Hiring Americans is hard for distributed organizations: How the federal and state governments can Fix It

The Internet Archive has over 90 employees in the United States, but they reside in 17 different states and even more counties. While distributed workforces are becoming common, it has become so painful to deal with the federal, state, and county regulations that we will soon be paying to outsource the headache.  We are not the only ones straining under the burden, but there are some possible fixes.

Hiring in Canada is easier and less expensive than in the United States, meaning that the federal government, each state and many counties should make changes to become competitive.  

The real reason the US and states should make changes is to make a better home for their residents, but some will be motivated by making it a better home for businesses.  Luckily, changes would benefit both businesses and individuals.

The rules might have made sense at a different time when companies hired many people in one location. But they do not make sense now– now that more organizations are becoming distributed. The non-profit organizations I work with are struggling with this issue and many are looking to outsourcing organizations of different flavors to deal with our governments.

The problems start with a lack of universal healthcare. If we did not put this administrative burden on companies and nonprofits, it would greatly ease hiring employees. It is not just the expense for the insurance– it is all the administration, yearly rebidding, managing many plans, and across the whole United States. Many people that do not want universal healthcare say they are “pro-business,” but in fact it is hurting United States businesses and families. It is hard for me to understand.

Then there are state regulations– if we want to hire a person in a new state, or someone wants to move to another state, then we have to register to do business there. Every state has a different unemployment rate as well as a different base rate to be taxed on. We also have to do seemingly endless forms and audits for workers compensation and taxes. And some counties or burroughs have their own regulations and taxes. A national payroll service helps (which is costly, by the way) but the screams of agony from the HR department for other administrative tasks have been growing over the years.  We often do not hire someone because they lived in a state where we did not already have an employee.

Then there are some bizarre regulations, like the definition of employee versus contractor. We may want to hire someone to work a few hours, but this can be too hard in California because of the expansive rules. This is being debated now in the case of Uber and Lyft, but let me give a different, recent, and real example.

I help support a five-person arts organization that pays teachers to teach specialized crafts. Some of  these teachers work only a few hours a year. At first they were contractors, but then one of the teachers applied for unemployment to the state of California which then launched a disruptive investigation and found every one of these teachers were employees in their eyes and fined the organization tens of thousands of dollars. The level of paperwork now required to have someone work for 2-3 hours per year is absurd. And many of the teachers were mad because they did not think of themselves as employees nor want to be. Lets figure out the benefit we are trying to achieve and go straight for it rather than the catch-all system that often does not fit our current environment.

Another bizarre regulation is that a nonprofit has to register to raise money in each and every state if they put a donate button on a website. Each state is bizarrely different. There are firms that outsource this registration function which is a tax on our non-profits. This is dumb. States should not penalize nonprofits in this way.

What should the United States do?  Universal Health Care.  Universal Retirement Accounts that are not attached to companies.  In general, stop assuming we are living in factory towns with employment for life, and therefore change the regulations to reflect our current world.

What should states do? How about uniform regulations for companies with fewer than 50 employees in a state before jumping in with non-standard regulations? One uniform regulation for all small businesses could be defined and state legislatures could adopt. Then states would have the incentive to adopt the uniform rules for small businesses in order to be attractive to small businesses which are becoming increasingly distributed.

Distributed organizations are becoming more common– lets not penalize those that want to hire United States residents.

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