Posted by News Express | 25 December 2017 | 3,252 times
To be clear, proration is not a radical idea. Social Security and Medicare have always been prorated: Zoe’s employer pays half of her 15.3 percent combined Social Security and Medicare tax, regardless of how many hours she works. But all mandatory benefits that normally accrue to full-time employees on a daily basis — sick days, vacation days, health insurance, unemployment insurance, workers’ compensation insurance, retirement matching, Social Security, and Medicare — should also accrue to part-time employees (hourly, salaried, or contract) and sharing-economy providers on a prorated hourly or equivalent basis.
Portability: Job-based benefits no longer make sense in an economy where fewer and fewer workers hold traditional jobs. This is why these accrued benefits must be fully portable, following the worker from job to job, or contract to contract. For example, paid vacation days that Zoe accrues at one employer could be carried over to her next, although the cost of paying for these days would come from funds banked in her Shared Security Account. Because benefits from multiple employers are pooled into the same account, portability and proration work together to provide workers with the full panoply of benefits, even within the flexible micro-employment environment of the sharing economy.
Universality: In the new economy, a basic set of benefits and labour standards must be universal across all employers and all forms of employment, with few exceptions or exemptions. While there is much to recommend the innovations introduced by companies like Uber and TaskRabbit, they are currently exploiting gigantic loopholes in our social contract by transforming jobholders into independent contractors, thus stripping them of essential benefits. A robust set of mandatory universal benefits would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive.
Within the context of the Shared Security Account, there would be essentially two types of benefits: those that are accrued over time, retaining a specific dollar value, and those that provide insurance against life events, foreseen or otherwise. And the two types of benefits would be accounted for differently.
Mandatory accrued benefits should include a minimum of five days a year of paid sick leave, 15 days a year of paid vacation leave, a matching 401(k) contribution, and the same health insurance premium contribution as currently required under the Affordable Care Act (ideally, health care would fall into the insurance benefit category, but that is a larger battle). Employers — that is to say, whatever entity is paying the worker — would be required to contribute to the worker’s Shared Security Account with each paycheck, with the contributions prorated based on a standard eight-hour day, 40-hour week, and 2,080-hour year. For example, 20 days a year of combined vacation and sick leave is equivalent to a contribution of $0.0769 for every dollar of wages paid, and that is the rate at which companies like TaskRabbit and Uber would contribute for non-hourly piecework (of course, there will always be under-the-table employment that circumvents these requirements, but that is true already). There would be restrictions on how and when the worker could withdraw the funds.
Mandatory insurance benefits should include unemployment, workers’ compensation, and paid maternity, paternity, family, and medical leave. These would not be cash benefits that the employee could accrue and cash out, but rather pooled insurance to which both the employer and employee would contribute small premiums as a percentage of pay, based on actuarial tables.
As for who collects and holds these contributions, there are several potential options. It could be the state or Federal Government, as with existing payroll deductions. It could be one or more not-for-profit institutions analogous to the old Blue Cross and Blue Shield. It could be a public/private institution created expressly for this purpose. It might even be the bank or credit union with which you’ve already set up direct deposit (it is quite likely that the value of holding these funds would more than cover the cost of administration, leading to competition for your business). As little as a decade ago, such a system might have been considered a costly logistical and accounting burden, but the electronic debits and credits of one’s Shared Security Account are nothing compared to the transactional complexity of the fast-growing sharing economy.
The universal, portable, and prorated features of the Shared Security Account would assure that all workers accrued basic job benefits regardless of the changing nature of employment. But that alone is not enough to provide the economic security necessary for the middle class to grow and thrive. The new economy also requires the adoption of a complementary set of minimal Shared Security Standards to level the playing field among employers while giving all the opportunity to fully participate in the economy.
We would be continuing this discourse in the next article. For further details call on me for in-depth discussions, business advisory services and training.
•Lawrence Chukwuemeka Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via email@example.com (07066375847).
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