🚀 go-pugleaf

jason@trg.saic.com (Jason S. Holloway) writes:
 
>In article <1.6sdzh2ios@gate.net>, Stefan Jon Silverman <sjs@sjsinc.com> wrote:
>
>>         First, because of the IRS's 20 question smell test for Independent
>> Contractors vs. W2-able employees, a number of brokers have joined the
>> NACCB (National Association of Computer Consultant Brokers) and using that
>> organizations template contract (which I think won't stand in a court)
>> will only allow IC's to sign a contract that states that the IC only gets
>> paid when the brokerage gets paid by the client (the "assumption of
>> financial risk" question of the IRS 20). This creates a situation where
>> the IC has to work up to 2 weeks before submission of the first invoice,
>> wait for the brokerages client billing cycle to pass, wait for the
>> client's bill paying cycle to elapse, and then finally, wait for the
>> brokerages check-cutting cycle to kick in. The net elapsed time on this
>> could very well be 10 weeks before the IC sees the first check (I have
>> seen it this bad!). Now, if one even takes a conservative rate to the IC
>> of $50.00 / hr. on a 40 hr. work week (how many of us actually get to work
>> this little?), this leaves the IC holding the bag on about $12,000.00 (6
>> wk. cycle) to $20,000.00 (10 wk. cycle). A truly uncomfortable situation
>> when one thinks about "roof over head / food on table." I know it could be
>> argued that we made the decision to enter this line of work, ___BUT!!!___
>> at some point reality has to set in. I personally try to keep an emergency
>> fund of about 6 months living expenses in liquid capital around, but
>> holding the bag on > $20,000.00 in outstanding AR makes me very
>> uncomfortable (and that's at $50.00 / hr., I work for much more than
>> that). So the brokerages are still charging the %15 and in fact are the
>> beneficieries of a non-interest paying loan from the IC to the brokerage
>> (they still get to carry our AR / AP on their books as an expense for tax
>> purposes); neat work if you can get it.
>>
>
>Of course, it can get worse.  What do you think happens to your "loan" to
>the brokerage if they go out of business?  This isn't an FDIC insured $20K
>you got invested!
 
 
One could also take the legal postition, which PATCA and several other
organizations have, that it is a fundemental precept of contracting law
that the sub-contractor (in this case the IC) should get paid regardless
of whether the prime contractor (the brokerage) gets paid by the client.
 
In the case of the housing contracting sector, this is a long standing
principal, with a great deal of precedent case law behind it. It's too
bad that IC's cannot implement some kind of construction lein on the
client...
 
Another point, on the same regard, is that interpreting the IRS statutes
to the benefit of the brokers, regardless of the applicable case law, in
an attempt to keep IRS auditors out of the brokerage is doing a dis-
service to the people that they claim to represent...
 

-- 

	Regards,

	b c++'ing u,

	%-) sjs

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Stefan Jon Silverman - President                     SJS Associates, N.A., Inc.
                                                            572 Chestnut Street
Distributed Systems Architecture & Implementation      San Francisco, Ca. 94133
                                                            Phone: 415 989 2741
E-mail: sjs@sjsinc.com                                      Cell:  415 519 3494
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                  Weebles wobble, but they don't fall down!!!
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In article <1.6sdzh2ios@gate.net>,
Stefan Jon Silverman  <sjs@sjsinc.com> wrote:

[ portion deleted]

>	For these services and the contracting, time-sheet submission, and
>factoring of monies owed (the brokerage paying you regardless of when they
>collected money from the client), they, I feel, justifably charged aprox. 15%
>of the consultants hourly fee (on top of the IC's fee) to the client as an 
>administrative spread / profit.
>

I've seen brokers take as little as 5% to as much as 25-30%. The high end
of this range is excessive for an IC. 15-20% is the norm.

>			- - - - FLAME ON - - - -
>
>	In today's world, however, things are a little more complicated. 
>
>	First, because of the IRS's 20 question smell test for Independent
>Contractors vs. W2-able employees, a number of brokers have joined the
>NACCB (National Association of Computer Consultant Brokers) and using that
>organizations template contract (which I think won't stand in a court)
>will only allow IC's to sign a contract that states that the IC only gets
>paid when the brokerage gets paid by the client (the "assumption of
>financial risk" question of the IRS 20). This creates a situation where
>the IC has to work up to 2 weeks before submission of the first invoice,
>wait for the brokerages client billing cycle to pass, wait for the
>client's bill paying cycle to elapse, and then finally, wait for the
>brokerages check-cutting cycle to kick in. The net elapsed time on this
>could very well be 10 weeks before the IC sees the first check (I have
>seen it this bad!). 

A few points to consider:

1. Contracts are negotiable, including the NACCB one (which I also concur is
slanted way to far in the brokers favor). If they don't negotiate, don't take
the gig.

2. The 20 Common-law tests of employment are subjective, not objective. Not
qualifying under one of these tests doesn't automatically brand you as an 
employee. Brokers who tell you otherwise are BS'ing you.

3. If you are working as an IC, other laws apply, like the Uniform Commercial
Code, state business and labor laws, etc. You have _every right_ to negotiate
payment terms with brokers _regardless_ of the receivable cycle of the end
client organization.

4. In every case where I rejected a "pay when paid" contract, the broker saw
things my way and gave reasonable payment terms.

5. As a rule of thumb, if the broker is paying you when they get paid by the
client, the broker, IMHO, is entitled to _at most_, 5% of the gross billing.
Part of their cut consists of the float they must carry between paying you
and getting paid by the client. All reputable brokers I have done business
with operate this way - and some are NACCB members.

>	Second, and even more galling to me, is the proliferation of job
>postings on the internet vis-a-vis the brokerages doing something valuable
>for their fees. A situation seems to exist at the moment, whereby, an IC
>looking for work has to spend upwards of 2+ hours per day scanning the
>relevant news groups, contact the brokers making the postings, educate
>them on what the requirements they have posted really mean (can we say
>"career transition from insurance salesman"), and then do all of the leg
>work of convincing the client to hire us. And still the brokerages collect
>their %15. Maybe the fee should be discounted for the amount of work that
>the IC now has to do??? 
>


If you've been around this business for any length of time (and it appears
to me that you have), it's common knowledge that brokers are not technical.
That's why the client interviews you.

What's the difference between scanning the net versus the Sunday Want Ads
or Computerworld emplyment sections? You gotta do some work here. Expecting
a broker to give you a break because you found him is unrealistic. Why? It's
the _broker's client_, not yours.


>	Am I just over-agitated??? It seems to me that this new paradigm
>has imposed a greater workload on the IC, short-changed the potential
>client of valuable candidates (if the databases are not searched and
>candidates of merit do not follow the news postings), and led to a
>cash-cow sort of situation for the brokers. 
>

It sounds that way. Also, it's been this way for years, not a recent 
development.

In the end, it's up to the IC to find work, whether through a broker or
on your own. Brokers will seek you out if you have the skill sets they're
looking for. If you don't have them, you aren't going to get called. A
COBOL programmer is not a valuable candidate for a client/server position,
for example.

>	I do also want to make the point that there are several brokers
>with whom I have worked that are honerable and wonderfull to work with.
>They will in fact make the extra effort on behalf of the IC. But, overall,
>this new paradigm does not do justice to the fine guild of computer IC's
>

There are a number of fine brokerages to work with and for. There are also
extremely shitty ones. One learns this through trial and error and being
in the business awhile. You must realize that the broker's position is to
find people that meet the client's requirements, not try to place every IC
on the street for the sake of getting a billing off of a warm body for a
month. Brokers that do this don't last long.

>	Any brokers out there care to take a shot at justifing the
>continuing %15 fee??? 
>
>	Any IC's have comments on the above diatribe???
>

I think you need to go back to Business 101. If you want to cut out brokers,
start spending the time and money to market yourself and develop a
clientele, along with the requisite lost billing that marketing entails. If
you don't want to market and simply bill your time, then continue to use
brokers. That 15% you're complaining about is the cost of marketing, whether
it's done by you or a broker - what's the difference?

Bob McIlree
rmac@well.com