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Specific Overhead Descriptions
One half of this tax is withheld from your gross pay in the amounts of 6.2% for Social Security and 1.45% for Medicare. The other half is paid by the employer and is a substantial overhead cost. The Social Security tax has an upper limit known as the wage base after which it is no longer deducted nor is it matched by the employer. In 1999, that wage base was $72,600 which is certainly reachable by technical contract workers. When Synesis no longer is liable for that 6.2%, it is added to your pay. Medicare has no limit.
The Federal Unemployment Tax (FUTA) is an employer-only expense, and you see no mention of it on a paystub. The current rate is 6.2% for the first $7,000 of income, but is reducable by any amounts paid to the states.
The State Unemployment Tax (SUTA) is also an employer-only expense. It varies widely based on the employer's history in that state, and typically starts around 2.7%. Some examples specific to Synesis for our largest placement states: AZ (2.7%), FL (0.36%), PA (2.1692%), TX (2.8%).
Disability Insurance is required by some states.
Workers' compensation insurance should need no explanation. Employers are forced by the government to contribute to this Socialist program to pay people who are injured on the job. In conjunction with Unemployment Taxes, this ensures that nobody plans for the future and saves money. It also increases everyone's dependence on the government and therefore its power. It has spawned an entire industry of fraud and legal infrastructure that you pay for with your other taxes.
Many hiring companies require insurance of this type which protects you and Synesis for general mistakes. For example, if you leave your briefcase on the floor beside your desk, and someone trips over it and breaks a leg. The liability insurance would kick in to cover that type of situation.
Some hiring companies and even some states require professional liability insurance. This differs from general liability in that it covers the work you do. If you are a software engineer whose coding mistake leads to a satellite drifting into the sun instead of into orbit around Mars, then professional liability is the first stop if the hiring company decides to come after you for reparations.
Accounting is a necessary evil of running a business. A good portion of Synesis' accounting is outsourced to qualified accounting firms. We approximate the cost at the beginning of the year, but adjust your pay with a year-end bonus if we overestimate.
Legal fees are hard to predict, but once again we return any overestimated portion to you at year end.
The cost of initial placement is the interest charges on money that Synesis borrows to pay a person until payments are received from the customer. These interest charges are calculated based on a 20% APR on the amount borrowed to pay your payroll for ten weeks. This is a typical return for venture capitalists. It also assumes that no principal is repaid until your contract position terminates. In this case, $50 per hour times 40 hours per week times 10 weeks is $20,000, twenty percent of which is $4,000 per year. Averaged over 2,000 hours per year, the hourly cost is $2 per hour. A typical factoring fee would be similar or higher.
For Synesis Inc to get paid for your time, we would normally submit an invoice to the customer for whom you are working once a month. If you begin a contract position at the beginning of a month, you will work four weeks before we submit an invoice for those four weeks of time. That invoice is payable 30 days from submittal.
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