Unemployment on the rise in San Luis Obispo County

I have a small business in San Luis Obispo. For six years I was freelance, then for the past five years I’ve had employees.

Labor costs take most of the income, but the the hassle is overwhelming. Easily half my administrative time is spent dealing with employee issues. Oh, this desk isn’t ergonomic enough for you? Need a better mouse, a new chair? They have but to ask, because otherwise they can claim injury and my workers comp rates will skyrocket. I pay employee taxes to the EDD and feds more than 50 times a year. I fund training for the employees, along with all the benefits. It works out to more than a month of time per employee that I pay for no work. None of it is billable time. They make an average of $25/hr not counting an additional 20% in taxes. If there is anything left after expenses, I have to save it up to pay my own income taxes every three months. If we do well, the tax payment on April 15 balloons. This year I had to come up with an extra $6000 on top of the $2000 I paid every quarter. Meanwhile, I’m not bringing in new projects or serving clients. I’m working nights and weekends. I’m filling in all the gaps while the employee learns the job and increases their skills, on my dime. Then I’m scrubbing the toilets and emptying their trash because there’s no money for janitorial.

The employee has to be competent and ethical. I hired a Cal Poly graduate who had a great portfolio but couldn’t handle the most basic project. Turns out the portfolio was a group effort. Cal Poly’s “learn by leaning on others” is not advertised. I hired another Poly graduate who had been freelance for years but wasn’t making enough to support a family of four and a big mortgage. I discovered that employee working on his own projects on my time and planning a vacation in Costa Rica. My equipment is top of the line, the software is more recent than he has at home. He didn’t invest in his own company or in mine.

The two times I’ve had to fire someone because their incompetence was harming my company, the EDD gave them benefits though I had hard evidence of cause. In both cases the EDD did not contact me for my side of the story, which they are required to do, so I had to appeal. The evidence for termination for cause meant nothing. The evidence of progressive discipline meant nothing. The fact that EDD didn’t follow their own process and contact me meant nothing. I had to follow their process, but they didn’t One EDD person told me they knew the ex-employee had given them the wrong phone number and that’s why they hadn’t interviewed me but it was too late and I had to appeal. (She did give the right phone number to all her creditors, and it took a year to get them to stop calling her here and speaking roughly to me, which I was shocked to find out was standard procedure for collectors.) Of course, my phone number is on every tax payment and report I am required to make to the EDD.

The result is that the EDD raised the amount of unemployment insurance I must pay for the next several years, and of course they extended the ex-employees’ benefits and gave them “retraining” benefits as well. I’m convinced the EDD is in place to shake down employers so they can provide all these benefits to the unemployed, no matter why they are unemployed.

I’ve been investing in my business, in the employees, building a company that gets most of its business from referrals and repeat clients. All through the bailout fallout, I never laid anyone off, though the clients want our service at rock-bottom prices or they’re holding off until the economy improves. They hang onto their money longer, so I have to spend time collecting. Still, I’ve never been late with a payroll or a tax payment or an insurance payment or a loan payment. Doesn’t matter. I have perfect credit, but that doesn’t matter either. When the Consumer Credit law was passed a year ago (becoming effective in Feb 2010), all these banks that took bailout money from our Treasury cut my limits in half and raised the APR, in one case to 30%.

I’m waiting for the appeal hearing in the case of the employee who embezzled half his salary from me while collecting income from his own clients. If I lose that one, I have already decided that the only way my company will survive is to lay everyone off and go back to freelance.