This is pretty normal, you need to lay off people before you run out of money to pay them. You don’t gamble with your employees paychecks.
As a business owner, you get the upside if business is going great. The downside is that you, the owner, only get paid if there is money left over after you pay your employees.
It's bizarre that the threads on this post seem to straddle "founders are only in it to make money off the back of their employees" and "worker's rights and compensation are onerous" simultaneously.
Can anyone comment how common it is? Isn't normal in Europe? US? Other countries?
It's not optimal, but it's pretty common in management courses. I wish I had more of that in Engineering (even though we hated it at the time).
> Open a company in Brazil is crazy
Crazy? Try shutting one down to see what's crazy.
> Labour protection here is insane too
I have to disagree with you on that one. As an entrepreneur, you have responsibilities towards your employees. Far too frequently you see entrepreneurs who think they are doing employees a favor by giving them jobs when very few realize that they hired people because they couldn't do it themselves. It's a privilege to have a smart team working to make your dreams true.
- We have 13º salary, with may be easy for a large company to pay, but it's expensive for a small company;
- We have FGTS, that is like a saving account paid by the company in the name of employee;
- It's very complicated to hire someone with a non-conventional work contract.
And so on. I'm not saying that we should remove labor rights, what I'm saying it's that we need to find a balance that is good to everyone: employee, small companies, large companies and so on.
FGTS also has its equivalents in several forms of unemployment insurance. It's a bad thing only in how the insurance is mismanaged by the government, not because it exists at all. I guess countries that do not have unemployment insurance are rare and extremely poor?
http://www.uhy.com/wp-content/uploads/UHY-study-on-employmen...
2) The overall tax rate isn't that bad (I live in England now, you'd be surprised). The tax system is complicated but for small companies, falling under Simples rules, it's fairly easy.
Re. labour laws, the fact that labour debts aren't protected by limited liability is fairly bad.
Re. regulated, yeah, it's also pretty complicated to get good legal counsel, despite the amount of law school graduates.
2) I agree completely that the tax rate is not bad, it's around 30%, less than Germany and other countries. The problem is the number of taxes and how complicated is our tax system.
1) Public Universities here hates private money and do business, entrepreneur classes are rare and most of the teachers never did create a company (to teach here you must be an academic, a successful entrepreneur can't give classes about it). If you suggest to your teacher to start a business with his Ph.D. thesis, probably, he will feel offended by your suggestion.
2) Our legislation is bad. I'm mean, very very bad. Open a company in Brazil is crazy:
- So many taxes. I'm not talking about the value that you pay here, I'm talking about an insane amount of taxes. At the federal level, for example, there're 6 or more different taxes. And if you need to send a package across states, you need to deal with a lot of bureaucracy to transport it (and more taxes);
- Labour protection here is insane too. It's not cheap for small and medium companies. And there is a thing that makes it even more complicated for startups: legally, the owner of the company is in charge of the labor debts even when the company is broken. So, if your company broke, you can't close it until you pay all the labor debts, and if you don't pay, you can lose your home or other assets that belong to you, not to your company;
- Almost everything here is regulated, and our regulations are not easy to deal with.