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Business as Benefactor to Workers and Government

A century ago, businesses' contract with workers was simple: Workers put in a certain number of hours (albeit what would be excessive in FLSA parlance) and companies paid them a fixed wage. Clearly, this is not the only thing for which companies are responsible.

How and when did the change in business's responsibilities toward workers (and the government) change?

Business vis-a-vis employees
This basic compact began to change in the 1940s when defense contractors used the perk of health coverage to recruit workers to their plants, according to an NPR programThe Internal Revenue Bureau (the IRS's predecessor) ruled in 1943 that that employer-paid health coverage was a tax-free fringe benefit and this treatment was codified in the 1954 Tax Code (the treatment remains unchanged today.) After World War II, most large employers (in many cases negotiated by unions) offered coverage, but small employers usually did not. However, over time, small businesses had to offer some type of coverage in order to compete in the marketplace for talented workers.

A Kaiser Family Foundation report last year found that as of 2012 only 43% of very small employers (3 to 9 employees) offered coverage while “virtually all” employers with a 1,000 or more workers offered coverage. Other findings: 68% of employers with 10 to 24 workers; 85% of those with 25 to 49 workers, and 91% of those with 50 to 199 workers.

Under Obamacare, employers with 50 or more full-time and/or full-time equivalent employees must provide health coverage or pay a penalty to the government (employers with 50 to 99 employees don’t have to meet this obligation until 2016) (remember 91% already did in 2012).

The government is also moving toward some type of mandatory retirement plan offering to help workers save for retirement in light of statistics showing that workers don’t save enough and that Social Security can’t provide a secure retirement (and may not even be around unless the system is fixed). For example, companies offering 401(k) plans are now induced to enroll workers automatically in exchange for guaranteed nondiscrimination status for the plans (employees can opt out of coverage). In Australia, employers must deposit 9% of workers’ pay into retirement accounts, and there have been cries to implement a similar system in the U.S.

Business vis-a-vis government
The contract that business made with government is that business would follow regulations and pay taxes; government would provide infrastructure to enable business to function.

Today, business is often asked to do part of the job that lies within the government’s purview. Businesses must report their activities (e.g., business census forms; workplace injuries) to the government so it can compile statistics about business activities and create regulations for businesses to follow.

Most recently, the Government Accountability Office wants the IRS to require employers to submit W-2 forms to the government by January 31 (employers already have to furnish them to workers by this date). Why? So that the IRS can better match employee-reported income and thwart identity theft.

For large employers, moving the deadline for submission of W-2s from the current February 28 to January 31 likely won’t be a major hardship because their reporting is computerized. For some microbusinesses, however, this could be problematic. For example, a retailer that conducts inventory in January following the holiday season would be faced with yet another administrative burden in the same time frame as it is focusing on its business.

Bottom line
How much can small businesses do for everyone? It’s hard to mount arguments against employer’s underwriting the cost of benefits for workers (in direct contributions or in administrative costs to facilitate benefits). It’s hard to argue against employers helping the government combat identity theft and achieve other objectives (e.g., safe workplaces). But I ask you, in light of an ever-growing burden: who’s helping small business?