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Business has recently picked up for me, largely because I stopped doing pro bono work for NASA (as much as it was fun and looks good on a resume, not being paid for more than a year was really not sustainable), and I ended up hiring two people to help me assemble circuit boards and drone bodies. I guess this makes me a Job Creator(tm). The only time I've ever had to manage people was for hours at a time on sailboats, so I'm a little jittery. This happened 3 weeks ago to this day, so I've had a little time to reflect on the change.

While I wait for a congratulatory call and complimentary GOP membership from Mitt Romney, I'd like to ask for some advice from the reality-based community...

I hired these two very interesting women, about a year or two younger than me, pretty much off the street: they mentioned being about to be homeless in a chatroom, and I offered a place to crash for a few days while they looked for another place to rent. That happened (I have taken an informal vow of hospitality, having been in that situation myself a couple of times), but one of these girls (let's call her Lia) saw all the electronics stuff and mentioned wanting to learn to solder. I was overjoyed at that. Turns out that the other girl (let's call her Anna) had tried to do the whole startup thing earlier on, and knew how to code to some degree.

I'm now in the odd, but historically common situation of having two apprentices living with me. They're married (domestic partnership, come on California you've done better than that!) so I gave them their own room as soon as I could move the spare parts out of it. There has been a little bit of adjustment about using up the hot water, keeping the cats inside, and so on.

This works overall quite well; stuff got done, autopilots got built and sold, and I have a lot more free time for design so I can come up with new products.

What I am uncomfortable with is that by some metrics, I'm running a sweatshop: I've been paying them somewhat above market rate, and taking on all the bills and even groceries, but it will be difficult for Lia and Anna to move out if they insist on not saving money. What I have been doing other than providing room and board is paying them minimum wage for their time, plus x dollars per "piece" they finish, and x/2 per "piece" that they finish but doesn't work and needs me to rework it; x varies from $5 for an audio-port modem, which takes about 15 minutes to make, to $50 for a full NAVCOM autopilot, which comes in mostly preassembled by a fabrication house but must be tested rigorously. On average that tallies to between 20-25 dollars an hour, again plus the room and board. However, this seems to not be enough for them to save up enough to be able to move out.

The issue is that while I live in a rather spartan fashion (I only drink water, go to the movies an average of four times a year, am not above a bit of dumpster-diving for parts for my server, etc.) they have told me that this is really not the proper way of existing, culturally; in order to properly belong to their specific subculture -- their words --, both Anna and Lia seem to put most of the money they make from me towards sodas, oddly expensive compressed gas capsules, and likewise oddly expensive incense. This while they choose to buy little other than ramen at the grocery store even though I keep telling them that they're welcome to healthier stuff, since I'm paying for food anyway! (At least they appreciate proper pasta when I make it)

What am I doing wrong, and what else should I be doing? I do not want these otherwise wonderful women to need me in their life, but I don't want to tell them how to live it, either.

UPDATE: For what it's worth, this was supposed to be a very temporary thing. It's been 21 days now, so I'm looking into the necessary paperwork. I may keep them on if it's feasible for me to do so, paperwork scares me and I haven't invented a way to scare it back yet.

Poll

Am I running a healthy workplace?

3%1 votes
66%18 votes
22%6 votes
7%2 votes

| 27 votes | Vote | Results

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Comment Preferences

  •  Tip Jar (6+ / 0-)

    I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

    by spiritplumber on Mon Dec 10, 2012 at 07:24:45 AM PST

  •  It is difficult to be all things (6+ / 0-)

    You are a boss, benefactor, friend, etc..  

    You are providing more than sweatshop wages and compensation.

    If they are good employees then you have a lot to work with.

    You are living with 2 other humans who have different experiences and ideas.  How they spend their money should of no consequence to you unless it is illegal or completely against your belief system.  If they did not live in your house you would have no say in how they spend their money.

    Perhaps the object should be to help them find their own living space in a set amount of time while keeping them as employees.

    My Brothers Keeper

    by Reetz on Mon Dec 10, 2012 at 07:58:43 AM PST

    •  Yes (3+ / 0-)
      Recommended by:
      Reetz, llywrch, cassandracarolina

      I've been trying to; the issue is that if I give them a $350 bonus for say setting up a 3d printer, they will take the money, spend it mostly on gas and incense, and about half the time not finish setting up the 3d printer. By my math they should have about $1200 saved up by now, which should be enough to start looking at an apartment - I even agreed to pay for part of a deposit. Instead, they have not saved much if anything. I am told that their subculture does not differentiate between needs and wants.

      I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

      by spiritplumber on Mon Dec 10, 2012 at 08:04:46 AM PST

      [ Parent ]

      •  OK (6+ / 0-)

        If they are taking money and not completing the task that they were paid for you have a problem.

        You need to sit down and have a serious talk about your expectations.  Not sure what culture they come from but they live in your home and should respect your culture as well.

        Maybe they were homeless because they dont have a clue how to manage money.  I would start a forced savings program with them and if they balk, tell them they will no longer have a job, or a place to live.

        My Brothers Keeper

        by Reetz on Mon Dec 10, 2012 at 08:23:16 AM PST

        [ Parent ]

        •  Expectations (3+ / 0-)

          This is in the Bay Area, and these are both creative/slacker types. I'm their reintroduction into the workforce after about a year. "Anna" has given me her word of honor that the job will be finished.

          I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

          by spiritplumber on Mon Dec 10, 2012 at 08:31:48 AM PST

          [ Parent ]

          •  To be blunt, ... (1+ / 0-)
            Recommended by:
            Trobone

            you are being taken advantage of.  

            My advice to everyone, no matter the circumstances, is to pretend your best friend is telling you this story.  Figure out what you'd honestly advise him/her do, then follow that advice yourself.

            "Two things are infinite: the universe and human stupidity, and I am not sure about the universe." -- Albert Einstein

            by Neuroptimalian on Mon Dec 10, 2012 at 11:53:22 PM PST

            [ Parent ]

  •  Interesting story (7+ / 0-)

    There are signs of a new economy everywhere I look, as society adjusts to new realities, and as internet disintermediation of both supply chains and market channels.

    I have neighbors that raise alpaca, send their wool to Peru, get finished goods in return, and market at art shows and on a website.   They make some handmade articles here in the US, using knitters and crocheters in homeless shelters and halfway houses.  But the capital costs of knitting looms is beyond their reach.  

    I don't know the answer to your questions, but,

    What strikes me most, is the potential impact of a single payer health plan on freeing up entrepreneurial talent and drive.    

    •  Very much agreed (0+ / 0-)

      it'd be one less thing to worry about. As it is, I had to get both of them eyeglasses. I can't imagine going a day without eyeglasses, much less almost a year.... shudder

      I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

      by spiritplumber on Mon Dec 10, 2012 at 07:43:54 PM PST

      [ Parent ]

  •  Are you taking out FICA, & state & federal (7+ / 0-)

    unemployment taxes properly? If not, you could be in big trouble. Being an employer is not for the faint of heart. You seem to be confusing being a human being with running a business, and despite what Mitt Romney said, the two are not the same thing.

    •  Still learning about that (5+ / 0-)

      Not yet,  I will when they agree to formalize the relationship, there's no contract yet; I keep asking but they're not interested in editing it and signing it.

      This is supposed to be a temporary thing (my priority is allowing them to move out), but it has been 3 weeks which is why I'm going to start looking into the paperwork now.

      At the very least I am absolutely not kicking them out around Christmas, if the law has a problem with that, the law is wrong.

      I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

      by spiritplumber on Mon Dec 10, 2012 at 08:13:35 AM PST

      [ Parent ]

      •  spirit - you have some employment law issues (9+ / 0-)

        technically these are employees and you have to be withholding FICA and income taxes and reporting all of this to both state and local government agencies. Because the amounts are small you can probably get away with treating them as contractors and giving them a 1099 at the end of the year, although they don't meet the legal requirements of independent contractors. However, unless you do something that documents that you have direct labor expenses you won't be able to deduct what you are paying them from your gross revenues for tax purposes. As you are becoming aware there is a significant additional administrative burden on entrepreneurs and small businesses once you hire your first employee.

        "let's talk about that"

        by VClib on Mon Dec 10, 2012 at 08:29:30 AM PST

        [ Parent ]

      •  Well, if they are using your tools and working in (3+ / 0-)
        Recommended by:
        cassandracarolina, SilentBrook, kurt

        your facility (i.e. your home) it would be hard to argue that they are independent contractors (in any event, you'll have to file 1099's for them). So if there is any dispute in the future, you could easily be on the hook for ALL payroll taxes, both their portion and your portion.

        •  I'm hoping that (3+ / 0-)
          Recommended by:
          plumbobb, llywrch, cassandracarolina

          I'm hoping that I will not be hounded by the IRS for this if it's only lasted for three weeks - in honesty I'd rather give them more money now.

          I like the work they do, when they get around to doing it, but my priority is getting them to move out. I don't mind roommates but I need to put some distance physically and emotionally.

          Again, my issue is that they have spent all their wages on consumables and can't move out yet. I do not understand their strategy and they're not interested in explaining it to me.

          I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

          by spiritplumber on Mon Dec 10, 2012 at 08:42:00 AM PST

          [ Parent ]

          •  Every employer would like to give his/her (3+ / 0-)
            Recommended by:
            cassandracarolina, VClib, kurt

            employees more money rather than give it to the government. But you have to anyway. Or you can get in serious, serious trouble.

            •  I appreciate paying US taxes (0+ / 0-)

              they actually buy me good services. Part of why I'm asking for advice here is that I'm asking for advice in general, especially to friends who already have a business with employees; I will gladly do extra work to comply with the law if it doesn't break my ethical rules.

              I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

              by spiritplumber on Mon Dec 10, 2012 at 07:43:01 PM PST

              [ Parent ]

      •  Be very careful about doing without a contract (4+ / 0-)

        If you don't have a contract, what happens is that local law and "precedent" determine the actual "contract".

        For example, just from tenant/landlord law, in Callifornia if you ever allow a tenant to claim to represent you, they become a "manager" and have rights to sublet, which can make things extraordinarily complicated to untangle if the tenant OR the subletter suddenly decide to stop paying rent.

        Accepting rent late without issuing a warning every single time can lead to a legal precedent that the "real" date when rent is due is on the 10th, not the first, regardless of what the lease says.

        Stuff like that.  Essentially, at least with tenant/landlord law in California, pretty much any behavior that allows the tenant to live on the property becomes a precedent for the future.   A lease (contract) helps with that a lot, allowing you to spell out ahead of time important things that can be immediate cause to evict (damaging property, breaking the law on the property and disturbing the neighbors are the holy trinity) but the lease has to also be backed by action  (if wild parties are disturbing neighbors, you need to post a legal warning to your tenants and you need to follow through and evict if they repeat after the warning or your ability to evict for cause is weakened and you instead might be held responsible for any "disturbing the peace" or property damage that occurs during future parties).

        I don't know employer law in the bay area, but I'm sure there are pitfalls there too.   The point is, you have a legal relationship with these people with or without a contract.  Think of it like how property works in a common-law marriage state.   The contract allows both parties to free themselves a bit from the local law and clarify what their obligations are to each other.  Contracts should have a severability clause, which just means that if any part is found to be illegal, the rest still stands.  

        Thus if you make a contract, they sign it and it turns out one clause violates labor law, the rest is still binding (although you should cross out the offending clause and re-sign the amended contract, of course, should you find out if not already in a legal dispute).

        If your situation is too complex for self-help legal books to make you sure what to do, it really is worth spending $100 or so to get a consultation with a lawyer who specializes in this kind of law to help you write a proper contract.  (most folks can do ok with the boilerplate stuff, crossing out or amending a few paragraphs).

        •  I keep insisting on a contract (0+ / 0-)

          but they keep not touching the wiki, so I have nothing to print yet.

          I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

          by spiritplumber on Mon Dec 10, 2012 at 07:41:47 PM PST

          [ Parent ]

      •  I echo what VClib said, ... (0+ / 0-)

        but you should be aware that the authorities won't care a bit how kindhearted you want to be.  You have a legal obligation to report their wages, etc.  The fact that they won't "explain their strategy" or are refusing to "touch the wiki" should tell you all you need to know; i.e., they intend to subvert the law ... and will stick you with the consequences if it comes to that.  Save yourself before you find yourself facing false assault charges or worse.  Seriously.

        "Two things are infinite: the universe and human stupidity, and I am not sure about the universe." -- Albert Einstein

        by Neuroptimalian on Tue Dec 11, 2012 at 12:03:12 AM PST

        [ Parent ]

  •  i voted that you're being taken advantage of (5+ / 0-)

    it's not a sweat shop because they're not forced to live there, you're paying above minimum, and they get room and board.

    IMO, that's not a bad deal for them at all.

    the problem is, they have no incentive to change it, they get free food, free place to stay, and they can put all their work $ into entertainment.

    you're being extremely nice, and i'm going to sound like an a-hole here, but it's not sustainable for themt o stay there forever. I'd talk with them, set a move out date, or even ask if you could reduce their pay to save $ for them so they can afford a security deposit. (only with their permission in writing of course).

  •  Being 'all things' means being family... (5+ / 0-)

    you have an odd dynamic going on, and your confusion makes sense.

    Basically, you're WAY closer to these women than any 'boss' should ever be. You have visibility into, and concern for - if not control over - aspects of their lives that aren't part of a worker-boss relationship.

    Now, I'm not saying your situation is wrong or can't work, just that when you deviate from the norm, it often gets harder to make sense out of things, much less make them work.

    And if you're paying them the equivalent of $80,000 per year ($20/hr x 2 x 2,000 hrs/yr), and they can't seem to make ends meet, you might be a little concerned about just what is in those 'oddly expensive compressed gas capsules' and 'oddly expensive incense'.

    So if y'all are going to be a 'family', cool. But if you're wanting to be a boss, then you might want to take steps to put a little distance between you and your workers.

    Cheers.

    Against stupidity the gods themselves contend in vain. Friedrich Schiller

    by databob on Mon Dec 10, 2012 at 08:31:26 AM PST

  •  Also, since this is the Bay Area, you could (4+ / 0-)

    be putting yourself in a position where getting these women out of your house is not possible without lengthy legal proceedings. And if they, for example, reported you for hiring them without withholding FICA, FUTA, SUTA, etc., you couldn't fire them either (whistleblower protection). So be careful.

  •  You're in a somewhat tricky situation (5+ / 0-)

    being both a landlord and an employer.

    It doesn't sound like you're doing what I'm doing with one of my tenants, which is to essentially knock off some of her rent in exchange for services rendered (gardening as a rule, but there's been some dogwalking while both me and my wife have injured feet and I let her do very minimal stuff to maintain the property, things that don't need a full-on handyman, and take receipts instead of cash for some of her rent).

    In that case, from a tax standpoint, I declare all of her services as income on my tax returns (I declare the full rent, whether I was paid in kind or in cash).   There is never a direct transfer of money from myself to her (triggering FICA, social security, or forcing her to pay any kind of income tax).   Doing this does give her some extra rights as a tenant (by accepting services instead of cash, she can legally argue that I have an obligation to continue accepting such services and can't claim she's in default if she pays less than the full rent but continues to perform the services.  Evicting her for nonpayment becomes even more complex than usual.  OTOH, she's been a steady tenant for a decade, so...in life you sometimes take some chances).

    Frankly there is some risk I'm violating a local, state or federal law somewhere, but I think the risk is higher when I pay a woman I know cash to do big laundry jobs.  (she really is self-employed, providing the service and I think what I'm doing there isn't any different from paying the fluff and fold fee at a laundromat.  So I think I'm just buying a service and it is her responsibility to deal with the legal implications of accepting money.  I could be wrong.  Tax laws change yearly and frequently)

    If you are actually giving them money in exchange for them making product for you, that isn't ambiguous at all.  You are an employer, and there absolutely needs to be FICA and social security deducted, as an employer you need to provide the right matching funds and forms need filed with the IRS and possibly your state tax board for it to be legal.   (you also have to be careful of things like the ADA act, overtime, citizenship or green card status and similar.)

    Frankly the fact that you're nervous means that you probably know you're slacking on at least some of the obligations of an employer.   There are a number of self-help books on local law for both landlords and for small business employers.  Read at least one of each.  They'll have things like sample forms to fill out, sample contracts (highly recommended for the landlord-tenant relationship to protect both of you from each other) and up-to-date information on laws in your area.

    Once you're squared away as both a landlord and an employer, you can probably keep up with nothing more than a little internet or library refresher yearly (you don't need to keep buying the books year after year, but you should pay attention at least a little to any significant changes to the laws.  Eg, Obamacare, health insurance exchanges and such will matter if you get a bit larger and employ a group of people instead of just a couple)

  •  Who are the buyers of your autopilots (5+ / 0-)
    Recommended by:
    VClib, plumbobb, SilentBrook, kurt, BlackSheep1

    and drones? If it's the Department of Defense (directly or through a Defense contractor, you may need to be providing proof that you are paying your workers appropriately under employment law as well as meeting health and safety and other regulations.

    While it's laudable that you want to help these women out, your lax arrangement exposes you to a lot of issues, from the tax issues others have noted to delivery issues if they suddenly take off and leave you in the lurch to occupational injury or exposure issues.

    Those who do not understand history are condemned to repeat it... in summer school.

    by cassandracarolina on Mon Dec 10, 2012 at 09:53:36 AM PST

    •  I do not sell to militaries (0+ / 0-)

      or paramilitaries on ethical grounds. My buyers are mostly nautical companies, with the occasional university sprinkled in.

      I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

      by spiritplumber on Mon Dec 10, 2012 at 07:40:19 PM PST

      [ Parent ]

  •  Seriously (7+ / 0-)

    You need more legal and tax advise than is appropriate for an internet forum. I would recommend that you locate your local SCORE branch. They offer free counseling to people starting businesses. My wife used their services when she was starting her business.

  •  Boot them out (4+ / 0-)

    You are getting yourself into trouble.

    There are payroll accounting services for small (and very small) businesses that can handle the wage and tax things for you.  You NEED to dot every i and cross every t.  Just. right.

    Move them out.  You need to do this.  Tell them that their next payday is their last day of occupancy.

    If the work is done in your home, you need to comply with local home business law.  But, if you cut corners on this, it is much, much less serious than employment law violations and tax law violations.

    Did you know that if you fail to properly withhold and forward your employees' income tax, the IRS can take your home or anything else you own?  True.

    You do have a business set up paperworkwise, right?  You have a business license, pay business tax, have liability insurance, etc.?  You gotta.

  •  Reading this... (0+ / 0-)

    ..I'm wondering, is this reality or some kind of Neuromancer sequel?

     But honestly, I think that you are giving your "employees" way to much control and demanding too little as an employer. Sounds more like you have a couple of friends living in your house that do some work for you every once in a while.

    "Good to be here, good to be anywhere."~Keith Richards

    by bradreiman on Mon Dec 10, 2012 at 03:51:12 PM PST

    •  Hey, it's 2012 (0+ / 0-)

      we're behind schedule as it is, I want my hoverboard :)

      (then again I make robots for a living, so)

      I am an electrical engineer, run a reasonably high traffic server, and build autopilots and drones for a living. If you have technical questions, ask away and I will try to give a cogent answer.

      by spiritplumber on Mon Dec 10, 2012 at 07:38:33 PM PST

      [ Parent ]

  •  Dual (or multi) role relationships are probelmatic (1+ / 0-)
    Recommended by:
    plumbobb

    I strongly suggest that you delineate, in writing, which aspects of this relationship are compensation and which are generosity.  What they do with the compensation, you have little say over and likely has tax and legal ramifications (not a lawyer, not gonna try and touch that).  The aspects that are based on your generosity you have every right to place time-based and other restrictions on (i.e., providing only vegetables to eat, or only allowing them to live there if they can show you a savings balance that increases by a predetermined amount each month).  

    They are not required to participate in the delineation of these two roles.  It would be better, but ultimately you are responsible for establishing boundaries that you can live with.  As we try to build a society that allows as many individuals as much autonomy as possible, it can be difficult to come to terms with the idea that dependency is a secure way of being for some.  You may also need to consider how your own emotional needs are being served by allowing this situation to continue even though you seem to feel it is problematic in some ways.

    This is merely my opinion and advice, and I am not an expert on employment relations in any way.

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