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Why The Contingent Workforce Is Growing, And What That Means To You

By //  by Khaleef Crumbley

As the outlook on the economy remains grim for many industries, many companies are still wary about hiring full-time workers. Very few companies are hiring in great numbers, and even less are continuing with employee recognition programs. Therefore, we are witnessing a rise in the number of companies that are turning to the contingent workforce in order to fill their staffing needs.

What Is The Contingent Workforce?

At one time, the only major distinction between workers was full-time vs part-time. However, as the workplace has evolved, so have the various roles.

When one speaks of the contingent workforce, they are referring to a group of workers which includes, temporary workers (working through an agency), contracted workers, per-diem, self-employed contractors, day laborers, and direct-hire temporary workers.

When I became a part of the workforce, these types of employees were very common in warehouses and/or industrial jobs, doing manual labor, office work, and tedious projects (such as mass mailings or taping together damaged money).

However, now we see the contingent workforce filling rolls in accounting, finance, health care, and information technology. With the rise in Internet sales & marketing, and freelance writers, designers, and programmers, we can expect these numbers to rise in the future.

The Rise In The Contingent Workforce

There has been a sharp increase in the number of temporary workers employed over the last few years. According to an article on Marketwatch:

Temporary-help services employment increased to about 2.3 million in March from a recent trough of about 1.7 million in mid-2009, according to the Labor Department.

That’s an increase of over 35% in about 2 years! Keep in mind that this is just one small segment of the contingent workforce. However, information from this category is probably the most reliable, since temporary workers are employed through agencies.

Why Are Companies Looking To The Contingent Workforce?

Many companies have present staffing needs, which must be filled in order for them to be able to conduct business. However, due to the unpredictable nature of the current economy, these businesses are not willing to make long-term commitments to large groups of workers. Therefore, hiring workers on a part-time basis, or bringing them on as consultants, seems to be the best move.

Reduced Benefits

Many contingent workers do not receive health insurance coverage, life insurance, retirement benefits (such as free money through a match, or the ability to take advantage of 401k contribution limits), or paid time off. Most temporary agencies will force their employees to wait for 6 months or longer before being eligible for such benefits.

There are also certain workplace laws that do not apply to contingent workers.

This makes it much cheaper to hire someone under this type of arrangement, which is one of the main reasons why employers are seeking more contingent workers!

No Long-Term Commitment

With most forms of low and mid-level employment, your contract can be terminated “at will”. This means that you can quit or be fired/laid off at any time. However, there is usually something owed when this happens. For instance, if someone is laid off, they are sometimes given a severance package, possibly vested (meaning that they can keep employer contributions) in a retirement plan, and even paid for unused time off.

This is usually not the case with contingent workers. Once the contract is terminated, the employer usually walked away from the relationship owing nothing. If an employer is not sure of long-term funding, this can be a great option. Of course, this also makes it very easy for an employee leave the company. This risk has to be weighed against the benefits!

Low Recruitment Costs

Since there isn’t much of a commitment made to these workers, it is usually easy to bring them on board. Many in the contingent workforce are hired through an intermediary firm, that does handles the initial interviews, background checks, competency testing, etc. This way, the employer simply has to pay a fee (or a percentage of the salary) to the firm, and doesn’t have to worry about the costs of advertising, background checks, and time spent holding multiple interviews. This also works out for the employee by reducing their job hunting expenses (especially if they work through an agency).

If these employees are offered any benefits, they are usually handled though the staffing firm (and are subject to a waiting period). This way, if the employment arrangement doesn’t work out, the employer hasn’t wasted any money by adding a worker or group of workers to their various benefits plans.

Why Does This Matter?

Most people are probably wondering why this shift is important. The main impact that it will have is that we may be forced to rethink how we market ourselves. Many people are not willing to take a job on these terms, because they have been looked down upon for so long. However, if you are currently looking for a job – or if you are suddenly laid off – you may have to consider becoming part of the contingent workforce.

Depending on your status, you may have to arrange for your own health-care coverage, and start paying self-employment tax. You may also have to look into various certifications that demonstrate your competency in your field. While the contingent workforce still makes up a very small part of all workers, the numbers are growing, and the trend will most likely continue in that direction as uncertainty about the economy lingers.

For employers, this type of arrangement is a great way to grow your business, without all of the costs traditionally associated with hiring employees.

It is better to be prepared and able to adapt, than to be caught by surprise, struggling to support your family!

photo by Idea Go

Filed Under: Workplace Tagged With: business, business ethics, contingent work, contingent worker, contingent workforce, contracts workers, economy, employee recognition programs, employment, globalization, labor, labor history, permatemp, self employed, temporary agencies, temporary work, temporary workers, vendor management system, worker, workforce, working conditions

Social Welfare Program Payments Account For Over One Third Of U.S. Wages!

By //  by Khaleef Crumbley

According to a recent article by CNBC, various government welfare payments account for more than a third of all salaries and wages across the entire population of the United States! That is an amazing statistic when you stop to think about it what a social welfare program really is.

Welfare Payments Gone Wild

Now, when I speak of welfare payments, I am not just referring to payments made to the poor. Social Security, Medicare, and another popular social welfare program – unemployment – are all included! Here is what the article had to say about the numbers:

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

So 35% of total wages and salaries will be nothing more than government handouts! The fact that this number was only 10% just a mere 40 years ago should alarm many!

What this means is that if you are in a room with 99 other people (say at a supermarket), 35 of them would completely rely on a social welfare program for their wages! There is no way that this nation can continue to function in this state for much longer!

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients.

Instead of being a nation of people who worked as hard as we could in order to support ourselves, and making sacrifices whenever needed, we are now people who depend on the government to support us, without any real effort on our part! I would say that we are not just dependent on government support, but we actually feel entitled to it.

Now, obviously Social Security is different because most of the people who are collecting benefits are retired and are receiving income based on contributions they made while working. The system is set up so that current workers support those who are retired, so this assessment doesn’t really apply to them.

A Social Welfare Program In Trouble

Even though I stated that Social Security should be seen in a different light than the other welfare payments, the thought of it should immediately bring to mind all of the baby boomers that plan to retire within the next decade or so!

Many people are simply not prepared for retirement, which means that they will depend even more heavily on Social Security to support even the most basic needs. Whether you are a baby boomer or not, take a look at the current IRA contribution limits and 401k contribution limits, and prepare yourself for retirement!

One of the proposed ways to fix this problem has been to reduce either Social Security or Medicare…or both! Unfortunately, most people are blindly hoping for another way…

A Wall Street Journal/NBC News poll released last week showed that  less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

So, we are already at 35% of the population receiving welfare payments, and now we are expecting about 78 million more retired baby boomers!?!? I honestly don’t know if there is anything that can be done to turn this around – unless we make some major changes to how our economy functions!

Most people are aware of the fact that we won’t collect enough in Social Security taxes to cover outgoing benefits in the future (and the current payroll tax holiday sure isn’t helping)! Here is how the article summarizes our current crisis:

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

That’s the key question! Not only will we have a huge surge in the amount of retirees looking for government benefits, but because of the tremendously weak (and it will weaken more in the future) housing market, high unemployment and underemployment, and increasing public healthcare costs, we will surely face an unprecedented amount of citizens looking for complete government support!

Unfortunately, most politicians are only interested in the short term, so the future looks pretty bleak! What’s even worse is that many of the developed nations are facing the same problem! Here is another quote from the article:

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world’s reserve currency.”

If we existed in a vacuum, then maybe we could feel good about our nightmare not being as scary as others. However, since many of the world economies are so connected, this means trouble for the entire world population! So while we are focusing only on ourselves – thinking about various credit card benefits, finding a cosigner for our loans, and identity theft – the economy could very well be crumbling before our eyes.

photo by renjith krishnan

Join The Discussion:

  1. Are you shocked that 35% of all wages are based on payments from a social welfare program?

  2. Do you think that there should be a limit to these welfare payments?

  3. Do you find comfort in the fact that other nations are doing worse?

  4. How do you think we can return to being a nation full of people who support themselves?

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Filed Under: Economics Tagged With: federal insurance contributions act tax, goldberg v. kelly, government, government welfare, labor, medicare, payments, personal responsibility, politics, social issues, social security, social security debate, social security tax, social welfare, social welfare program, socioeconomics, the economy, unemployment, wages, welfare, welfare economics, welfare payments, welfare state

How The IRS Wants To Help You With Your Job Hunting Expenses

By //  by Khaleef Crumbley

Normally, when we talk about tax deductions, we immediately think of IRA contribution limits, the standard mileage rate, or self employment tax. However, with so many people being out of work or working part-time hours, the job market is being flooded with applicants. This is why it is important to look at the tax deductions related to job hunting expenses.

Summer used to be the season for job hunting. I received a ton of announcements and advertisements for career fairs, resume services, and headhunters during the summer. However, since the economy has tanked, I get them all year long!

Due to this fact, the IRS has released a list of tax benefits for job seekers. So, while our Senators debate another payroll tax holiday, see if you qualify for any job search deductions.

A Few Guidelines Regarding Job Hunting Expenses:

  • You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
  • You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
  • If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
  • To qualify for a deduction, the expenses must be spent on a job search in your current occupation.

So, be sure to save all records of any of these job hunting expenses. Don’t forget things such as printing and copying your resumes, paying headhunters and agencies, and even travel costs.

Other Things To Note About Job Hunting Expenses:

  • You may not deduct expenses incurred while looking for a job in a new occupation.
  • You cannot deduct job search expenses if you are looking for a job for the first time.
  • You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

So, in order to deduct job search expenses, it can’t be your first job search and it can’t be in a new field. Of course, just to complicate things, the IRS does not go on to specify what a “substantial break” actually is. However, if you decide to start your own business and become a young entrepreneur, then there is another set of tax laws that govern your situation.

To find out more about deducting job search expenses, see IRS Publication 529. If you have any questions regarding any other issues, please visit our tax help page. Also, be sure to contact us for professional tax preparation once you are ready to file.

Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. To get the most out of your financial situation in 2011, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

photo credit: nidhug

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Filed Under: Career, Taxes Tagged With: Career, deductions, Economics, employment, finance, income tax in the united states, internal revenue service, job hunting, job search, jobs, jobs marketing, jobs seeker, labor, looking for work, payroll taxes, self employment, self employment taxes, tax deduction, tax deductions, taxation, taxation in the united states

Why You Should File A Tax Return Even If You Are Not Required!

By //  by Khaleef Crumbley

In a previous article, we discussed the fact that many people are not required to file an income tax return. However, there are some instances when you may want to file a tax return even though you are not required to do so.

Why You Should File A Tax Return:

Recently, the IRS gave seven reasons for doing so:

  1. Federal Income Tax Withheld – You should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

  2. Making Work Pay Credit – You may be able to take this credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.

  3. Earned Income Tax Credit – You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund.

  4. Additional Child Tax Credit – This refundable credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

  5. American Opportunity Credit – The maximum credit per student is $2,500 and the first four years of postsecondary education qualify.

  6. First-Time Homebuyer Credit – The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. To qualify for the credit, taxpayers must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. If you bought a home as your principle residence in 2010, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.

  7. Health Coverage Tax Credit – Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2010 tax return.

Well, there you have it…seven reasons why you should file a tax return even if you don’t have to do so.

If you have determined that you have to prepare a return, then be sure to contact us to set up an appointment for tax preparation. If you decide to file your own taxes, we recommend using TurboTax to do so.

Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. Also, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

photo by JD Hancock

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Filed Under: Taxes Tagged With: child tax credit, earned income tax credit, economy of the united states, estimated tax payment, federal income tax, federal income tax withheld, file, filing, filing status, income tax in the united states, labor, political economy, public economics, tax, tax credits, tax refund, tax return, tax returns, taxation in the united states, Taxes

Federal Income Tax Rates For 2011

By //  by Khaleef Crumbley

The Income Tax Rates for 2011 haven’t changed much from 2010. This is because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law on December 17, 2010 (Click here if you would like to read the full bill). This Act included a last minute extension of the Bush-era tax cuts, which in turn confounded most projections regarding the federal tax rates for 2011.

If you recall, this is the reason for the income tax filing delay, but not the reason for the extension of the tax deadline.

First I will give you the income tax rates for 2011 in the form of a basic chart with the dollar range and the marginal tax rate. Then I will list the income tax rates using the form of the IRS rate table showing exactly how much you will pay in taxes.

Single: Income Tax Rates

Taxable Income isTaxable Income is
OverBut Not OverTax Rate
$0 $8,500 10%
$8,500 $34,500 15%
$34,500 $83,600 25%
$83,600 $174,400 28%
$174,400 $379,150 33%
$379,150Unlimited35%

Below is the actual dollar amount that “single” taxpayers will owe:

If Taxable Income Is OverBut Not OverThe Tax Is:
$0 $8,500 10% of the taxable income
$8,500 $34,500 $850 plus 15% of the excess over $8,500
$34,500 $83,600 $4,750 plus 25% of the excess over $34,500
$83,600 $174,400 $17,025 plus 28% of the excess over $83,600
$174,400 $379,150 $42,449 plus 33% of the excess over $174,400
$379,150 Unlimited $110,016.50 plus 35% of the excess over $379,150

Married Filing Jointly: Income Tax Rates

Taxable Income isTaxable Income is
OverBut Not OverTax Rate
$0 $17,000 10%
$17,000 $69,000 15%
$69,000 $139,350 25%
$139,350 $212,300 28%
$212,300 $379,150 33%
$379,150 Unlimited35%

Below is the actual dollar amount that “married filing jointly” taxpayers will owe:

If Taxable Income Is OverBut Not OverThe Tax Is:
$0$17,000 10% of the taxable income
$17,000 $69,000 $1,700 plus 15% of the excess over $17,000
$69,000 $139,350 $9,500 plus 25% of the excess over $69,000
$139,350 $212,300 $27,087.50 plus 28% of the excess over $139,350
$212,300 $379,150 $47,513.50 plus 33% of the excess over $212,300
$379,150 Unlimited$102,574 plus 35% of the excess over $379,150

Head of Household: Federal Tax Rates

Taxable Income isTaxable Income is
OverBut Not OverTax Rate
$0 $12,150 10%
$12,150 $46,250 15%
$46,250 $119,400 25%
$119,400 $193,350 28%
$193,350 $379,150 33%
$379,150 Unlimited35%

Below is the actual dollar amount that “head of household” taxpayers will owe:

If Taxable Income Is OverBut Not OverThe Tax Is:
$0 $17,000 10% of the taxable income
$17,000 $69,000 $1,215 plus 15% of the excess over $12,150
$69,000 $139,350 $6,330 plus 25% of the excess over $46,250
$139,350 $212,300 $24,617.50 plus 28% of the excess over $119,400
$212,300 $379,150 $45,323.50 plus 33% of the excess over $193,350
$379,150 Unlimited$106,637.50 plus 35% of the excess over $379,150

Married Filing Separately: Federal Tax Rates

Taxable Income isTaxable Income is
OverBut Not OverTax Rate
$0 $8,500 10%
$8,500 $34,500 15%
$34,500 $69,675 25%
$69,675 $106,150 28%
$106,150 $189,575 33%
$189,575 Unlimited35%

Below is the actual dollar amount that “married filing separately” taxpayers will owe:

If Taxable Income Is OverBut Not OverThe Tax Is:
$0 $8,500 10% of the taxable income
$8,500 $34,500 $850 plus 15% of the excess over $8,500
$34,500 $83,600 $4,750 plus 25% of the excess over $34,500
$83,600 $174,400 $13,543.75 plus 28% of the excess over $69,675
$174,400 $379,150 $23,756.75 plus 33% of the excess over $106,150
$379,150 Unlimited$51,287 plus 35% of the excess over $189,575

A Quick Note About Marginal Tax Rates:

As you can see from the tables above, a marginal tax system works very differently than a flat tax system. If the United States used federal tax rates based on a flat tax, then once you crossed over into a new tax bracket, all of your income would be taxed at that higher rate. For example, once a single taxpayer earned over $34,500 in taxable income, then they would pay 25% on all of their income.

However, due to our marginal tax system, this single taxpayer only has to pay 25% on taxable income over $34,500. You must keep this in mind when you evaluate whether a raise, bonus, or investment is as good or bad as it seems (especially when compared to a flat tax system).

photo by Infrogmation

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photo by alancleaver_2000

Filed Under: Taxes Tagged With: 2011, alternative minimum tax, federal income tax rates, federal tax rates, finance, flat tax, income tax, income tax filing, income tax in the united states, income tax liability, income tax rate, income tax rates, labor, marginal tax rate, political economy, public economics, tax, tax bracket, tax cut, tax rates, tax relief, taxation, taxation in the united states, Taxes

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