ARTAX by Jack Moore, CA
The Costs of Having an Employee
Let's talk about the costs, other than salary or wages, of having an employee.
There are several tests which can be made to determine if the person doing
work for you is an employee, but the ones that count most will determine
the existence of a "master-servant" relationship.
The expression is very old but accurate and fairly simple: if the person
performs tasks in the general order that you assign them, at the place that
you designate, during hours that are similar from period to period, enjoys
the fringe benefits available to other persons working there, does not perform
similar services for anyone else on a regular basis and you control the
time and activities during the work cycle, then you are the "master"
and the person is the "servant".
By general government decree, employees are enroled in the various programs
operated by the government and covered in union contracts or by employer
policy, if applicable. They may include unemployment insurance, government
and/or employer pension, injury compensation, several health and/or medication
insurances, income protection insurance (short/medium/long term), life insurance,
car allowances, performance bonuses, holiday pay, vacation pay and extra
days off for specified occurrences. The list is limited to ones imagination.
The cost of these benefits can be very significant in the scheme of things
and does not take into consideration the time, energy and expense of preparing
the paper-work for the organisations (and government departments) to which
information must be reported.
The bottom line may be from 10% to 35% of the base salary/wage and is usually
considered by the employee to be part of the total package. The organisations
have a vested interest in people being considered as employees for their
existence depends upon the programs being large enough to be economically
viable.
There is an alternative which is in common usage: contract labour.
There is less work available today than there was yesterday. The population
mix and the computer have combined to reduce the amount of labour necessary
to keep our economy going in the fashion to which we have become accustomed.
It is more practical to have work performed when it is needed rather than
keep employees constantly available but not necessarily working.
The contract method of remuneration does not attract the general fringe
benefit package. Therefore it permits the employer to pay for labor when
it is performed and to know precisely what it will cost, both directly as
well as indirectly (those fringe benefits). It is desirable that the person
work for others too.
In due course, governments will probably protect their self-interests by
legislating inclusion of contract labour into their programs. It will be
difficult for non-government operators to maintain past volumes and still
protect against anti-selection. But that is a whole different problem.
In the meantime, business will continue to try to control its costs and
better match them to the related revenue. It is essential that there be
a bottom line that is black, not red. Otherwise, the business will close.
Let us hope that we can all work together and help each other during the
next 50 years while this societal revolution is taking place. It is going
to be difficult.
Sleep tight.
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