SEC Proposes Rules for Giving Gig Workers Equity (axios.com) 47
The U.S. Securities and Exchange Commission has proposed rule changes that would make it possible for gig companies to give equity to their workers as part of their compensation if they meet certain requirements. From a report: This is something gig companies including Uber and Airbnb have asked the SEC to do over the years as a way to share their companies' upside with these non-employees. Instead, both Uber and Lyft gave certain long-time drivers cash and the ability to purchase IPO shares when they went public, while Airbnb is putting 9.2 million shares into an endowment it will use to finance initiatives for hosts. The five-year pilot program would allow gig companies to issue equity as long as it's no more than 15% of a worker's compensation during a 12-month period, and no more than $75,000 in value during a 36-month period (based on the share price when it's issued).
and what will the IRS say about this? (Score:2)
and what will the IRS say about this?
As if they it makes them an employee?
Hit's them with an very big tax to take that Equity?
Leads to workers not reporting that to the IRS get out of an really big tax on an free gift?
Other labor laws at the state level get in the way?
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The IRS has lots of existing rules about stock grants and transfers, and on reporting payments to independent contractors.
But this is an odd thing to do: Usually employees accept incentive stock options in lieu of higher salary, or as a form of deferred (and uncertain) compensation. ISOs are usual structured to reward staying at the company for a long time, in hopes that the value goes up. This is not the way that an independent contractor relationship usually works; they want cash on the barrelhead, not
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so this really hammers it in that they are not independent contractors?
Labor laws may really kill this.
Individuals cannot negotiate whether they want equity or cash in exchange for their services.
The company has to reasonably try to prevent gig workers from reselling the equity.
1. makes them an employee
2. may stick them with an tax bill they can't sell stuff to cover it.
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I am confused.
What prevent a normal person with a normal job to accept equity(Aka stocks/options) as part of the normal salary?
Is that now allowed in USA?
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I am confused.
What prevent a normal person with a normal job to accept equity(Aka stocks/options) as part of the normal salary?
Is that now allowed in USA?
Of course it's allowed. My employer gives out $0/share ISOs in 5-year blocks as retention incentives; 20% mature each year. I can keep the stock or sell it as I want. They're taxed as regular income.
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Pre-IPO stock currently is given to employees or "qualified investors" - people who have demonstrated, through work history, education or more commonly just having enough money, that they aren't investing money they cannot afford to lose in a business whose risks they do not understand. You cannot just sell shares of your private company on the street to randos. This is seeking to have gig workers fall under the same umbrella as employees - people who can own that restricted stock.
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No, it does not determine employee versus independent contractor status. It just doesn't make a lot of sense for independent contractors to accept this kind of deal. The company might want to do it for the reasons they give stock options to employees, but that doesn't mean it objectively makes sense.
For it to make sense for the company, the strike price would have to be a fair bit above the current value of the stock. Doing that makes it a lousy form of compensation for a contractor, who in theory should
A couple reasons it makes sense (Score:2)
> For it to make sense for the company, the strike price would have to be a fair bit above the current value of the stock.
Nah, they could partly pay in stock at the current price or lower and it would make sense for the company, for two reasons:
A) The company is low on cash, or may soon be. They can't afford to spend all their cash.
B) As you said, if the workers OWN Uber, they'll want Uber to do well. They'll have a small incentive to drive more for Uber than for a competitor.
Re: and what will the IRS say about this? (Score:2)
I think the purpose of the SEC rules is to put an upper limit on the percentage of compensation a gig worker can accept - limit their exposure to the downside, as they are presumed to not be sophisticated investors.
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YOU just declare it on your taxes, likely as not, it would be listed on your 1099 at the EOY for tax purposes.
The smart way to do 1099 contracting is to incorporate yourself so as to have a more pure Corp-To-Corp relationship and that pretty much ends all employee questions.
If you don't mind a bit more responsibility and paperwork, incorporate yourself as a Subchapter S Corp..and this way you can keep from having t
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Well, err....what other reason do you work for?
I mean, you only work a job to earn money....
And there is NO such thing as "loyalty" anymore, that disappeared decades ago.
That's why I prefer contracting....if you a not going to get loyalty and be as disposable as a contractor, you might as well get the bill rate and the freedom that does with that risk.
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In IT, there are TONS of folks, self included, that have made VERY comfortable lives 1099 contracting.
And you don't always have to put out fires....you can get onto lucrative multi-year contracts.
It does help a GREAT
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Yeah, and consider that as a full time employee myself, the rate we bill customers is 3x my salary fully burdened. So companies are quite prepared to pay good rates for quality work, and there is plenty of room to pay your own benefits. The only real downside is an inability to get a good group rate on health insurance.
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It isn't a big deal if someone else is paying, eh?
This is not options at all (Score:2)
Usually employees accept incentive stock options in lieu of higher salary, or as a form of deferred (and uncertain) compensation. ISOs are usual structured to reward staying at the company for a long time, in hopes that the value goes up.
This isn't even close to being structured as an option plan, this is allowing contractors to play in the Employee Stock Participation Plan (ESPP). Every public company I have worked at allows you to use a part of your salary (up to 15% by the IRS, there are maximums at ~25K a year and companies can go lower than these maximum numbers) to buy discounted stock. Most plans have a look back where you accumulate money over a 6 month period and you get the discount based the lower of the start or end price. Th
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they want cash on the barrelhead, not to wait years in hopes that their faith in, and to, the company eventually pays off.
Here's the dirty little secret (that isn't all that secret): There is no cash to be had,either now or later. Uber doesn't make money now, and won't in the future, and that is why they can't/won't pay decent wages now, or in the future. Any equity you get now will be worth squat in the future.
Let me put it more direct. Have you ever met a rich taxi driver? No? Why would you expect to make MORE money than a taxi driver charging LESS to do the same job? Uber/Lyft never made any sense as a full time job
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I rode with a taxi driver once who had a bigger house in a nicer neighborhood than I did, when I had been working more than a decade as a software developer. I was impressed; I thought he must work his ass off to provide for his family. He was not rich by US standards, but comfortably within the middle class, possibly even upper-middle class.
As you point out, that is very different from an Uber or Lyft driver. It would be a foolish driver who takes Uber or Lyft stock rather than puts a roof over their he
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Being an employee vs contractor doesn't make a big difference to the tax people on this. If you get equity, it gets reported to the IRS regardless of your employment status. None of this stuff ever happens off the books legally.
Re: and what will the IRS say about this? (Score:1)
What?
There are limits on the size of the equity a gig worker can earn (not a gift).
Any taxes owed are a fraction of the equity, , based on the size of the position and what you choose to do with it.
Why shouldn't equity positions be taxed just as every other form of income is taxed?
Oh goodie (Score:3)
Not only do these employees not get paid even minimum wage or have any benefits, but now they're going to be given worthless stock/stock options.
How wonderful.
Re: Oh goodie (Score:3)
But ... but ... they have a *choice* to starve and die!
They don't have to have bread on the table, you know?
They can eat cake!
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There ARE other jobs out there if this doesn't float their boat you know.
These are Adult people you know....do you not believe grown adults can make their own decisions in life?
Hell, these jobs are not meant for FULL time, make a living employment...they're for earring some part time side money if they choose to.
Geez, not EVERY job is meant to make a full living from.
I certainly don't pay living wages to the neighborhood kids that mow my lawn...I
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There are?
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These are public companies. Their stock is clearly not worthless. They have a cash value that you can look up in five seconds. Uber is worth $51/share. Lyft is worth $39/share. That can vary.
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These are public companies. Their stock is clearly not worthless. They have a cash value that you can look up in five seconds. Uber is worth $51/share. Lyft is worth $39/share. That can vary.
~Shanghai Bill
It's a wash.
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Their stock is clearly not worthless.
Public companies still give restricted stock, often. RSUs are preferred because it's an incentive for you to stay on and work your ass off for the company. And if the decide to let you go then they don't have to pay (but it's unlikely you'd be offered RSUs in the first place if there was any consideration of letting you go).
These are public companies.
Yet, the proosal applies to all companies not just public traded ones. The companies (AirBnB and Uber) commented:
Instead, both Uber and Lyft gave certain long-time drivers cash and the ability to purchase IPO shares when they went public, while Airbnb is putting 9.2 million shares into an endowment it will use to finance initiatives for hosts.
So it clearly was an issue for them pre-IPO.
time for an strike! (Score:2)
time for an strike!
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"not get paid even minimum wage " -- how do you figure that?
Are they paid hourly? or are they 'per trip'? Does the pay 'while actually working' equal less then minimum wage or do you mean if they sit 20 hours out of 40 during a week not working they are not earning minimum wage?
I am honestly asking because I honestly don't know and am a little to lazy to research it myself.
I did google it and this says the average Uber driver, if they pay for health insurance and don't count that as income takes home a lit
They own even more of the means of production (Score:2)
Well, currently the workers own the primary means of production - the cars. This way, they'll also own the app platform.
It gives them a chance to try out communism, for anyone who wants to do that.
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CEO takes a $1 salary. "That doesn't mean anything. Most of their pay comes from getting shares of stock and stock options."
Rule proposed to allow gig workers to receive stock options. "That's doesn't mean anything. Stock and stock options are worthless."
Company script (Score:4, Insightful)
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St. Peter don't you call me , 'cause I can't go.
I owe my soul to the company store.
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Well, already the workers own the primary means of production - the cars.
By getting stock (ownership in the company), they'd own the company, the platform, as well. Over time, the workers would own all of most of the means of production. A voluntary path to communism, for anyone who wants to try that out.
Personally, I didn't skip history class and I watched the news from 1980-2020, so I'm not interested in any communism myself - I've seen it.
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Well, already the workers own the primary means of production - the cars.
I'm thinking if you want to make good money with Uber and Lyft, don't be the person driving the car. Same thing like you can make good money at McDonalds and Arco gas stations. Don't be the ones flipping burgers or working the cash registers (actually don't ever be onsite).
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Indeed car driving isn't a specialized skill, so it doesn't pay that great. Especially if you're talking about the hours in which there is lower demand.
It's a service, there is no production (Score:2)
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That's literally the definition of communism. The workers own the means of production. That's the definition. You can like communism or not like it, but that's the definition of the word.
As it's most commonly used, and to distinguish it from your 401K and the American system, it means:
The workers own the means of production, whether they want to or not. The politician uses the people's resources to build gun factories or GMO labs or whatever the politician wants, and the workers have no choice in the matte
What if ... (Score:2)
... I'm not a (gift) horse?
Where's My Flying Metaphor? (Score:1)
Voila! Eureka! Or is the other way 'round?
A new standard in externalization.
Uber and Lyft are nervous. Can't you feel it? Why own a car in a share economy?
Its stock options! Why consume when you can utilize?
Wasn't Mao's
No health insurance (Score:2)
But if you take our shit for the next 4 years these stocks will be worth almost as much as what a full-time employee gets as a year's bonus.
Form of deferred wages (Score:2)
If this is considered to be in lieu of employees' (oops I mean contractors') commissions or other benefits, that just means that a struggling gig worker doesn't even get all their compensation in spendable cash. What does it matter if the stock goes up in the future, if you're dead of starvation first?
So gig workers can be paid even less (Score:2)
Wow, finest example of capitalism at work. Letting companies pay workers even less.
Even during the dot-com boom in 2000, the general advice was don't factor in the stock options when taking a job in a startup, because 90+% of the case it would amount to nothing. And that was supposed to be a consideration for highly paid positions only.
And now the average gig worker need to consider having 15% of their income being paid in highly speculative pre-IPO stock options? Good luck trying to survive with only 85