Nonononono. You're hired as an employee. There is a legal and ethical agreement for them to pay you at the intervals agreed upon in your contract. There are no ifs or buts about it, no invoicing them, no excuses for 'just started'. Payroll is NOT hard.
No - you are completely wrong.
There is absolutely nothing wrong - or even remotely immoral - about paying using invoicing while a company gets going. It's common and normal.
And payroll is not easy - it's a huge mess - and it can be very complicated.
If a founder, with funding, told me: "Invoice us for the first two months until October when we are up with payroll" I would have no problem with that so long as I was getting paid.
Again - of all things, it's not the issue.
The non-payment, the lies about funding, the loans from staff, and all the rest were bad signals.
What's odd is how nobody seemed to have anything to say about the product itself ...
If my contract says I'll be paid monthly on the 15th, when do I send in the invoice? Are the payment terms net-10, net-30, or longer?
Do I need to break out sick or vacation days as its own line item? What about the deductions?
Who is responsible for figuring out and paying the payroll tax? Because it sounds like asking for an invoice is a way for the company to avoid paying unemployment tax, social security, etc. That in itself would be a red flag.
If the invoice is not paid, can I file it as a wage claim or do I use some other mechanism?
These are the obvious questions. If as you say it a common and normal practice, there must be some place which describes the basic details.
If payroll is hard for a company, why is it any easier for the employee to figure out these payroll details?
I send in the invoice? Are the payment terms net-10, net-30, or longer?
Do I need to break out sick or vacation days as its own line item? What about the deductions?"
If you are having difficulty grasping this - you should not work for an early stage startup that is pre-funding. You are expecting very standard 'employeeship'.
If you are an 'employee' of the company - yes - you are required to be paid with W2's etc. - of course.
But if you're not obligated to be an employee of a company to accept equity - or other kinds of payment for services rendered.
As far as 'invoicing' - either you're being sarcastic or you've never done such a thing. You send an invoice, and you get paid. You have to claim it yourself in terms of taxation. As far as 'terms' - I'm hoping you are kidding. Either you get paid or you don't.
The company in this article I think was well past the time wherein they should have had had payroll set up - no doubt about it.
At the same time - it's absurd how confused many of you seem to be about the simple mechanics of getting paid.
You do not need a payroll system (i.e. W2s) while you are in the most early stages of a company.
There is no special exception for startups where employee salaries are exempt from payroll taxes. It is also illegal for a company to pay you as a contractor when you are really an employee. What you propose sounds exactly like breaking the law.
Also, a company which proposes this arrangement takes on the liability that the 1099 contractor could come back in the future and sue for the taxes and benefits that a W2 employee would have received. That happened to Microsoft a few years ago.
I was giving you a chance to demonstrate that this practice is common and that you know what you are talking about.
However, given your posting history I should have expected continued blustering where you demean others for lack of knowledge. Why, just the other day you said that I, spouse of an Army vet who did two tours in Iraq, didn't have exposure to family members in the military. Now you say that I, employee of two startups and founder of two more, have no startup experience.
No one in this thread says a startup company needs a payroll system. The question is about paystubs for employees, which the employer can even do by hand.
You should really talk to an HR/tax attorney before you continue to spread misinformation.
If you are an employee, the company is required by law to withhold taxes and pay you regularly. Every state in the U.S. has an agency that will take and prosecute wage claims. People have gone to jail for messing with witholding taxes.
If you just invoice, you are effectively an independant contract, they might not pay you, and you are on the hook for paying your taxes. A big difference.
It astonishes me that anyone could be so ignorant as to say there is nothing wrong with making people invoice you. As you've correctly stated, it's a completely different relationship. Even the liability is different.
If you're a contractor and the guy who signs your checks says "nice ass! Now shut up and do your work" He's pretty much just pissed you off and as a self-employed contractor, you're free to decline and move on to another "client". If that same person is your employer, he's broken several civil laws and in most jurisdictions, committed an actual crime.
We could both go on for hours on the differences which is why this whole thing amazes me.
The fact, for a number of different states in which I've employed people (including MA, CA, NH...) is that there are very specific requirements for hiring people, and
NO, YOU CANNOT SIMPLY "pay using invoicing while a company gets going".
Federal and state laws specify that all employees are W2 status, and you are REQUIRED to withhold taxes. Management is even personally on the hook for these tax liabilities.
There are exceptions under certain limited criteria in which you can hire people as outside contractors -- commonly referred to as "1099s" -- the Federal laws are quite tight (the famous '20 questions'), and state laws are even tighter. E.g., in MA you cannot hire any person who performs core functions of your company as a 1099, so if your company writes software you cannot hire anyone to work on that software as a 1099 (but you could hire someone to, say, customize your office accounting package as long as you are only using it). Yes, it is that tight.
Just because some founders decide to break the law, and you would be happy to go along with them, does not make it legal.
Employees cannot invoice their earnings, they must be paid according to the law and the employment agreement you signed with them.
Yes payroll is complex but this is exactly why it needs to be done correctly and timely. The earnings, taxes, insurance, and other liabilities must match up along with all the reporting requirements. There is no way around this. You cannot just skip the complexity by telling them to invoice you.