Upwork Platform

Question about legitimacy. One of my children, college age, was offered an internship. Said child accepted internship and then learned that company will be paying through Upwork. Company will pay additional, above the promised hourly rate to account for Upwork's fees (it's more than enough to cover it). 

My question is, why do you think the company is doing this? Usually companies use Upwork to FIND freelancers. That was not the case here — intern and company connected through typical job-finding and application procedures. 

I feel like I'm missing something. What is the internship company trying to avoid by using Upwork?

Thanks for insights.

paying her as an employee 

This sounds like the temp agency model. They pay a fee to Upwork who pays a portion to the employee. Do I have that right?

but they are paid as a contractor-and now have to pay their own taxes including the employers share of social security ( self employment tax). A total screwing.

oots said:

but they are paid as a contractor-and now have to pay their own taxes including the employers share of social security ( self employment tax). A total screwing.

When I worked as a temp I got paid by the agency, who took care of withholdings. But this was decades ago. Is that what Upwirk is doing?

highly unlikely that upworks is withholding taxes 

Its just a question of how they do business. It's not unusual for people to be employees of temp agencies while bring placed on temporary stints, even fairly long ones, at the offices of the temp agency's customers.  If this is  the arrangement in this case, Upworks is withholding taxes.

There is also the question of whether an employee hired in this manner would be entitled to any fringe benefits such as paid sick leave/vacation time, health insurance, etc.  This could be a way for the company to save money.

an intern is not going to get benefits- but they should not be paid as independent contractors 

OK, to clarify: This is a college student's 12-week summer internship, 20 hours per week. Even if the company hired directly and the student were a W-2 employee, the student would not be getting benefits. Further, the student is not being set up as an employee of Upwork. 

As for taxes, the student will not owe any fed or state taxes anyway because total annual income will be less than $12,400, which is the threshold for owing income tax. 

Also, I'm thinking that because my kid will get a 1099 at the end of the year, it will be necessary to file schedule C and pay self-employment tax -- which I calculate will be about $500. 

I can't figure out what the benefit to the company is. They do avoid paying social security and Medicare taxes — but I calculated that the employer's share would be A LOT less than the fee the company pays to Upwork. 

What am I missing? Why would they do this? My kid really wants this internship, so I don't want to make a big stink about it unless I learn that there is something really nefarious going on. I feel like I'm missing something.

Background: The company is a start-up -- but in the advanced stages of start-up. They're raised $151 million in five rounds since 2015. Investors are Francisco Partners and IDG Capital. It's a known company. Many of you may have the app.

shoshannah said:

OK, to clarify: This is a college student's 12-week summer internship, 20 hours per week. Even if the company hired directly and the student were a W-2 employee, the student would not be getting benefits. Further, the student is not being set up as an employee of Upwork. 

As for taxes, the student will not owe any fed or state taxes anyway because total annual income will be less than $12,400, which is the threshold for owing income tax. 

Also, I'm thinking that because my kid will get a 1099 at the end of the year, it will be necessary to file schedule C and pay self-employment tax -- which I calculate will be about $500. 

I can't figure out what the benefit to the company is. They do avoid paying social security and Medicare taxes — but I calculated that the employer's share would be A LOT less than the fee the company pays to Upwork. 

What am I missing? Why would they do this? My kid really wants this internship, so I don't want to make a big stink about it unless I learn that there is something really nefarious going on. I feel like I'm missing something.

Background: The company is a start-up -- but in the advanced stages of start-up. They're raised $151 million in five rounds since 2015. Investors are Francisco Partners and IDG Capital. It's a known company. Many of you may have the app.

 Self employment tax is approximately 14% so closer to $1400 or so 

It may just be the way the company handles all part-time employees, not just interns; it may not be of particular benefit (or detriment) to either party in your child's case.

ril said:

It may just be the way the company handles all part-time employees, not just interns; it may not be of particular benefit (or detriment) to either party in your child's case.

 Well, I think it will be to his detriment because he might have to pay self-employment tax.