DFW Area Landscaper
LawnSite Silver Member
- Location
- DFW, TX
Ok. This thread is intended to open up an honest discussion about the benefits of each type of pay system. There is a tremendous difference between paying 1099 and W2. And I have yet to speak with any LCO, face to face, that's told me they were paying their help via W2. I even get the feeling my accountant thinks I'm nuts for using W2 pay with my help.
I had posted some questions re W2 vs 1099 earlier this winter, and based on all the feedback, I had made the decision to do everything by the book...overtime pay, unemployment insurance, federal tax whithodings, etc.
The thing that really got me to thinking about this again was, I bumped into an LCO the other day who says he pays his lead guy $150 per day. He's had this lead guy for something like six years. And the LCO has been in business for 10 years...never bothered by the government. He pays no overtime for hours worked beyond 40 in a week. He pays his entire crew this way. If they work til 1:30, they're paid for the full day. If they finish before 1:30, they're paid for half a day's work. He's not sure they're legal, but as he says, he's not the INS. He can't tell if the doc's are real and it's not his job to verify doc's.
Ok. Fine. But if I'm going to do everything by the "rules", my labor costs are going to be huge compared to his. Here's the math:
His costs
Cash payment of $150.00 per day with nothing witheld. Figure $750.00 for five days at 10 hours per day. Plus another 10% for workers comp insurance. Total cost to the LCO: $16.50 per hour
My costs
If I want my lead guy to take home $150.00 per day after all witholdings, it'll depend on how many dependents he says has. So let's figure he's married and he's got three kids (or at least he says he's got three kids). In order for him to take home $150.00 per day, or $750.00 per week, I have to pay him about $880.00 per week. That's $16.00 per hour for forty hours and $24.00 per hour for 10 hours. I've also got another 10% for workers comp insurance, which is about $88.00. Since I'll be laying a lot of people off every December, I expect to pay the maximum in unemployment insurance, which is currently 8.4% in Texas. That would cost me another $73.92. Then there's the social security tax that I must match, which is another $66.00. Total cost for the week is $1,107.92 for the week. Divide that by the fifty hours of work, and my labor costs are $22.16 per hour. And they only go up as we work beyond 50 hours in a week due to overtime rules.
If I play by the rules, my labor costs are 34% higher than my competition's labor costs!!!
Why shouldn't I label my employees as subcontractors and issue 1099's???? I mean, my God, this guys been doing this for 10 years.
Later,
osu2winbig12
I had posted some questions re W2 vs 1099 earlier this winter, and based on all the feedback, I had made the decision to do everything by the book...overtime pay, unemployment insurance, federal tax whithodings, etc.
The thing that really got me to thinking about this again was, I bumped into an LCO the other day who says he pays his lead guy $150 per day. He's had this lead guy for something like six years. And the LCO has been in business for 10 years...never bothered by the government. He pays no overtime for hours worked beyond 40 in a week. He pays his entire crew this way. If they work til 1:30, they're paid for the full day. If they finish before 1:30, they're paid for half a day's work. He's not sure they're legal, but as he says, he's not the INS. He can't tell if the doc's are real and it's not his job to verify doc's.
Ok. Fine. But if I'm going to do everything by the "rules", my labor costs are going to be huge compared to his. Here's the math:
His costs
Cash payment of $150.00 per day with nothing witheld. Figure $750.00 for five days at 10 hours per day. Plus another 10% for workers comp insurance. Total cost to the LCO: $16.50 per hour
My costs
If I want my lead guy to take home $150.00 per day after all witholdings, it'll depend on how many dependents he says has. So let's figure he's married and he's got three kids (or at least he says he's got three kids). In order for him to take home $150.00 per day, or $750.00 per week, I have to pay him about $880.00 per week. That's $16.00 per hour for forty hours and $24.00 per hour for 10 hours. I've also got another 10% for workers comp insurance, which is about $88.00. Since I'll be laying a lot of people off every December, I expect to pay the maximum in unemployment insurance, which is currently 8.4% in Texas. That would cost me another $73.92. Then there's the social security tax that I must match, which is another $66.00. Total cost for the week is $1,107.92 for the week. Divide that by the fifty hours of work, and my labor costs are $22.16 per hour. And they only go up as we work beyond 50 hours in a week due to overtime rules.
If I play by the rules, my labor costs are 34% higher than my competition's labor costs!!!
Why shouldn't I label my employees as subcontractors and issue 1099's???? I mean, my God, this guys been doing this for 10 years.
Later,
osu2winbig12
