Overtime Tax

Ensuring a fair go for all

Our economy is not in bad shape at all. And yet too many people are forced to sit on the fence, while others are overworked. We have to find a way to share work, duties and benefits in a dignified manner.

Where is the root of the problem? Under current rules of game, if Company needs 200 man-hours per week, it is cheaper to employ 4 people 50 hours per week than 5 people 40 hours per week. Not only there are additional fixed costs for every person on your paylist and additional complexities - if you are lucky (and ruthless) you may even get part of this overtime free! Result of this situation is costly for society, nightmarish for workforce and disastrous for unemployed.

Yet there seems to be simple solution, which does not require heavy handed rulings or revolutionary changes: Overtime Tax. Rules of game for Overtime Tax Environment would be simple. Government sets up regular working hours - say 38.5 per week. Any hours worked overtime - paid or unpaid - are taxed at progressive rate, related to normal hourly rate of particular worker. Rate of Overtime Tax and regular hours are adjusted by government from time to time to keep unemployment on acceptable level. Overtime Tax is paid by employer. Other taxes may be abolished or adjusted (what about infamous payroll tax?) to keep overall level of taxation same.

Overtime Tax would make overtime far less attractive for employers and in most circumstances it would be more effective for Company to hire additional staff. Overtime will be used only in exceptional situations, as it should. That should assure, that everybody will have chance to participate in a fair way.

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Last changed: 3.6.98