Monday, September 19, 2005

socialistic capitalists

I wrote an Employee Furthering Technology Plan the other day for my company.
Maybe I should start at the beginning.
I am considering buying a new computer. Income tax in Israel is outrageously high and aside from that you have to pay a 16.5% surcharge on anything you buy (VAT). I decided that I would buy the computer in Israel if I could do it pretax and without VAT. So I asked a friend who's an accountant how I can get around the tax laws and made a number of suggestions which he promptly shot down and said there is no way to do what I want. So I ignored him and found a way. I came up with the idea that if employees would voluntarily cut a portion of their income and be allowed home-use R&D equipment of an equal value then it would work.
The example I gave was as follows (The numbers are all made up):

John earns 20,000 shekels a month and is at a 20% tax rate. He decides to drop that to 19,000 shekels a month, and is allowed 1000 shekels per month for home use R&D purchases. After 4 months John opts to get a computer for 4000 shekels.

Without the plan:
80,000 (4 months salary) * .80 (after taxes) = 64,000 shekel net salary
4000 * 1.165 (VAT) = 4660
Total left after computer purchase: 64,000 – 4,660 = 59,340

With the plan:
76,000 (4 months salary) * .80 (after taxes)= 60,800
Computer is paid for by company with money reduced from salary.
Total after computer purchase = 60,800

Savings for employee: 1460
Cost to company : 0
Savings To company: Pension plan and tax share on the salary reduction.

The company does get a benefit when I buy technological equipment because I use the knowledge I gain on my own time when I am at work. So it is perfectly logical that the company should help me with the purchase, especially as it doesn't cost them anything.
I decided that it would look petty to just come up with this purchase plan out of the blue so I wrote a furthering technology plan including various ways that the company can help the employees advance, including an introduction about why it was good for the company for the employees to advance. I included in this plan: books and magazines, education, buying emerging technologies and seminars and workshops. I sent the document to my boss and within 15 minutes he was in my office to discuss my new plan. He liked the fact that I took the initiative to write it and said one of the reasons he doesn't like turning down ideas like this are because if he does then I might not write out the next idea that I had. I told him not to worry. So we went through each item listed in the plan. Some of them we are already doing, others he liked the idea of publicizing it to the other employees and then we got to the employee purchase plan.
He said it wasn't going to work. Because it is a benefit for the rich. The less affluent employees can't afford to take advantage of the program. They will want to go on the program when they want to buy things and then go immediately off and they will want to buy things that we do not currently order. So he turned it down. I can accept that, he had a somewhat valid point that a company benefit shouldn't cause hard feelings among those who can't afford to use it.
But on the other hand, here is a company that has the ability to help some of its employees in a no-cost program and won't do it because it won't benefit everybody. WTF? I came up with a perfectly legal way of saving a ton of money on components and I can't take advantage of it because there are other people who don't have the ability to.

Something to think about.

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