Comment by potatolicious | Hacker News Reader

Comment by potatolicious | Hacker News Reader

Former Amazonian, the constant use of contractors, even in cases where the jobs are anything but contract, is one of the many things that eventually made me decide to look for something else.

I had the privilege there of working with some insanely dedicated people, smart, hard-working, and good, who were kept on near-permanent contractor status, and then unceremoniously dumped when the legal limits for contract lengths came up.

And these weren't warehouse workers, these were HR folks, recruiters, technicians, and the such - people in positions that are neither seasonal nor temporary.

Beyond the moral/compassion concerns of this, it wreaked havoc with the team to have a good hire on board for most of a year, and suddenly have him/her replaced with someone unknown who needed even more retraining. It also placed a constant load on the people involved, since you're essentially always re-hiring the same position, over and over, with the requisite interviews and costs. Suffice to say it caused a lot of disruption with the team, and I have to question the wisdom of dragging down the productivity of a dozen people to save money on one.

I can't say I know the official (or unofficial) reasoning for this, though of course the usual suspects of paying out benefits comes to mind. Also, certain headcount metrics may exclude contractors, which might be a way for management to look like they're keeping headcount down while still getting the hands they actually need. Either way, it soured my faith in the company some, and with a bunch of other factors led me to depart from the company.

EA has the same problem.

It's a US legal system thing. I don't know the law by name, but a contractor can only be kept on for a period of 6 months to a year. After that, they must be made full-time or removed. After a cool-down period, they can be rehired.

Some companies are getting around this legally but hiring companies to outsource, and yet embed, contractors into the client's office under a managed service agreement.

Wouldn't it also be a tax thing? Here in the Netherlands we have tax laws to prevent this kind of things, where if you can't choose your own hours/days/work and are essentially employed, but pretend to be a contractor, for all tax purposes the company is your employer, even in hindsight. Makes hiring people as contractors pretty tricky for startups sometimes.

We have a saying here used by the IRS and CRA (Canadian-equivalent) for determining if contractors are employees, that if it walks like a duck, and talks like a duck, then it is a duck.

Basically, a contractor (by the nature of its name) is supposed to be hired for a fixed-length period of time. I would guess that's what the tax laws are trying to enforce.

All the government cares about, though, is that they are W2 and not 1099. Then there are no rules. The IRS just wants to make sure that a big entity is responsible for payroll taxes instead of some individual. That way, it's cheaper to collect if there is a problem.

(Where I work, all contractors come in through third-party companies that pay the employees as W2s. They limit being a contractor to 18 months because then people can start suing to get benefits, like an invite to the Christmas party and healthcare. Or so I've been told.)

Right, but it gets trickier than that because even though you give someone a fixed-length period, if you're the only job a contractor does, and you pick the days they work, here you are essentially becoming the employer. Don't know what the US employment taxes are, but it was prohibitively expensive for us as a startup. The total employee costs run about 1.4-1.6x net base salary, even if we would outsource through a temp/payrolling agency.

There isn't a law. Each company has their own policy as a result of so-called Permatemps at Microsoft filing a class action:

http://en.wikipedia.org/wiki/Permatemp#Vizcaino_v._Microsoft

Where I work we had contractors that were contractors because they didn't fit into company wage scales, i.e. they made too much money. Some of them had been here more than ten years. After that suit all of them were let go or converted to employees at substantially lower wages.

Thanks, Microsoft permatemps. Litigious bastards.

Sounds like your company needs to rethink their wage scales instead of using contracting as a way to loophole out of their own policies.

Maybe. The point of hiring top dollar people is the skills that can get you a job are not the same as the skills you need to actually do the job. We would tell them straight out - "Look, we're paying you top dollar, and we expect you to produce." But no matter how careful you are occasionally a lemon slips through the hiring process. If he's a contractor you call up his agent and he's gone the next day. Employees? Not so much.

So when contractors aren't an option management switches gears and says "We're providing all these benefits and growth potential. Hire the best people you can get in this salary range." And what you get, instead of superstars, is plodders.

In Massachusetts you can't hire someone as a contractor that is in effect an employee. It's really tricky to get right. But they're extremely strict about it so employers can't evade payroll taxes, workers' comp., etc.

In Arizona a person is not a contractor unless they can set their own times and their own pace to complete work that is assigned.

That means as a contractor you can't be forced to come into the office at 9:00 AM to work till 5:00 PM, if you are not allowed to set your own work schedule you are not considered a contractor and the company should be paying your taxes and you should be getting a W2 instead of a 1099.

They were fairly strict in that regard as well, my boss was paying me as a 1099 and I wasn't aware of this, and the business got audited by the IRS and he had to retroactively pay taxes and they talked to me and I had to redo my taxes for the two years I worked there. Was a nightmare.

This is federal tax law, and it applies in all 50 states. Contractors also must provide their own equipment (i.e. computer) and be able to make a profit or loss on the engagement. Absent these conditions, you are an employee as far as the IRS is concerned, and your employer is responsible for a great many taxes and sometimes overtime pay.

See IRS form SS-8: http://www.irs.gov/pub/irs-pdf/fss8.pdf

More details at: http://www.irs.gov/businesses/small/article/0,,id=99921,00.h...

"I don't know the law by name, but a contractor can only be kept on for a period of 6 months to a year. After that, they must be made full-time or removed. After a cool-down period, they can be rehired."

Is that true? I know of contractors from other countries who have worked in the U.S. for the same company for more than five years. And these companies are Fortune 500 so I assume they have a pretty rigid legal team.

It isn't true. There's no limit on the length of time a legitimate contractor can be engaged, but if you are a business walking up to the line of the law defining employees or contractors, one way to limit your risk is to engage the contractors for a limited duration.

What's not true?

An independent contractor can only work 6 to 12 months before being let go? Absolutely true. I saw it with my own eyes. An independent contractor returning after a few months of break? Absolutely true. I also saw this.

But a US law? You're right, it may not be a real law. However, when the legal department comes down and says that contractors cannot stay longer than X months because of a previous lawsuit at a company, I'm going to rightly assume that they don't want to break a law. And the way you said "if you are a business walking up to the line of the law", I'd guess that you agree that there is some sort of law that may be broken if companies aren't careful.

I was merely pointing out the real problems that companies face by employing contractors, instead of giving a blanket "Untruth!" statement.

Another advantage to keeping a significant part of your work force transitional, is that knowledge has to reside in the documentation and processes, as you can't plan on the same employee being present for more than a year. Management likes this, because it gives them more leverage in replacing employees.

Ah, if only the nuances of a year's worth of experiences can be held in a collection of text and diagrams ;)

And if only comprehending the full breadth of that experience is as simple as hunkering down and reading it all!

Another flaw in this assumed "advantage": It assumes that said documentation is actually created and maintained, and apparently assumes that doing so is free, or nearly so.

That's a whole bunch of dangerous assumptions.

Companies that treat their people like crap will reap what they sow, sooner or later.

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