Contract Employee Corporation
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The Contract Employee Corporation concept...

Contract Employee Corporation is built around two key principles: Open Book Accounting practices, and Individual Employee control and responsibly for their own future.

Open Book Accounting practices simply means that all of the details about where CEC money comes from, where it goes, and why it gets spent where it does is open for anyone to see. When it comes to financial information, we have nothing to hide...particularly from CEC employees.

However, this openness has a price. CEC employees are expected to understand all of these details and to actively participate in managing them. CEC employees need to understand how our company makes money and how that money gets divided between us.

Contract Employee Corporation
Business Unit Gross Revenue
- Administrative Unit Cost
- Marketing Unit Cost
- Finance Charges (optional)
- Employment Taxes (reducing)
- Business Insurance Costs
- Business Unit Expenses
- Retained Earnings (optional)
- Benefit Cost (selective)
- Mandatory 3% 401k Contrib.
- Matching 401k Contrib. (optional)
=  Unit Manager Gross Wages
-   Optional 401k Contrib.
-   Employee Taxes
=    What's left.....
       (Your Take Home Pay)
To begin with, Contract Employee Corporation is built from individual Business Units. Most CEC Business Units are individuals who work on a "fee for service" basis. Some CEC Business Units do Computer, Business, Marketing or Management Consulting; some provide Physician, Dental, or Nursing Services; some are Accountants, Pharmacists, Architectural Designers; and some are Teachers. Truck drivers, sales people, guards, temporary office staft... the possibilities are endless.

CEC is plant, no store front, no central office... just the people that work for our clients.

And although there are some exceptions each CEC employee is Manager of a their own individual CEC Business Unit. That employee is responsible for generating revenue and deciding what to do with it.

CEC Business Unit Gross Revenue is tracked individually by our on-line, Internet based accounting system. (Obviously, only CEC Business Unit Managers have access to that part of the site).

Each Business Unit pays 6% of Gross Revenue (or $10 per invoice, whichever is greater) as Administrative Unit Cost. The CEC Administrative Unit handles all of the billing, payroll, contracts, insurance, legal, and tax-reporting duties associated with running the company.

Usually, a CEC Business Unit assumes the reasonability for finding its own work or revenue producing activity. On the other hand, if the CEC Marketing Unit finds the job, the Business Unit pays a portion of its Gross Revenue as Marketing Unit Cost. This cost varies from 2% for "hey, you should call these people" kinds of leads, to 10% for "here's a for work on Monday".

Normally, CEC Business Units assume responsibility for their own cash other words, they don't get paid until the client pays for their invoices. Normally, the CEC Administrative Unit bills the first workday of each week for work reported by the Business Unit up until the previous Friday (there are some exceptions). CEC pays on Friday, or the next business day if Friday is a holiday, for revenue received up until the previous Friday.

Sometimes, for certain types of work, CEC will advance money against outstanding invoices. This is subject to Finance Charges of one-quarter percent per week.

Each CEC Business Unit pays all of the Employment Taxes associated with its employee. This includes the Employer's portion Social Security and Medicare as well as Federal Unemployment (FUTA), State Unemployment (SUTA), and, where applicable State Disability (SDI). There's an important point here...most of these taxes have limits. FUTA for example is only charged on the first $9,000 an employee earns during a year. Once these limits are passed, the CEC Business Unit no longer pays these taxes..this results in an increase for the Business Unit Manager. A "normal company" , and for that matter most consulting or temp worker companies pocket this money. CEC passes it back to the person that earned it

CEC Business Units pay for all legitimate business expenses associated with operating the Unit. CEC requires that each Business Unit carry appropriate Business Insurance. For many Business Units, this is simple liability insurance and is quite inexpensive (especially, since its available through CEC at group rates). Some Business Units may be involved in products or professions that require "Errors and Omissions" insurance or even Mal-Practice insurance...the cost of this is borne by the Business Unit, but again, is available through the corporation at group rates.

Business Unit Expenses can include phone charges, office equipment, uniforms, travel expenses, computers, Internet charges...whatever the IRS allows as a legitimate cost of doing business. And unlike sole proprietors that have to worry about putting this all together at tax time, Business Unit managers simply submit an on line expense report each week and mail in their receipts to the Administrative Unit. The total is deducted from revenue, and a check is mailed when funds are available. Again, certain expenses may be advanced with an associated Finance Charge.

At your option, you may choose to set aside some of your Business Unit's revenue as Retained Earnings. This money would be placed in an investment program administered by a licensed investment counselor. (Of course, you can set aside money out of your own paycheck for such things...but, if your Business Unit does it, you don't pay taxes until you actually use it). These funds would be used, at your discretion, to pay for benefits, vacations, or personal time off during the periods when your Business Unit is not generating revenue.

The Contract Employee Corporation has a broad range of benefits available to its employees. Each CEC Business Unit...employee...can pick and choose which programs to participate in. (With one exception, see below). CEC benefits are designed to be either full-blown, primary breadwinner programs...or, fill in the blanks for employees that do not need all available benefits. You get to pick and choose what you need and can afford, and, because the Benefit Cost is paid completely by your Business Unit, it's all with "before tax dollars". CEC even has a plan where your Business Unit can reimburse you for deductibles and co-pays...again, with before tax dollars.

That term...before tax an important, and calls for a little explanation. (If you already realize what a great deal this is, skip ahead a little). If you work for a normal company, you probably have to contribute out of your own pocket to the company's benefit program. This might be in the form of paying a portion of your medical insurance cost, or insurance co-pays, or even paying for things like dental, or glasses, or expenses that your company doesn't pay for. When you get your paycheck, you start with your gross earning, subtract all your employee taxes, and the remainder is the amount of your paycheck...your after tax pay. All these things come out of your net pay...what's left is what your have to live on.

With CEC, you pay for these things out of your Business Unit's gross revenue...before any taxes are withheld! The one exception to the optional benefits is that each CEC Business Unit employee is required to participate in the Contract Employee Corporation 401k benefit program. Therefore, each CEC Business Unit contributes a mandatory 3% of the Unit Managers Gross Compensation to his or her 401k. The Unit Manager may choose to add an Optional 401k Contribution (up to 7.575% of compensation) to the which case the Business Unit matches that with a Matching 401k Contribution (at 1.9041 times the optional contribution). In total, a Business Unit and its employee may contribute up to current IRS limit per year into the 401k program.

After all this, what remains is the Unit Manager's Gross Wages. Out of that comes the optional 401k contribution...not subject to Federal Income Tax, but included in Social Security, Medicare, and some state or local taxes.

Then, you have Unit Manager Taxes and what's left, goes in your pocket.

So, what's all this mean...

As a Contract Employee Corporation Business Unit Manager, all of the hassle with taxes, insurance, and benefits would be lifted from your shoulders. You would also have access to the best benefit package that money can buy...but you get to pick and choose which benefits actually make sense for you.

And, yes, it does cost you something to do this...a minimum of 6% of your Business Unit's Gross Revenue, but this is more than offset by the benefits, tax savings, and hassle free operations of the company.

Copyright, 2004 - Contract Employee Corporation. - All rights reserved.
Disclaimer: Note that this site is still under construction. Details related to the concept presented here may change before the site is completed.