

Invert the Employee/Employer relationship start an Umbrella Company - pelle
http://stakeventures.com/articles/2008/09/24/great-business-idea-1-umbrella-companies

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run4yourlives
That's an interesting concept. I wonder what legal issues would need to be
tacked with regards to the notion of whether you are a "business" or an
"employee" to make that work in the North American market?

I wonder though, do the individual contractors market themselves as being from
that company? What does that do for the reputation of the umbrella corp?
Anyone have any details?

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zach
We have PEOs here in North America:

[http://en.wikipedia.org/wiki/Professional_employer_organizat...](http://en.wikipedia.org/wiki/Professional_employer_organization)

I worked for Administaff, a huge PEO, when I was at a startup video game
company. They are your employer-in-name on behalf of your employer-in-fact. So
all your payroll, benefits, etc. come from them. It enabled us to not have an
HR person (or any other non-development personnel) in the company until we
were acquired, which is a particular benefit in a small, product-focused
company.

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run4yourlives
That's a little different though in that the PEO works for your "real"
employer, whereas the Umbrella works for you, the employee.

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denglish
This is a pretty common practise here in Australia as well. I've been
contracting through an umbrella company - certainly takes the headaches out of
paperwork. Don't quite know how they manage it but usually their fee is added
on top of my negotiated daily rate rather than taken out of my rate. Works for
me :)

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tptacek
I'm not sure I see the difference between an "umbrella company" and every
private consulting company in the US.

* I assume the difference is, the "employee" in the umbrella scenario has to do their own sales and marketing? If so, how does some other company pay them a salary? They don't know what the revenue from the consultant is going to be.

* If the umbrella just provides invoicing, you can already outsource invoicing without changing your employment status.

* In the US, your "employer" is responsible for a portion of your payroll taxes, which adds financial risk and overhead.

* If you do the kind of high-end work most HN readers do, the major corp-to-corp relationship problem can't be outsourced --- the negotiation of a master services agreement. Are you working on some F-500 company's own paper? You're a sucker.

* If you're a contractor that plans to continue contracting, this isn't necessarilly a win: you've outsourced the corp-to-corp stuff to someone else, who now owns the paper for the deal and thus a chunk of the relationship. How do you resolve channel conflicts?

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pelle
The real difference is that it allows you to cut all the paperwork out of your
life. There are many people who want the perceived safety of W2 and/or don't
want the hassle of running their own business. Umbrella Companies make it very
easy to do so.

The umbrella company basically deducts payroll taxes, benefits expenses and
any other benefits and pays the employee.

For the majority of contractors this model would be easier. However granted
it's not for everyone, and it isn't supposed to be either.

An interesting side effect of having one or two good umbrella companies, could
be that people who don't normally contract might start preferring working
through them.

These wouldn't necessarily have to work on regular hourly contracts either,
but could do monthly fixed invoices that would map to a regular salary.

SF for example has lots of people who move from one job to the other several
times a year. Why not take control of your own benefits program.

As an entrepreneur myself I would probably prefer working with employees
through something like this than having to deal with it myself. Paying an
invoice is a hell of a lot simpler than having an employee.

There are other unexplored issues. How do you deal with stock options and
vesting for example. I'm not too familiar with the legalities of that.

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RobGR
If this were done in the US, the umbrella company could offer a 401k, which
many freelancers would like. (I know you can do it even as a freelancer, but
it's a hassle.)

Edit: There might be at least one place that does this:
<http://www.mbopartners.com/Individuals/groupbenefits.html>

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nazgulnarsil
this is interesting. basically offering the accounting department of a company
as a package deal?

I can definitely see something like this working in a tech dense area.

