The Job-Hunting Conventional Wisdom FAQ -- Part 5: On the Job

Contents

Q-5.1 Is it acceptable to talk business with co-workers in the elevator?
Q-5.2 What is the correct way to answer a business phone?
Q-5.3 What are the IRS 20 Questions? (U.S.)
Q-5.4 Is it appropriate to visit a co-worker in the hospital?
Q-5.5 Is all discrimination in employment illegal?
Q-5.6 I just noticed that 10% of my paycheck is taken out as union dues. I don't want to be a union member. Can I have a refund?
Q-5.7 How does deferred compensation (retirement benefits, profit sharing, etc.) work?
Q-5.8 How do insurance coverage benefits work?
Q-5.9 How does paid time off work?
Q-5.10 How do stock options work?
Q-5.11 What other benefits are commonly offered to full-timers?

Q-5.1 Is it acceptable to talk business with co-workers in the elevator?
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No, for two reasons. First, the co-workers are a captive audience and have no choice but to listen to you. Second, visitors may be listening in.

Q-5.2 What is the correct way to answer a business phone?
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When answering your own line, state your name: Jane Doe speaking. When answering someone else's line, state their name: John Roe's office, how can I help you? When answering a general line, state the department (application development, how can I help you?) or the organization (Hacks 'R' Us, how can I help you?).

Q-5.3 What are the (U.S.) IRS 20 Questions?
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The 20 Questions are a paraphrased version of what the IRS uses to determine if you are an independent contractor or an employee.

The 20 questions exist also to protect individuals from being taken advantage of by large companies. Without them, the protection guaranteed to employees such as unemployment insurance, workmen's compensation, social security, paid overtime, non-discrimination, and right to organize unions would be worthless.

It is not just the IRS that is concerned about these issues. A bigger concern for the client is legal liability. If you have someone on site for a long period, and that person is seriously hurt, they are VERY LIKELY to file for workmen's compensation, and claim that they are a common law employee. If their contract ends after a long period, and they can't find work, and can't pay the mortgage, they are likely to file for unemployment insurance.

When retirement time comes around, they may try to force past clients to pay social security.

Text of the Twenty Questions

[From IRS form SS-8 (which you can file with the IRS and let them determine your status).]

  1. Is the person providing services required to comply with instructions about when, where, and how the work is to be done?
  2. Is the person provided training to enable him to perform a job in a particular method or manner?
  3. Are the services provided integrated into the business' operation?
  4. Must the services be rendered personally?
  5. Does the business hire, supervise, or pay assistants to help the person performing services under contract?
  6. Is the relationship between the individual and the person that performs services for a continuing relationship?
  7. Who sets the hours of work?
  8. Is the worker required to devote his full time to the person he performs services for?
  9. Is the work performed at the place of the business of the potential employer?
  10. Who directs the order or sequence in which the work must be done?
  11. Are regular oral or written reports required?
  12. What is the method of payment-hour, week, commission, or by the job?
  13. Are business and/or traveling expenses reimbursed?
  14. Who furnishes tools and materials used in providing services?
  15. Does the person providing services have a significant investment in facilities used to perform services?
  16. Can the person providing services realize both a profit or a loss?
  17. Can the person providing services work for a number of firms at the same time?
  18. Does the person make his services available to the general public?
  19. Is the person providing services subject to dismissal for reason other than nonperformance of contract specifications?
  20. Can the person providing services terminate his relationship without incurring a liability for failure to complete a job?

Q-5.4 Is it appropriate to visit a co-worker in the hospital?
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No. A professional will resent being seen lying in bed, incapacitated, and wearing pajamas. Instead, send flowers, books, cards, notes, and call on the phone as soon as the person is well enough to receive calls. Don't say either We're doing fine without you, or The office is falling apart without you.

Q-5.5 Is all discrimination in employment illegal?
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While discrimination in employment is a complicated and a controversial topic, one can definitely say than not all discrimination is illegal. For example, an employer has the right to discriminate against candidates with little education -- unless this leads effectively to discrimination on other, illegal, criteria. A city can require its employees to live in the city and refuse to hire anyone from the suburbs. Certain criteria for discrimination have been outlawed in the last few decades in most countries. For example, it's usually illegal to refuse to hire or promote someone because of the color of their skin or their sex (but there are exceptions to that, such as the 'affirmative action' program in the U.S.). Other examples of legal discrimination might be a family refusing to hire a man as a babysitter (insisting on a woman), or a theater refusing to hire a black actor to play a white character. Many jurisdictions also have outlawed discrimination based on marital status (can't refuse to hire someone because s/he is/isn't married), religion (with some exceptions: a synagogue can refuse to hire a Christian to work as a rabbi), disability (if it doesn't interfere with the job duties), and sexual preferences.

A company that tried to practice no discrimination in employment would probably have to hire all applicants indiscriminately on first-come, first-hire basis (and even then it would discriminate against the late comers). It probably wouldn't hire the best people. On the other hand, a company that practices 'illegal discrimination' is probably violating certain laws.

Q-5.6 I just noticed that 10% of my paycheck is taken out as union dues. I don't want to be a union member. Can I have a refund?
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This section is under construction. Contributions welcome.

Q-5.7 How does deferred compensation (retirement benefits, profit sharing, etc.) work?
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In various deferred compensation plans, the employer defers part of the compensation until later. Sometimes no income tax is paid on the deferred compensation until it's actually paid. Sometimes the employee can make additional voluntary contributions funds to the plan and not pay income tax on them. Sometimes the employer makes a matching contribution.

In the US, retirement plans can be qualified (confirming to S.401 of the Internal Revenue Code, and qualifying for tax benefits) or nonqualified. In qualified plans, neither the contributions nor the interest from the investments in the plan are taxed until actually received by the employee. Nonqualified plans can't be unconditionally funded by placing the deferred payment in escrow. The employee has the company's promise of payment, but the compensation is not secured. If the company goes bankrupt, it may be lost.

Under nonqualified plans, some companies require their employees that in order to receive their pensions they must not compete and must make themselves available for consultations after retirement. Read the fine print.

Unlike a pension plan, a profit sharing plan has no commitment by the employer to contribute a fixed amount of money. Instead, the contributions are typically a portion of the employer's profit in a given year. In bad years, contributions may be reduced or skipped altogether. Wording like UP TO 15% of profits means that the management may choose to contribute a much smaller percentage in a good year.

Pension plans can only be used to save for retirement or disability. Profit-sharing plans can sometimes be used after as little as two years for house mortgage financing, college tuition, emergency loans, etc.

If you leave the job, you may be able to withdraw your vested contributions (and pay income taxes) or do a rollover into your new employer's plan or your own Individual Retirement Account (IRA) within 60 days.

Some plans (even qualified) have rigorous vesting provisions. For example, if you become 50% vested after 5 years of employment, with 10% increments each year, this means that if your employment is terminated within the first five years, you forfeit all your contributions, and if you leave in the seventh year, you forfeit 30% of your contributions. Read the fine print.

Some companies also allow an employee to set aside a specific amount for child care, dental and medical expenses not covered by the insurance, etc. The employee does not pay income tax on this portion of the compensation. During the year, this fund is used to pay for these expenses. At the end of the year any unused funds are forfeited (to allow for the tax deduction).

Q-5.8 How do insurance coverage benefits work?
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Employees as a group generally get lower rates on various types of insurance than they would if they purchased it individually; and employers often pay some or all of the insurance premiums.

In many countries, medical insurance is provided by the state. In the US, medical coverage became very generous during the periods when the government capped wages, and employers tried to attract better workers by offering more benefits. Currently, medical benefits are shrinking.

Most employers offer a choice of several medical insurance plans; depending on which one you choose, and whether you want coverage only for yourself or for your family as well, a certain amount is deducted from your paycheck.

Things to look out for in a medical package:

Many employers also provide life insurance benefits (which may be taxable in the US). If you choose to buy life insurance, you can usually get better rates through your job.

Some employers try to impress candidates with an array of insurance benefits that sound impressive, but are very unlikely to be used (and hence cost the company very little in premiums). For example, the company may provide an insurance policy that'll pay you a if you become disabled travelling on a company business. A general disability insurance may cost more but provide more realistic coverage. Or, limited dental plan might refer to a policy that'll only pay for replacing healthy teeth lost in an accident -- a rather uncommon dental procedure.

Q-5.9 How does paid time off work?
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Paid vacations are the most obvious form of paid time off. Good managers insist that employee take vacations to make sure that the enterprise can run without any particular person. Depending on your rank and the time with the company, you are allowed a certain number of vacation days per year (either calendar year or work year based on your date of hire). Some companies allow you to carry over unused vacation days into the next year and/or to be paid for not using all the earned vacation days. Unlike sick days, vacations should be planned.

Holidays: most US companies observe New Years Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Many also observe the day after Thanksgiving, Presidents' Day, and Martin Luther King Day. Some observe religious holidays, like Good Friday or Yom Kippur. Many companies offer some set holidays and some floating holidays that you can use for your own birthday, a religious holiday, or treat it as part of the vacation.

Sick/personal days are often treated as floating vacation days as well. Many companies ask you to telephone your manager every day when you're out sick, so you don't quite call in sick and go to the beach. An employee is often allotted a certain number of sick/personal days off per year. Unlike vacation, unused sick days and floating holidays are usually forfeited at end of a year.

Q-5.10 How do stock options work?
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Many publicly traded companies offer stock options or employee stock ownership plans (ESOPs): in a typical plan you're allowed periodically (typically, once a year) to spend part of your salary (typically 5%-10%) to buy stock in the company from the corporate treasury at a 10%-15% discount from the current market price (or the lowest price over some period). You can sell the stock at a profit, or keep it. In a common variation, you may purchase a certain number of shares at a fixed price (such as the market price at the time the option is granted) which may be below the market price at the exercise time by much more than 15%, if the stock has appreciated. If the stock depreciates, you don't exercise the option. Many companies also have dividend reinvestment plans (DRIPs) where instead of receiving cash dividends on the stock you own, you receive more shares of the stock.

Some companies have a lock-up period, during which you can't sell the shares received through an ESOP (typically 6 months). If you're intent on exercising the ESOP and circumventing the lock-up period, your stock broker may help you sell your stock at a price comparable to the current market price, to be delivered after the lock-up period. Even if you don't want to take the risk of holding the stock that may go down in price, there's seldom any reason not to exercise the stock option to the maximum allowed if you can sell the stock immediately at a profit.

Q-5.11 What other benefits are commonly offered to full-timers?
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Training/tuition reimbursement: in most technical fields, an employee must spend a certain amount of time every year just to keep up with the changes in technology. A company that ignores this fact is not a good place to work. Some companies also encourage employees to learn new technical and managerial skills. Typically, an employer will pay for a Master's degree, reimbursing 100% of tuition for an A grade, 75% for a B, etc. Some companies give the employee certain time and money to be used for training at her discretion. This benefit may be taxable if the coursework is not related to your current field.

Tuition reimbursement at the company's discretion means that when the time comes for you to be reimbursed, the company may refuse to pay since it has no guarantee that you won't leave the company soon. (This is a faulty argument: you should be reimbursed because you're working for the company now.) Some companies ask you to refund the tuition if you leave within a certain time after being reimbursed for it.

Subsidized company cafeterias are common. Some employers allow dinners to be ordered from the outside after a certain time and billed to the company.

Other common perks include subsidized exercise clubs, child day care, travel agencies, and parking reimbursement. To comply with the Clean Air Act, some companies reimburse employees for travelling by public transportation (up to $720/year). Companies often allow employees to purchase their own products at deep discounts; e.g., a personal computer manufacturer might sell its own computers to employees at dealer's price; a retail chain might sell certain merchandise to employees at cost.