Comment by DanielBMarkham | Hacker News Reader

Comment by DanielBMarkham | Hacker News Reader

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Since everybody else is pointing out how poor his employee compliance is and that he's picked a freaking hard row to hoe, I'll praise the guy. Awesome job! This is the internet equivalent of going door-to-door. In fact, I bet you could combine this with going door to door and see sales really take off :)

The scaling thing Edw brings up doesn't concern me right now: you are in the throes of kicking ass. Later on reality will sink in. But he's right -- you have some major changes to make if you really want to go long-term with this.

Patio has a more legal concern: that your cleaners are really workers. I'm not so sure. I'd see a lawyer about this pronto. If these folks were already doing some cleaning before you met them, and if you make it clear that there is no office, there is no work hours, they are free to take or not take work, and that their only obligation to you is completing each job they sign up for? I think you might be fine. It's certainly a lot less control that software contractors have over them, and they're contractors.

Instead of growing, I'd concentrate on making this thing hands-off. Hire a temp to do the office work, etc. Even if it eats into most of your income, once you are freed up then you'll be in a position to really expand. This "make the business a machine" is your next step. At least according to everybody I read.

I liked the post. We need reminding that a little bit of hussle and not over-thinking things can take you a long ways.

He has a "detaileddddddd" checklist of how he wants the work done and a training program. His lawyer is going to tell him that they're employees.

What's worse is, the better he does, the more clear-cut this issue gets. His key business metric is employee turnover, and anything he does to improve this increases the likelihood that his employees will be relying on him for most of their wages.

This is a "too good to be true" scenario. He's defined a fixed-price service with rigorous standards to be delivered across a major metro area with 8 known-good workers and is making $1000/month on it. To be compliant, some of that has to give: his business will have to look more like a placement or dispatch service, or he'll have to make way less money.

The IRS reclassification thing will be painful.

Thanks. I only read the initial post.

Yeah, you can't get into how to do the work. Also using anything called employee turnover is a dead stop.

But I still think it's salvageable, simply because there are so many independent cleaners out there already. This industry is heavily independent. I think he really needs to look at his structure, pronto.

I'll play devil's advocate just a bit more for the crowd. Many times startups skirt all sorts of rules and regulations when getting off the ground. I'm okay with that -- startups are always a bit subversive, and if you listen to your accountant and lawyer you'd never take any risk at all. But you can't go on like that for very long.

EDIT: Here's a possible setup: place the jobs on cards and put on the wall. Have the cleaners bid for the jobs. The checklist could just be the terms of contract completion, and you'd have to make sure the checklist was not a job description. Whether or not the contractors conspire to set the price or anything is none of your concern. You're simply a clearing house for very small cleaning contracts.

I think it's very doable. His business and income is really in chasing down people who need cleaning and people who can provide it. That doesn't have to have anything to do with employees. But it won't work as you've described it.

I was just blogging about this. Many times you find value and struggle with the model. http://news.ycombinator.com/item?id=3847651

This is not the good kind of subversive. This is the kind of subversive that screws people who are making close to subsistence wages over on taxes. He spends "an hour a day" on Maids In Black now and based on his pricing and the prevailing take-home for housekeepers is taking more than half the gross from the business. That doesn't seem particularly laudable (but maybe my math is fucked up).

I don't think it's going to be easy to provide the service he wants to provide (flat-rate book-online competitive-quality housecleaning on demand) profitably under a 1099 structure.

I'm unable to address this, as I'm not sure what you mean. I was simply saying that from his vantage point, hooking up customers and vendors who were already in the market can be a valid business model.

I believe you are talking about bringing new people into the market as vendors and then treating them poorly. Hopefully we can agree that folks that are already doing cleaning can continue doing it just using this guy's services to find customers. If not,if the point is that all cleaners should be w-2 employees, then yes, no matter what he does it will not satisfy somebody with that view. I do not believe all cleaners should be employees. It's perfectly fine with me if you feel otherwise, but I don't think that's the way the IRS sees things. (thankfully)

Someone is paying FICA taxes.

If the maids are 1099 employees, they're paying both halves of it. That's "self-employment tax". It's very expensive; around twice what employees pay.

The prevailing rate right now for "qualified" housekeepers in the DC metro area is $9.80/hr. Even if he's "generously" giving them $20/hr (if a 1bdr apartment takes 2 people 1 hour to clean, then according to his price list that means he's keeping about 60% of the gross), he's still shifting around $8000/yr to these workers just in FICA.

I'm taking exception to the idea of cheering on as "getting-stuff-done subversive" the business model that says "here, let me take a chunk of your taxes and stick it in my own pocket".

Again: I don't think "all maids should be employees".

Someone is paying FICA taxes.

I think you're arguing semantics here. Yes, everybody pays FICA, but for most people who are working their own business at a lower income FICA is offset such that no taxes are owed at the end of the year. So while you "pay it", it's not like that means much (insert long discussion here about complex tax systems)

Even if he's "generously" giving them

He doesn't have to give them anything.

I don't understand how you can separate "being subversive" from a discussion of the underlying business model. It looks to me like you're weaseling out, but that's fine. My point was that you must assume some kind of risk -- many times a bushel barrel of risk -- when you are poor and just getting started. It wasn't about labor laws. And whenever you assume risk, there's going to be a bunch of characters coming out of the woodwork telling you how stupid you are for taking on that risk.

As far as the model discussion, I think we've reached the point of diminishing returns. Although you've re-phrased yourself, it appears to me that you are describing some political argument and I am simply talking about business opportunities. I don't think you're ever going to be able to see this business model as anything but exploitative. I think once we mention the words "cleaner" or "lawn care" it sets off a pre-canned argument, probably involving immigrants and such, so this guy really never had much of a chance for positive feedback. Thanks for the chat! Seems like we always get hung up on self-employment, huh? Maybe one day I'll do a good enough job explaining myself that it will click.

Wait, what?

Someone is paying FICA taxes.

I think you're arguing semantics here. Yes, everybody pays FICA, but for most people who are working their own business at a lower income FICA is offset such that no taxes are owed at the end of the year. So while you "pay it", it's not like that means much (insert long discussion here about complex tax systems)

What is the FICA/SECA offset you're talking about here? It is not my impression that maid services don't pay FICA.

I understand your concerns here, but I'm also wondering about the 8k figure. Isn't it closer to 3k? (1.45% medicare and 6.2% SS?)

I'd be interested in more background on the industry. My experience is that, exempting cleaners hired by large offices, most cleaners are working under the table or for small firms. The small firms seem to be doing 1099s as well, I know a friend in that situation complaining specifically about the taxes.

So, I do wonder whether this guy is just doing business as usual. Well, actually, not as normal since he (claims to be) issuing tax paperwork (1099s).

If he's misclassified them, the onus will be on him to pay the taxes he didn't pay, and they will have a good case to sue for missed benefits.

Where people typically get screwed in the 1099 scenario is when they receive their first 1099. Most people are used to getting a tax return, not a bill. But, and here's where I have no insight, if he's being honest and up front with his workers, I don't see an issue. I've been on the receiving end of the 1099 conversation several times and never felt cheated, "So you understand, you are not an employee, you are responsible to paying all your own taxes, saving for tax time, your own benefits, etc."

Edit: I also want to state, I still think there are probably ethical/moral issues here. I just don't think that FICA is the issue. I think the reality is that most people vastly underestimate the value of benefits. Most people don't save up for the week or month or more that they are sick or injured and can't earn. They don't prioritize health insurance or save for retirement. People tend to associate these things with "having a job" and I don't know that many people are well-versed in the difference between employment and contracting. (At least from my middle class suburban upbringing.)

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