibilities and goals and then measure performance against those goals shortchanges you and them.

This may be an unpopular sentiment around HN circles, but just expecting every employee to "get it" and not having a consistent process to deal with underperformance (which can have many different and often addressable causes) is a crappy way to treat employees in my view.

I don't think people are being careful about the terminology here. Firing could mean terminating employment because someone is no longer needed (what you are calling 'laid off') but it can also mean terminating employment because they broke some rules or laws (i.e. didn't show up for work, harrased co-workers, etc).

If you are fired "with cause" (i.e. you did something wrong) you aren't eligible for unemployment. If you quit you are not eligible for unemployment. Only if you are fired "without cause" are you eligible for unemployment payments.

If you quit you are not eligible for unemployment.

Let's be careful about this. It depends on the reason you quit. If you were being harassed and the company did nothing about it, or you had unsafe working conditions, etc, you can still collect.

It's better to say that if you quit for reasons that have nothing to do with the employer, you cannot collect unemployment.

I had a co-worker who quit because the raise he was promised (in writing) at hiring time never materialized. The company had to pay unemployment while he looked for work.

Good point. Thanks for the meta-clarification.

The employee files for unemployment insurance regardless, lying and claiming they were laid off. You file a dispute, claiming they were terminated for cause. The unemployment office makes it quite clear that you will lose your dispute and should drop it. You refuse, because you have a good clear case where clearly this guy was fired for cause. You present your good clear case, and you lose anyway, and the person fired for cause still gets unemployment, and your unemployment insurance rates go up.

That's just how it works. It's not how it's written, and it's not how it's supposed to work, but it's how it works.

I find it odd when people create such strange generalizations in their head. Whether this comment is from your own anecdotal experience or not, it is just plain wrong as a general matter. Defeating an unemployment appeal is certainly possible and not that difficult if you've done your due diligence during the process.

You are wrong. I won every case (~5) filed against me over ~3 years working at Tech Support. If you have proper documentation as to why you fired someone you do not have to pay unemployment insurance.

I'm flat out wrong? I see your anecodote and raise you a statistic: "In 2009, employers filed 405,153 appeals to deny benefits to former workers and 36% won, a figure that hasn't changed too much in recent years, according to the U.S. Department of Labor." Wall Street Journal "Feeling Blue about Pink Slip Taxes" http://online.wsj.com/article/SB1000142405270230396060457515...

36% won. So 2/3rds of the time (read: most of the time), employee wins.

By all means, still appeal. But odds are not fantastic. Plan on having to pay out some unemployment that you shouldn't have to. A written employee handbook and records showing when policies were violated will save you some money sometimes, but don't count on it. You can fire employees, for cause, and still see your insurance go up, even with an appeal.

Your (ridiculous) assessment doesn't mean that 64% of workers fired for cause end up getting unemployment. Far from it.

Like you said, these are appeals - not initial claims. That means they're cases in which the court has already reviewed the fairly clear-cut criteria for awarding benefits, determined that they are justified, and has proceed accordingly. Indeed, a court that reverses itself 36% of the time seems remarkably open to appeal by employers.

As far as the 64% of appeals that are rejected are concerned, it IS flat out wrong to say that these are all justified dismissals that they employer had to pay for anyway. After all, this figure also includes cases where employees quit for cause (e.g. flagrantly abusive work environments, failure to pay wages in full and on time, efforts to avoid paying unemployment claims by radically demoting or cutting hours instead of laying off, etc.), as well as cases in which the termination was wrongful, and likely to do lasting damage to the employee (e.g. by way of demonstrably slanderous performance reviews, for refusing to engage in abusive or deceptive practices on behalf of the employer, etc.)

You're also disregarding the way incentives function here. Since the employer is on the hook for damages - and the cost of an appeal is trivial - they have a strong incentive to fight, even in cases where they are monstrously in the wrong. Indeed, HR people will tell you that they automatically appealing everything, no matter what, as a matter of standard operating procedure. The idea is that by developing a reputation for reflexive fighting, they can use the notoriously slow pace of justice to delay payments for the better part of a year. Accordingly, people with limited savings who simply want to get the hell out of a truly unbearable situation can't count on unemployment insurance to finance their job search. Instead, they have to line up their next job before they quit their current one, rendering the question of unemployment moot.

"My payroll is suddenly $100K/year lighter than it was. Am I going to replace that guy with another full-timer? Fuck, no. Hello, independent contractors."

From this country? That matters much more than whether they'd be contract or full-time.

Absolutely from the U. S. and A. All of them.

Reply on news.ycombinator.com