This is (regrettably) common at poorly capitalized companies, as employees are the biggest expense and as making payroll on time every single time requires discipline. You have to make payroll, on time, every time. That is the only expense for which this is true.https://twitter.com/Austen/status/1085553659738378241 …
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This advice is partly informed by the way payroll and payroll taxes is special cased legally and can result in you personally being held liable for the company’s debts, but mostly informed by the special moral responsibility employers have to employees above all other accounts.
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Every other counterparty is a sophisticated business which has already priced in your counterparty risk. Employees treat payroll as a sacred trust. That may be suboptimal personal financial management but they’re outsourcing sophisticated risk management to a business i.e. you.
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Replying to @patio11
What risk mitigation (beyond personal savings) can an employee really take though? Insurance?
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Replying to @deworde
Savings, adequate untapped credit, immediately reducing exposure to a firm if they show signs of credit risk, etc. All the things that businesses would do to manage credit/counterparty/liquidity risk.
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Replying to @patio11
One of the problems with adequate untapped credit of course being that "having a job that reliably pays you" is generally the entry requirement.
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Replying to @deworde
I respectfully disagree that this is accurate with regards to consumer credit in the United States, but it’s complicated and path-dependent for people.
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Replying to @patio11
Yeah, I was wondering as I posted it if I could back that up. Seemed intuitively obvious, but potentially incorrect.
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Replying to @deworde
You’re historically or aspirationally right but the consumer credit industry basically found that income verification is harder on the scale of the economy than FICO scoring and less predictive of default, so it has fallen out of favor for much consumer underwriting.
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One of my controversial beliefs: this is a good thing. There is no business process by which e.g. one’s credit cards would get automatically withdrawn if one’s employer suffers financial hardship or lays one off; we should prefer this world to ones where that is true.
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Replying to @patio11
I guess I could argue that an employer that pays you irregularly could impact your FICO as a secondary effect, but I think that's just an attempt to retroactively justify my original point, and also I'm not convinced it's true.
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