Skip to comments.Hypothetical employment question for knowledgeable freepers
Posted on 10/07/2013 9:26:21 AM PDT by Abathar
Hypothetical question that has been rolling around in my head for a while, wondering if it would be legal or not.
Lets say I own business X with 40 employees and need to hire 20 more. I want full time employees but insurance costs will be prohibitive if I do.
Business Y nearby also wants to stay under the 50 employee number of full time employees and is looking to hire, or is too close the the red to take on any more full time healthcare costs being demanded now. I'm looking for the stability of a full time employee with the obvious benefits of avoiding Obamacare.
If we were to make an arrangement that every day at lunch we moved 20 employees back and forth between out companies, at the same hourly wages and doing about the same type of production tasks, would that be illegal?
The real reason this question came about is my wife manages a gas station for a bigger midwest competitor to Walmarts. She is having a really hard time scheduling her employees, and she can only offer about 25 hours per week now. She can't get good help because everyone worth having wants full time work (40 hr. paycheck).
Since this is so prevalent now in employment, I was just wondering if company X and Y couldn't work together for mutual benefit while still offering the full time paycheck and stability.
Great strategy...you used variables X and Y - thereby making the message impossible to decode by all the press and Obama voters (same thing, I know).
Could you start a second company with new employees and have your first company contract services from your second company?
Granted most never took an algebra class I’m guessing...
Doesn’t work that way. IRS has specific prior case law from businesses which already tried this, and lost to the IRS , to back up the IRS in auditing/prosecuting you.
You didn’t reinvent the wheel.
I believe that loophole was already filled when they wrote the law, two separate companies with the same owner counts together towards the 50, if I understand it correctly.
“Could you start a second company with new employees and have your first company contract services from your second company?”
The general answer is No, with exceptions.
A contracted worker, a subcontractor, a day laborer, etc, all have been defined under IRS regulations, as well as the distinctions between the different definitions of employment... this has already been through the IRS auditing process (before ACA was made law), and civil and (even a few criminal) court cases.
Under Obamacare all business you own will be counted together, even if they are not related. That way people can’t avoid the 50 employee threshold by merely starting smaller companies.
I figured I wouldn’t have, but why would that have been illegal before Obamacare anyway, unless you were trying to avoid overtime that is.
You are looking for avoidance, which is legal, not evasion, which is not, and that can be a pretty fine line, so you’re almost going to have to get the advice of a tax attorney, to plot strategy.
Yes, closely held related companies are covered under the law.
Non-closely related companies that have intertwining workers are also covered under the law, so arm’s length arrangements like the original poster mentioned would also fall afoul of ObamaCare regulations.
Prior case law dealt with other facets of employment law,
tax withholding laws,
definition of a indepdendent contractor vs employee,
I think some did say this but I think they will eventually catch on. Still, I like your thinking. Myself, I’m only working part-time, eventually I’d like to go to full-time but with Bammycare, I don’t know. In a way, I’m glad to be part-time now, the money is a bit tight, very tight but I need the time right now to care for Mom who is fighting breast cancer and once she gets a bit better, I’ll ask for more hours. I’m 47 myself, like you. I had a good paying, full-time job but the assignment ended just prior to my mother’s diagnosis, if I was in your area, I’d consider the 20/25 hours. I think I’ll be there soon after Mom is a little better where I’m working at. I also do webpages as well, freelancing from time to time, I’d like to work from home eventually. If Bammy keeps up, we will need to create our own jobs.
Every employee that is not full time status where my wife works will be dropped to no more than 25 hours Jan. 1. Almost all of those workers will now have to find a second job to make ends meet. How is it different to the IRS if the employee finds a second job, or you as the employer do it for them though?
I would think that a better strategy would be to create a third company as a contracting agency. Then employees could be 1099 contractors. Just thinking out loud.
I think there are some categories of employees where you can't do this, and your new employees would be responsible for paying SS self-employment tax, estimates for federal and state income taxes, and purchase their own medical plans. Possibly more requirements to be met.
I wouldn't go down that road unless I'd gotten solid legal advice. Also, there is info about it somewhere on the IRS website.
The answer is simple for all concerned.
Just ask John Galt.
Subcontractors and transfers to subsidiary organizations has been a trick used by Japanese companies for over 30 years to avoid outright workforce downsizing. They have a funny reaction in their stock market in that laying off employees is seen as a sign of weakness and bids their price down. Transferring them to a subsidiary, not so much.
I’ve worked as a contractor for TRS inc. (www.gotrsinc.com)
They’ve handled everything from hourly workers to $150/hour professionals. Long term “contracts” have gone on for years. I put it in quotes because if the employer stops paying then the contractor is gone overnight.
They simply plan on paying the penalty for not offering insurance.
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