Are Worker Status Laws Affecting the Contractor Market

I am curious and would love to hear from others with any experience regarding Worker Status laws. First, I have recently come across a couple of posts regarding a “crack down” on worker status violations. Probably in response to increased utilization of contracted workers as a result of recent legislated burdens in maintaining employees. Worker status is a determination of whether a worker must be classified as an employee or an independent contractor. The determination dictates whether the employer or the contractor bears the burden of employment taxes and worker protection under the law. Determination has always been a little gray and each tax and legal entity involved has their own methods. Further any difference in determination between the worker, workee* and taxing or legal entity is open for interpretation with the taxing or legal entity getting the final call.

Second, I am seeing a proliferation of so called W2 contract positions. My understanding is that these positions are offered as opposed to 1099 positions. Basically W2 means an employee, either employed by the workee or with an agency contracted to the workee, and 1099 means the position is a traditional independent contractor position (see more in the next paragraph), not many of these exist in my field anymore. This observation is consistent with my first observation that 1099 positions are being scrutinized and few 1099 positions would pass scrutiny. Basically the W2 positions are what I would call “temps” and these do not pay well. Surprisingly I have found that many recruiters don’t really understand the difference between a W2 and a 1099 position as they apply to the law and tax implications, especially the difference in cost and value to the worker and workee. I just recently tried to explain why the rate for a 1099 worker needs to be significantly higher than that for an equivalent W2 and why the cost to the workee is the same. He said he understood but still claimed he was not experiencing any difference in what was being offered.

Third, I have also been asked if I offer a corp-to-corp arrangement. Which, I discovered some time ago, is the term for exactly what I do offer. Provident Systems is an S-Corp which employs and pays me with a W2 and bears all of the employer burden of me, the employee of Provident Systems. A customer of Provident Systems gets a W9 Taxpayer ID as it would from any other vendor as required by IRS guidelines. And, clients do not even have to provide a 1099 to Provident Systems since 1099’s are not required to be provided to corporations, including S-corporations. So, a 1099 position, as opposed to a corp-to-corp, would be one in which the worker’s W9 indicted the worker as a “sole proprietor” and thus claiming his income on a schedule C of a personal 1040. In contrast, a corp-to-corp arrangement is not much different than buying goods and services as a company would from any other vendor.  Again, a distinction I have had trouble describing to recruiters looking for providers of short-term skilled services for their clients.  Part of their problem is the recruiting company they work for is looking to be the agency providing the W2 and then re-selling the worker’s time to the client. Trying to convert these opportunities to a corp-to-corp makes their compensation calculation difficult.

Finally, it is my understanding that since Provident Systems is an S-corporation which files a W2 for its employee and reports its income on a corporate tax return, there is no gray area on worker status with its clients. Much like there would be no gray area on a worker provided to a workee via a third party agency, such as the recruiting agencies. It just happens that in this case the “agency” providing the worker is also owned by the worker.

So, I would appreciate any comments on two areas. First, from HR professionals: are you seeing a push to only look for so called W2 contracts, aka temporary workers, through an agency? And second, from HR or legal professionals: is my information above correct? Is an employee of an S-corp (aka the owner) completely or mostly exempt from worker determination tests with respect to the S-corp’s clients?

* workee is to read as employer of contract client depending on worker status. Please excuse me for this liberty in terminology.

I Need a Wake-up Call

Buy low and sell high is one of those obvious sayings in the investment field. And then there is the law of supply and demand for price setting. So, right now I have a supply of time and not a lot of demand. So my time in theory is a little cheaper and I am investing it in three fronts. First, I am trying to get the word out that I am available for contract, in other words marketing to increase demand. This post is just such a contribution. I am also working with a past client that has some ideas but is not ready to pull the funding trigger so I am doing a little pro bono in another effort to increase demand. And thirdly, I am working on an open source based project that might turn into an entrepreneurial product if I can ever get out of the quagmire that is open source (more on that later).

So, which of these investments will provide future income? If future performance matches past experience then none of these will. To date, the only means for my gaining a new client engagement has come from someone I have worked with in the past, knowing of an opportunity, and strongly suggesting me for the effort. Even though I have and continue to search job sites, cold call managers and companies, presented at a conference and talked at length with agency recruiters, none of these efforts have ever produced a new client engagement. One of my most fruitful engagements for both me and my client came when a past neighbor who knew me because my kids babysat his kids and he suggested I might know something about FPGA to a client he worked with in the RF field.

I am somewhat reminded of what Mona Lisa Vito said at the end of one of my favorite movies: “ You know, this could be a sign of things to come. You win all your cases, but with somebody else’s help. Right? You win case, after case, – and then afterwards, you have to go up to somebody and you have to say- “thank you“! Oh my God, what a nightmare!”.  It may not be a nightmare but while you are waiting for your next win, and the help that you depend on to get that win, it can be a bit scary when you feel that it is not totally in your control. So, to all of you who have recommended me and continue to recommend me, Thank You again. And to you and everyone else, please send me a new wake-up call soon before my dream job gets to the nightmare stage.

New Cool Project?

If you followed a few posts from last year you might notice I started an open source project, blogged on it 3 times and then nothing. Three things happened. First, I hit a couple of road blocks slash speed bumps that slowed me down and discouraged me. Second, I became fully contracted with a bit of a commute which took away time for side projects. And, third I recognized that NIOS running Linux was at least passe and at most never relevant given that FPGA SoCs come with ARM processors now and running Linux on a NIOS is probably not practical.

So, now I am back to NOT fully contracted, ready to fight through road blocks and speed bumps and looking for something relevant. If you have been reading my recent posts, and by you I mean me, since based on the stats for this blog it is more of a personal journal than a publication, then you know I have been exposed to all of the open source platforms at the ESC conferences as well as crowd funding and entrepreneurship. So, I am off on another side project until one of three things happen (see above).

I am open to suggestions if anyone has a good one.

Call Me First and Get a Discount

If it is not obvious from my greatly increased blog activity, let this post make it clear that I my most recent contracted engagement expired about a month ago. Yes, I don’t seem to do much blog wise or otherwise when I am fully contracted. My most recent contract started last May and was originally for 6 months to assist an ASIC company with the emulation of their next generation network adaptor product. They asked me to take the lead on the emulation process and after that was established and they had hired a team to support the effort, they extended my contract to maintain the process until they delivered the emulation product to its first internal firmware development customer. Of course, just as we reached that milestone the company’s management purchased a competitor’s effort for a similar ASIC product and canceled their own. So although the emulation effort was successfully on track the product it was supporting no longer existed and a lot of good work was abandoned. Worse than that a lot of good people were released and of course the purchased competitor division is offshore and so on. That’s the bad news. The good news is I have recent experience with Xilinx Vivado and Virtex 7, experience with state of the art ASIC partitioning to FPGA and exposure to extensive use of  System Verilog code. If you are reading this you have probably already been contacted by me and directed to this blog site, which along with my LinkedIn profile, is my primary web presence. If you haven’t then call me and tell me you saw this first and I will give you a 50% discount on your first 20 hours of contracted service.

Two’s Company, but what we need is a Crowd

My next observation after attending EELive this year.

Crowd source funding is popular. Maybe it was just the choices I made in personalizing my conference schedule but it appears I need to add Kickstarter to my bookmarks right along side my favorites of Google, Expedia, Amazon and Wikipedia. I wonder if I can get as good at using it as I have the others.

Trendy marketing really does make the difference. With Kickstarter you start with a product message, an entertaining, visionary and maybe informative video (not too much because vagueness creates mystery) and a prototype (maybe just a mockup, video special effects makes it look like a prototype). Marketing now precedes product development and with marketing you can convince many to risk a little instead of trying to land one big investor who probably wants to see a history of income growth and a 2 dimensional product roadmap before writing the check. A Kickstarter investor is a bit like high tech QVC shopper. He watches the video and hits the buy now button. Except, no sales representatives need to be standing by and no inventory needs to be sitting in a warehouse.

There is more technology and ideas than products. Every where I look I saw open source hardware, open source software, cheap and free and easily hooked to the internet. Websites that advertise hundreds of project ideas, development platforms and cloud services. All in search of a product. Or are they in search of a profit? I don’t know. The product seems to be the development platform and the consumer is the developer. Case in point: This company initially tried a Kickstarter campaign for a WiFi connected light bulb socket adapter that used a cloud service to connect your lightbulbs to a phone application. They wanted more than 4000 people to sign up to buy these at $59 each and surprisingly may have actually got about half that. Apparently, though, for the other 2000 people they needed, $2000 is more than they were willing  to pay to control all of the lights in their average US home from their cell phone.

With that campaign expired without full funding, the company took the WiFi guts out of their product and campaigned again on Kickstarter with just a WiFi development board at $39.  They already had the design and manufacturing of these boards figured out. In fact so does Texas Instruments, MicroChip, Atmel and several module companies. But they have a cool video and they do open source everything and that is attractive. So even though they only asked for a few hundred backers. They got over 5,000. So, the lesson is, you can’t get 2000 people to buy your internet of things (IoT) product but you can get 5000 people to try to do it better.

And another lesson may be sell the hardware cheap, give away the software and get people to develop lots of products that depend on your free cloud service. Which is free just like Netflix streaming and Logmein was.

EELive – ESC 2014 Presentation

Here are the slides from the ESC 2014 Presentation (ESC Slides). This project was completed under contract between Provident Systems and Advanced Microwave Products. All of the project from the interfaces to the Video and Audio codecs to the DAC of the transmitter and conversely the ADC of the receiver was implemented in two Altera Cyclone III FPGAs. One for the transmitter and one for the receiver.  This included all of the COFDM processing as well as encryption, framing, packetization, buffering and data loss compensation for the delivery of the video, audio and data.


Cheap, Cheap

Two weeks ago, I attended a conference, EELive 2014. Last fall I decided I should pursue some exposure to increase my network in hope of finding new clients. I google searched embedded systems conference and found one called exactly that, ESC. I submitted a proposal to present and they accepted. They also changed the name to EELive. ESC was still embedded, pardon the pun, in the conference as a track.

So I attended for  four days handing out business cards and doing my best to schmooze. And, I presented a case study of my COFDM transceiver work. I was second to the last session of the conference, to a couple of dozen die hards. Did I achieve some exposure? I hope so but I also made a few observations about the industry in which I currently participate and that may prove more useful than I had planned. I started writing a post with some of those observations in a somewhat random order and now that it has grown too large for one I will break it up into a week or more shorter posts. Here is the first.

My first observation; hardware is cheap. I have been to conferences before and I have had a closet full of backpacks, water bottles and logo’d footballs. But this time I brought home 3, could have been more, very capable hardware development kits as free SWAG. One is a low power bluetooth dongle, another is a near field communications kit complete with fairly good sized color LCD screen and the third is a very capable 32 bit micro ala Raspberry Pi. I was convinced I had really scored some valuable stuff until I discovered what they all cost at their manufacturer’s website. I had been reading about the Arduino and Raspberry Pi phenomena but I did not realize that these were just the most publicized of a whole catalogue of cheap, very powerful, development platforms.

Is software still cheap? Software engineers have generally earned less than hardware engineers and I think that is still true. However, everything is now full of software code. So although a hundred lines of software code may still be cheaper to develop than a few hundred ASIC gates, there is a lot more code demand than gates. The gates market seems to be saturated while the code market is still hungry. And, the software cost required to build a microprocessor based product far exceeds the hardware cost.

The real market is ideas. I don’t know how much a good idea is really worth or how much one costs to develop but Google and Facebook buy a good idea for about a billion dollars or more just about every week. The amount they pay far exceeds the hardware or the software cost. What they seem to be paying for is just the idea. And not just the idea itself but the popularity of the idea. So more specifically the real market seems to be a popular idea.