With so many workers facing long term unemployment and no job prospects for recent grads, isn’t it about time that employment strategies other than those that have unsuccessfully pursued in recent years be given serious consideration for getting millions unemployed workers into some form of gainful employment? There is a new employment innovation known as “universal employment” that is now available to companies that offer alternative employment options that simultaneously create organic incentives for companies to hire.
Despite claims that the “official” unemployment rate has gone down by a few fractions of a percentage point, the harsh reality is that more than 50% of the available U.S. labor force is NOT operating within the legitimate boundaries of the U.S. employment system. It is a well documented fact that 30-35% of the available U.S. workforce is comprised of independent contractors, consultants and freelancers, none of which operate under the safety net protection and coverage of employment and labor laws afforded “traditional” employees. Reliable sources place the real unemployment rate closer to 24%, which is likely more accurate when you consider those who have stopped filing for benefits, stopped looking for employment or who were never eligible to file for benefits in the first place. This is a travesty for American workers who have little hope of establishing economic stability through gainful employment; it is also a travesty for the Government because the more workers operating outside of the legitimate employment system, the less tax revenue the Government has to work with.
Political leaders continue to urge companies to hire workers while introducing one so-called jobs program after another as an inducement to companies to hire more workers. However, these so-called jobs programs have none of the incentives companies need to begin hiring again. U.S. companies have been trending toward mass layoffs/downsizings in response to their need to reduce fixed overhead costs since the late 1980s, so if political leaders were really listening and understanding what companies are saying through their actions, it should be crystal clear that companies need the ability to hire workers and simultaneously control their fixed overhead costs. After all, companies that chose to layoff/downsize, did so as a last resort to going under. They are, therefore, not likely to turn around and increase their fixed overhead costs again by hiring under the existing employment paradigm just because government and political leaders ask them to since this would put them right back where they were before. Sadly, it has become a frustrating game of trying to “force square pegs into round holes” as political leaders attempt to rally companies into a hiring frenzy with their futile jobs programs that produce no sustainable jobs and only give millions of job seekers a sense of false hope.
Recent so-called jobs programs touted by political leaders have promised to do one of two things to get companies to begin hiring again – they have either promised to infuse billions of dollars to create infrastructure jobs or to further reduce payroll taxes. Companies don’t need the government to throw money at them as an inducement to hire. Interestingly enough, most companies are doing quite well financially without government hand-outs as evidenced by the recent growth in GDP, the economic indicator of the output of goods and services produced by labor and property in the U.S. The U.S. GDP increased at an annual rate of 3.0% in the 4th quarter of 2011. However, despite the recent increase in the GDP, companies still are not hiring to a degree that it results in an appreciable decrease in the REAL unemployment numbers. Neither do companies need the government to offer additional payroll tax reductions as an incentive to hire. What companies need more than anything is for the Government to simply clean up the legislative mess surrounding employment and then get out out of the way so they can aggressively compete in a global economy and expand their businesses organically, which will in turn stimulate sustainable job growth and hiring.
Employees’ salaries and benefits is the single greatest fixed overhead expense that companies carry. If government and political leaders made it legislatively possible for companies to hire “employees” and treat their salaries and benefits as a variable as opposed to a fixed expense without taking away the safety net protection of employees, they would essentially untie the hands of corporations so they could exercise alternative hiring options that would prove beneficial to them, their employees and government tax authorities. ”Universal employment” offers such an option, where workers can be hired under a flexible hiring option such as job sharing. ”Universal employment” is an employment innovation designed to accommodate the unique needs and demands of the 21st century labor force that allows companies to “legally” hire workers in alternative employment arrangements without depriving the workers of legal employee status and the safety net protections that come with being an “employee”.
Following is an example of what a typical job sharing situation would look like under “universal employment”: Both Company A and Company B each have need of a financial analyst for 1,040 man-hours, which translates to 20 hours per week for each company. John Doe is a financial analyst who meets both companies requirements and is hired under the “universal employment” platform as a “universal employee”. John Doe is deployed to Company A to fulfill their 1,040 man-hour requirement. During John Doe’s deployment to Company A, the company pays the agreed upon salary for John Doe, from which an independent ASO (Affinity Service Organization) deducts the appropriate local, state and federal payroll taxes and makes quarterly payments to the appropriate tax authorities on behalf of John Doe. The ASO also collects from Company A the appropriate employer’s contribution to FICA, FUTA & SUTA for payment into John Doe’s state and federal unemployment and social security accounts. Company A also provides Workers Compensation coverage for John Doe for the period of time he works with them (1,040 man-hours). The same scenario is repeated for John Doe when he is deployed to Company B, which may occur in tandem with his deployment to Company A (morning hours at Company A/afternoon hours at Company B) or sequentially (6 months part-time with Company A followed by 6 months part-time with Company B). At the end of the year, the ASO sends John Doe a W2 which he uses to file his personal income taxes. In this scenario, it was not necessary for either Company A or Company B to become the “employer of record” for John Doe, which would have required them to hire John Doe as a traditional “employee” and treat his salary and benefits as fixed overhead costs. ”Universal employment” allowed both companies to hire John Doe as a “universal employee” and therefore treat his salary and benefits as a “variable” expense as opposed to a “fixed” expense. It is important to note that John Doe received ALL of the same safety net protection under “universal employment” that a traditional “employee” would have received under the existing employment paradigm. So, the company is happy because the have the use of a qualified worker without having to increase their fixed overhead costs; the workers is happy because he has a job; and finally the tax authorities are happy because they have another employee paying employment taxes into the treasury.