employee benefits

What Job Hunters Should Really Look for in a Job Offer

Ashley Eneriz — Mon, 30 Apr 2018 08:30:16 +0000

I've come across a lot of job listings that play up perks like they are advertising a trip to Disneyland. It makes sense considering that many companies are trying to attract millennial talent, and millennials just happen to be the group that look for and change jobs most often. But should new job hunters really be excited about perks like unlimited vacation, social events, and well-stocked snack rooms?

While these are certainly all nice, they aren't the most important job perks you should seek out. Instead, look for a job with these benefits.

1. Retirement match

It is never too early to get serious about retirement. Don't get hung up on the fact that you aren't in your dream job or that you don't think you have enough money yet to set aside. When evaluating potential job offers, look for a company that offers a defined contribution plan like a 401(k), or a 403(b) or 457(b) plan for employees in specialized fields.

If you can find an employer that offers a company match on retirement contributions, even better. A match is basically free money, so long as you contribute enough to take advantage of it. The boost this perk can have to your retirement fund is huge.

For example, let's say you land a position that pays $65,000 a year. Let's also say your employer matches your contributions dollar-for-dollar up to 6 percent of your salary. If you contribute at least 6 percent of your own earnings, your employer match alone would contribute an additional $3,900 to your 401(k); no extra hours at your desk required. (See also: 7 Things You Should Know About Your 401(k) Match)

2. Tuition reimbursement

The best thing my husband ever did was take a position with the company he works for now instead of finishing his bachelor's degree. The position was entry-level and only required a few years of technology experience rather than a formal degree. Because of this, his work paid for him to finish his bachelor's degree and get his master's degree, along with other expensive professional training. Not only has this saved our family a lot of money and potential debt, but his degrees have also allowed him to continually get promoted in his company and earn almost double than what he started out making.

This is not to say to skip college — but instead, to consider taking a lower-paying position that offers to pay for your higher education. It could save you tens of thousands of dollars overall.

3. Student loan repayment

Many companies are jumping on the bandwagon and offering new employees the opportunity to repay student loan debt as a perk. The most common repayment perk is around $100 a month, though some companies offer more. And while this perk isn't enough to replace a good company retirement match, it is beneficial for employees who want to tackle their education debts faster. (See also: These 17 Companies Will Help You Repay Your Student Loan)

4. Professional development training

Don't forget to ask if professional development training is offered when you are negotiating your new hire contract. This is different from tuition reimbursement and is useful for individuals who already have a degree. Taking advantage of professional development perks allows you to stay current in your skills and knowledge so that if you have to return to job hunting, you won't feel five steps behind. (See also: 7 Certifications That Add Big $$ to Your Salary)

5. Commuter benefits

What might seem like an unassuming commute can add up quickly in gas, car wear, and other transportation costs. You may wish to negotiate a stipend for commuting before signing your work contract, especially if the company wants you to travel frequently for work. Don't forget to ask about telecommuting, where you can complete essential tasks from the comfort of your home one or several days a week.

The company may be leery to grant telecommuting benefits, but if you can prove that your productivity remains the same or even improves when you are out of the office, each day you work from home can save you on commuter expenses. (See also: 3 Ways Your Commute Is Killing You — And What to Do About It)

Don't fall for fun perks like "Taco Tuesday" or "Bring Your Pet to Work Day." While these company add-ons make your work environment more fun, they don't boost your paycheck or your financial situation. Look for substance in your work perks, and you'll be more likely to come out ahead.

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

These 17 Companies Will Help You Repay Your Student Loan

Damian Davila — Thu, 22 Jun 2017 09:00:10 +0000

Student loans can dampen the ability of new grads to get on their feet financially, causing stress at home and at work. According to Student Loan Hero, the graduating class of 2016 had an average student loan balance of $37,172 — up six percent from the year before.

While it's daunting to see that number rise, the good news is that, in an effort to recruit and retain the best hires, a growing number of employers have started programs to help employees pay back those hefty student loans. Here are a few of those companies helping workers get out of debt.

1. Chegg

In April 2015, tutoring and study services company Chegg announced its college loan reduction plan for full-time employees in partnership with Tuition.IO, a company that provides a web-based platform for tracking and managing student loan payments. This benefit has an annual cap of $1,000 (less taxes), but has no cap on the total amount an employee can receive.

2. ChowNow

ChowNow has found this perk so useful in hiring talent that the company decided to double it from when it first started offering it to employees. The Los Angeles-based online food ordering company has an employer-paid student loan assistance program that matches up to $1,000 a year of employee payments.

3. CommonBond

Since December 2015, this lending marketplace platform has been granting $100 per month to its employees to pay down student loans. While CommonBond limits the perk at $1,200 per year, the company continues helping its employees until they fully pay off their student loans. Employees also have the option to refinance their student loans with CommonBond. On average, student borrowers save over $24,000 when refinancing through CommonBond, according to the company.

4. Credit Suisse

The financial services company doesn't offer a lump sum benefit to its employees, but instead provides a 0.25 percent discount on interest rates to workers that refinance their student loans with online lender SoFi.

5. Connelly Partners

Boston-based ad agency Connelly Partners works with Gradifi to offer a student loan repayment plan that improves the longer the employee stays with the company. Like a 401(k) plan, the agency matches up to $100 per month of its employees' debt payments. Employees who stick around for at least six months receive a $1,000 student loan payment bonus. Those who work for the company for five years receive another $1,000 bonus for the sixth year.

6. Fidelity Investments

The financial services firm makes an annual $2,000 direct payment to employees' student loan servicers, up to a total of $10,000. If your career with Fidelity requires you to continue your education, then Fidelity will reimburse you 90 percent of qualifying costs (up to $10,000 per year) of a work-related degree or certification program. You must have worked for the company for at least six months to qualify.

7. Kronos

Based in Chelmsford, Massachusetts, the workforce management software provider has partnered with solutions provider Student Loan Genius to pay up to $500 per year to help employees pay down student debt.

8. LendEDU

Since February 2016, the online marketplace for student loan financing has paid $2,400 per year ($200 per month) to employees with student loan debt.

9. Martin Health System

Employees working in the nursing field at Martin Health System in Florida can receive up to $2,000 per year to help pay down their student loans. In addition to this benefit from Martin Health System, Florida nurses can also work in areas with staff shortages to qualify for the state's Nursing Student Loan Forgiveness Program or the federal Perkins Loan Cancellation for Nurses and Medical Technicians.

10. Moonlite Bunny Ranch

In 2015, Dennis Hof, the owner of the legal brothel Moonlite Bunny Ranch in Nevada, promised to match 100 percent of his employees' student loan payments for two months, up to the full amount that they made during that period.

11. Natixis Global Asset Management

All Natixis employees receive an annual $1,000 student loan repayment benefit, up to $10,000 over a 10-year period. The company used to require that workers reached five years of employment in order to receive a lump sum benefit of $5,000, but did away with the requirement in July 2016.

12. Nvidia

This computing giant offers comprehensive student loan repayment options. First, employees working at least 20 hours per week who graduated within the previous three years can apply for a reimbursement of $6,000 a year for qualifying student loan payments, up to $30,000. Second, employees who successfully refinance their student loans with SoFi receive a bonus ranging from $200 to $500 and pay no loan origination fees. Third, employees who need to go back to college can receive a reimbursement of up to $5,250 each year for qualified job-related educational expenses, including tuition and books, as long as they earn at least a B average.

13. Powertex

The clothing design company was among the first businesses in Wisconsin to partner with Gradifi to offer a student loan repayment assistance program. Powertex gives eligible employees $100 per month for student loan payments for up to six years.

14. PricewaterhouseCoopers (PWC)

Associates and senior associates at the consulting firm receive $100 per month ($1,200 a year) toward student loan payments for up to six years.

15. SoFi

Many employers partner with SoFi to offer a student loan repayment assistance program. The online lender also offers its own eligible employees $200 per month to help them fully pay back student loans.

16. Staples

The office supply retailer offers top-performing full-time employees $100 a month for three years, for a total of $3,600 in student loan assistance. To maintain their eligibility, employees must meet set criteria throughout the entire three years.

17. Aetna

As of January 2017, the health care company matches employees' student loan payments of up to $2,000 per year, with a lifetime maximum of $10,000. The program is available to employees who have graduated within the previous three years from an accredited institution.

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This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

These 7 Companies Have the Craziest Employee Perks

Brittany Lyte — Mon, 13 Oct 2014 09:00:05 +0000

Looking for a job that offers more than the standard salary and health benefits combo? Look no further. From scuba diving lessons to a full-service concierge that will pick up the drycleaning and then stand in line for concert tickets in your stead, there are wonderful benefits to working at one of these seven companies we've scouted out. (See also: The 29 Companies With the Best Maternity Benefits)

Read on for the full scoop on the zaniest perks reaped by those lucky enough to be employed by a business that knows full well how to keep its workforce happy and loyal. Then you might want to freshen up that resume — we hear the competition is thick for gigs at a place with its own rock climbing wall.

1. Cisco's Acupuncture

Acupuncture is one of the many health and wellness benefits enjoyed by employees of information technology giant Cisco. This traditional Chinese medicinal practice is said to ease pain through the insertion of needles into the skin or the application of heat and pressure on specific pressure points across the body. The going rate for the rest of us is about $50 to $75 dollars per treatment.

2. Chesapeake Energy's Scuba Lessons

Free scuba diving lessons are among the mind-blowing perks offered to employees as part of Chesapeake Energy's "Living Well" program, which pays up to $1,000 for workers to participate in on-campus fitness and education classes. Ballet, aerobics, beach volleyball, rock climbing, and flying lessons — yes, we're talking airplanes — are also on the roster.

3. Google's Automotive Extras

It's widely known that Google employees enjoy some pretty amazing perks — gratis gourmet meals, massages, yoga instruction, an on-site bowling alley, child care assistance, top notch legal advice, business-travel destinations to paradises like Lake Tahoe and Hawaii, and up to $12,000 in annual tuition reimbursement. But did you know they also get free oil changes and car washes? That's a big bonus considering the average American spends more than $7,000 annually on their vehicle.

4. SC Johnson & Son's Private Concierge

The company that manufactures Glade, Ziploc, and Windex offers its employees a full-service concierge that'll shop around for the best auto insurance quote, pick up the groceries, and stand in line for concert tickets. It's like having a willing and able assistant to complete all of life's tiresome errands and chores in your stead. The goal, company officials say, is to provide employees with a healthy work-life balance.

5. Eileen Fisher's New Age Fitness

Pilates, Qigong, creative movement, and nutritional education are among the health and wellness courses available to employees at Eileen Fisher's headquarters in upstate New York. EF employees also receive a $1,000 annual stipend to pursue their health and wellness goals outside of work through massage, acupuncture, or the perhaps the purchase of some new home exercise equipment. The company offers an additional $1,000 annual stipend for educational pursuits like yoga teacher training, pottery classes, museum memberships, and horseback riding.

6. Deloitte's Paid Sabbaticals

The financial advisory company offers associates partially paid three- to six-month sabbaticals to pursue personal or professional growth opportunities in career development or volunteerism. Deloitte workers can also opt for an unpaid one-month leave during which there are no restrictions on how they spend their time. Europe, anyone?

7. Infertility Perks at Facebook

Facebook is now offering employees up to $20,000 toward infertility treatments, sperm donations, and, for women who want to delay pregnancy, procedures to freeze their eggs. "Anything that gives women more control over the timing of fertility is going to be helpful to professional women," Shelley Correll, a sociology professor and director of the Clayman Institute for Gender Research at Stanford University, told a Christian Science Monitor reporter. "It potentially addresses the conflicts between the biological clock and the clockwork of women's careers: The time that's most important in work, for getting your career established, often coincides with normal fertility time for women. This can potentially help resolve that by pushing women's fertility into the future." Apple will roll out a similar program next year.

Does your company offer any great perks? Please share in comments!

This article is from Brittany Lyte of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Contain Rising Healthcare Costs

Barbara Weltman — Wed, 21 Dec 2011 23:52:57 +0000

Link:

http://www.openforum.com/articles/5-ways-to-contain-rising-healthcare-costs

Healthcare costs continue to rise, even skyrocketing for some businesses. Premiums for small businesses have grown by 113 percent in the last decade. Despite passage of the Patient Protection and Affordable Care Act (“Obamacare”) last year, there is no premium relief in sight. However, there are still actions you can take to provide the care you want for your staff to keep them healthy and protected without causing you financial hardship.

1. Check Your Plan Options

Health insurance doesn’t mean that you must have the Cadillac of plans to cover every health need. Such plans are very expensive. There are other types of plans, such as HMOs, that provide less costly coverage.

Some states may offer state-sponsored plans for small businesses and sole proprietors. For example, New York’s HealthyNY.com provides an option for small businesses and sole proprietors that meet certain income limits. Massachusetts, with its health care mandate, has a HealthCareConnector for employers to find affordable coverage within the state; eligible small businesses can save 15 percent by joining a wellness health care track.

Discuss your needs with an insurance agent who can offer a variety of health care plans. Or do your own research using the small employer health care finder from HealthCare.gov. The finder lets you search your options by zip code.

2. Tweak Your Coverage

One way to keep premiums down is to increase the portion of costs borne by employees, including deductibles and co-payments. To maintain premiums, you probably need to hike these out-of-pocket costs. While it will cost more to visit a doctor or obtain a medication, at least you’ll be able to retain coverage for your staff. Again, you’ll want to discuss the impact that proposed changes will have on your premiums. Obviously, once you make decisions, share them with your staff.

3. Share Costs

Many small business owners would love to pay for all of their employees’ coverage but just can’t do it financially. They’re forced to share the responsibility for paying for coverage. Some cost-sharing options to consider:

You pay the cost of coverage for an employee. Anyone who wants to add family coverage pays the additional cost;
You share the cost of coverage in some way (e.g., 50/50);
You give employees a dollar allotment and they choose the type of coverage they want from options you provide, paying any additional costs.

Important: The cost-sharing option you choose may impact your eligibility for a federal tax credit, explained later.

4. Use Consumer-Driven Plans

There is a growing trend toward consumer-driven plans because of the money that can be saved by the company. As of January 2011, there were 11.4 million people using health savings accounts (HSAs) (explained below). HSAs and health reimbursement arrangements (HRAs) are plans that combine a personal account with a high-deductible (low cost) health plan (HDHP) in which the first dollars of care are borne by the employees. Once the deductible is met, the insurance operates like regular insurance.

Out-of-pocket medical costs can be paid through a couple of different accounts.

HSAs. These allow the employer, employee, or a combination of both to make tax-deductible contributions (within IRS-set limits). The funds grow on a tax-deferred basis and withdrawals for qualified medical costs are not taxable. There is no use-it-or-lose-it feature, so if employees don’t use up their account funds, they can use the funds in later years. If they leave the company, they take the accounts with them.
HRAs. These are employer-funded plans that cover employee’s out-of-pocket costs up to a dollar limit set by the company. Unused amounts carry over to the following year, but accounts are not portable; employees lose this benefit when they leave the company.

5. Take Advantage of the Federal Tax Credit

The small employer health insurance credit allows you to offset your federal income tax liability by 35 percent of the cost of the premiums you pay for your staff. When enacted last year, the government had expected 4 million small businesses to use the credit, but as of mid-October 2011, only 309,000 had done so, in part because many were unaware of its existence.

To qualify for the credit, you must meet all of the following conditions.

You pay at least 50 percent of the cost of the premiums for employees.
You have fewer than 25 full-time equivalent (FTE) employees. You may be able to meet this condition even if you have more than 25 employees because owners and their relatives who are employees are not counted.
The average annual wages for your FTEs are less than $50,000 per FTE.

The maximum credit applies if you have fewer than 10 FTEs with average wages under $25,000; a partial credit applies for more FTEs with higher wages until you hit the limits above. There are other limitations, restrictions, and requirements for the credit. Learn more in the instructions to IRS Form 8941.

More Resources

Handling the issue of health care coverage for your business can seem monumental. However, there are plenty of resources that can help. Here are two.

IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (it has not been updated for 2011 and 2012, but still provides valuable, general information about plan types).
MyVenturePad’s free webinar on Rising Costs, Unclear Mandates.

This article is from Barbara Weltman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Cell Phones as Tax-Free Fringe Benefits

Barbara Weltman — Thu, 13 Oct 2011 17:19:41 +0000

Link:

http://www.openforum.com/articles/cell-phones-as-tax-free-fringe-benefits

It used to be that employees who were given company-paid cell phones or were reimbursed for use of their personal cell phone had a taxable fringe benefit; the amount was determined by the employer. After all, employees could use these phones to call their family or friends, which is clearly personal and not for business. Figuring the amount of this benefit was a headache for employers.

All this changed last year when the Small Business Jobs Act eliminated cell phones from the category of “listed property” in the tax law. By “delisting” cell phones, onerous substantiation requirements were eliminated and the ability to offer cell phones as tax-free benefits was made much easier. Here’s where things stand now when it comes to employer-provided cell phones (including smart phones).

Phones Given for Business Purposes

If an employer gives a cell phone to an employee for a “noncompensatory business purpose” (i.e., not merely as a reward for services), then the value of using the phone is not taxable to the employee. It is treated as a “working condition fringe benefit” because the employee could have deducted the phone if he or she had paid for it.

Under recent IRS guidance, each of the following situations is viewed as having a “noncompensatory business purpose” so that the cell phone is not taxed to the employee:

The employer needs to contact the employee at all times for any work-related emergencies;
The employer requires the employee to be available to speak with clients and customers at all times when the employee is away from the office;
The employee needs to speak with clients located in other time zones at times outside of the employee’s normal work hours.

If the employer doesn’t provide the cell phone but instead has a reimbursement arrangement to cover the employee’s cost of his or her personal cell phone used for business, this too can be treated as a noncompensatory business purpose. The reimbursement amount must be limited to the cell phone charges; any excess reimbursements to the employee must be returned to the employer or it becomes taxable.

Once this business purpose is established, any personal use of an employer-provided phone is also tax free. It is viewed as a de minimis fringe benefit, meaning that its value is so small it isn’t worth bothering with.

Employees Taxed on Cell Phones

If there is no noncompensatory business reason, then the employer will figure the value of the use to the employee and include this amount on the employee’s W-2 form. The IRS provides several examples of a cell phone that is not provided primarily for a noncompensatory business reason:

Good will or morale of an employee;
Attracting a prospective employee;
Providing additional compensation;
Reimbursement or payment for international coverage for a service technician with only local clients or customers.

The IRS has told its examiners auditing company returns to look for reimbursement arrangements that deviate from what would appear to be normal cell phone usage. The IRS gives this example: If an employer reimburses an employee $100 per quarter for the first three quarters of the year and then reimburses the employee $500 in the last quarter, it raises the question of whether that additional $400 in the last quarter is disguised compensation that should be taxed to the employee.

Bottom Line

An employer should work within the IRS guidance to ensure that any cell phone it gives to an employee or any reimbursement arrangement for cell phone usage does not go beyond the tax-free bounds. If it does, it will create a burden for both the employer and the employee. The employer will have to figure the taxable fringe benefit and pay employment taxes on this amount; the employee will have the fringe benefit added to ordinary compensation and it will be taxable. It may make sense to consult with a tax advisor to ensure that you are doing things right!

This article is from Barbara Weltman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Things to Know about Cash Balance Plans

Barbara Weltman — Sun, 29 May 2011 19:04:07 +0000

Link:

http://www.openforum.com/articles/5-things-to-know-about-cash-balance-plans

You know about IRAs, 401(k)s, and traditional pension plans. You probably aren’t familiar with cash balance plans, but you should be. They could well be the solution you’re looking for when it comes to maximizing your retirement savings without being wholly dependent on the whims of Wall Street. Statistics in the recently issued Kravitz National Cash Balance Plan Research Report 2011 demonstrate the advantages of these plans. Here's what you need to know about them.

Not Your Grandfather’s Pension Plan

Pension plans are defined benefit plans that promise to pay participants a fixed sum upon retirement. The promise is based on a participant’s earnings and is not dependent on the investment performance of the plan. Cash balance plans, in contrast, are a type of pension plan that define the promise to pay in terms of a participant’s account (they are also called “hybrid plans”). Essentially, a cash balance plan transforms the retirement payment promise into something more akin to a defined contribution plan, such as a profit-sharing and 401(k) plan.

For example, instead of promising a monthly pension of $5,000 upon retirement as a pension plan does, the cash balance plan instead says the participant’s account balance is $90,000 at retirement. The account balance can then be taken as a monthly payment (which may be the same $5,000 per month as in the case of the pension plan). Or the participant can receive a lump-sum payment of $90,000 – something that usually isn’t possible with a pension plan.

The lump-sum distribution can be rolled over on a tax-deferred basis into an IRA, allowing the participant more flexibility in tailoring distributions to meet retirement income needs. This “portability” feature – being able to make a rollover – also distinguishes traditional pension plans from cash balance plans.

In contrast to traditional pension plans, cash balance plans are easier for participants to understand because benefits are stated as individual account balances rather than as “accrued benefits” or some other obscure formula.

Cash Balance Plans aren’t Just for Large Corporations

Just because the first cash balance plan was established by Bank of America (in 1985) doesn’t mean that cash balance plans are limited to large corporations. Small and mid-sized companies are now using them in greater numbers. In fact, according to the Kravitz Report, 82% of plans in place are with firms with fewer than 100 employees. Further,

Companies in the fields of finance and manufacturing account for a large percentage of plans;
Medical and dental groups account for 37% of all plans;
A diverse range of other companies (astrologers, auctioneers, animal groomers, bars, bagel shops, religious institutions, museums, and ski reports) account for 11% of all plans.

Advantages over 401(k)s

Cash balance plans can be better for certain business owners and their staff. Here are four advantages to participants:

Contributions are made entirely by the company, thus providing more retirement benefits for participants, which isn’t dependent in whole or in part on contributions by employees. This may seem burdensome to small businesses, but many of them are family-owned, with few “outside” participants, so the contributions primarily ensure to the benefit of owners and their families. Also, plan contributions are tax deductible, reducing the profits that will be taxed.
The company, rather than the participants, manages the investments in cash balance plans. Increases (and decreases) do not affect the promised benefit to participants. In contrast, with 401(k)s, participants at retirement have only as much as their (and the company's) contributions have earned. Retirement benefits are more stable in cash balance plans because investments usually are tied to a benchmark such as the 30-year Treasury rate and are conservatively invested.
At retirement, a guaranteed payment for life must be offered in a cash balance account. In contrast, a 401(k) may offer a similar payout option but this isn’t mandatory.
Participants in cash balance plans are guaranteed to receive a pension for life because, as a defined benefit plan, cash balance plans are insured by the Pension Benefit Guaranty Corporation (PBGC), a federal agency that protects participants in the event their pension plans don’t have enough funds to pay the promised benefits. There is no such protection for 401(k) participants.

Cash Balance Plans are No Longer Questionable in the Eyes of the IRS

In the past, there were uncertainties when it came to cash balance plans, and the IRS turned its nose up. However, some of these questions were answered by the Pension Protection Act of 2006. Last October, final and new proposed regulations, clarified more mysteries about these plans to enable benefits experts to craft plans that comply with legal requirements and avoid IRS challenges. The regulations, for example, clarify how plans can transfer from traditional pension plans into cash balance plans.

These regulations generally apply to plan years beginning on or after January 1, 2011.

Cash Balance Plans Can Be Combined with 401(k) Plans

Instead of a stand-alone pension plan, the cash balance plan can be combined with 401(k) plans to maximize retirement savings without increasing company costs. The Kravitz Report shows that 89% of cash balance plans are combined with a profit-sharing or 401(k) plan. Remember, the participants are the ones funding the 401(k).

Final Word

Be sure to discuss your retirement plan options with a knowledgeable benefits advisor to determine whether a cash balance plan is a good fit for your company.

To learn more, you’ll find general information about cash balance plans from the Department of Labor. You can find tax-related information from the IRS.

This article is from Barbara Weltman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Thorny Payroll Tax Issues and How to Handle Them

Barbara Weltman — Sun, 27 Feb 2011 00:07:29 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/4-thorny-payroll-tax-issu...

Small businesses historically have created 70% of all jobs in the United States. With such a high percentage of the workforce, employee-related tax challenges for small business owners are probably inevitable. Here are four common tax pitfalls and what you can do about them.

Personal Use of Company Cars

Many small business owners and some employees drive cars or trucks that are owned or leased by their companies. This arrangement lets the company deduct the costs of the vehicle. However, employees (including owners) are viewed by the IRS as gaining a taxable benefit for their personal driving. How is this valued?

The tax law gives companies several options about how to value the personal use, including:

* Report all of the value of vehicle usage and let the employee deduct his or her business use. While the easiest option for the company, it isn’t helpful for employees.

* Report the fair market value of the personal usage (what the employee would have to pay a third party for the same benefit).

* Figure the value of personal usage based on something called an annual lease value (ALV).

Discussion of each of these methods for valuing personal usage can be found in IRS Publication 15-B.

Worker Classification

When you need additional help, should you hire an employee or engage an independent contractor? There are both tax and practical considerations to this decision. Taxwise, it’s considerably less costly to use an independent contractor. With this in mind, the question of worker classification—as an employee or independent contractor—is high on the IRS’s audit list. And states also look closely at worker classification when workers seek unemployment benefits or workers’ compensation.

The problem is that you can’t simply attach a label to a worker and automatically make it stick. From the government’s perspective, if you have sufficient control over the worker—you have the right to say when, where, and how the work gets done—then the worker is an employee, regardless of any label. According to the IRS rules for worker classification, a determination depends on behavior and financial issues as well as the relationship of the parties.

What to do:

Look at how other companies within your industry classify their workers. If there is a long-standing industry practice of treating certain workers as independent contractors, this can be helpful.
Have independent contractors sign agreements acknowledging that they are responsible for their own taxes. These agreements won’t bind the IRS, but they are helpful to show that both you and your contractors view the arrangement as other than employer-employee.
Be consistent. Treat all workers doing the same type of work in the same manner.
Issue Form 1099-MISC to workers you are treating as independent contractors.

Recent Court Decisions Increase Uncertainty

The U.S. Tax Court and federal courts are continually deciding thorny tax questions. Do these decisions affect you? It depends.

One key issue that’s moving through the courts at the moment concerns the constitutionality of the Patient Protection and Affordable Care Act (“Obamacare”). One U.S. district court has said that the federal government has no constitutional basis to mandate that each person buy health coverage and has concluded that the entire act, including various tax provisions (such as the small employer health care credit), is unconstitutional. No one is quite sure at this time what this means for the tax provisions within the Act.

Another case (Quality Stores, Inc.) decided last year said that severance benefits were not wages for purposes of payroll taxes. The IRS, as well as some courts, continue to disagree. Some practitioners have been advising companies with laid off workers that paid FICA and other payroll taxes on severance benefits to file refund claims even though the issue isn't settled. Why? Because generally refund claims must be filed within three years of the original return filing date. The IRS has indicated it will not give refunds at this time. Companies that paid severance benefits in the past several years should discuss this issue with their CPAs or other tax advisors.

Cash Flow Problems

Small businesses, from time to time, may experience cash flow problems. Not having sufficient cash means deciding which creditors to pay first.

It’s vital for small business owners to pay the government first when it comes to certain payroll taxes and excise taxes. The income taxes and employees’ share of FICA that you withhold from their pay is considered “trust fund” money. Excise taxes you collect in the course of your business, such as a gas station’s collection of excise taxes on gasoline sales, are also trust fund money.

You have collected the money in trust and, as a responsible person, must pay it to the government. If you fail to do so, you can be held 100% personally liable for the unpaid amount, plus penalties and interest. This is true even if your business is incorporated or is a limited liability company; your entity does not protect you from this tax obligation.

The IRS has helpful information about the trust fund recovery penalty. If you are facing a cash crunch with unpaid trust fund taxes, meet with your financial advisor to figure out the best way to handle the situation.

This article is from Barbara Weltman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

12 Ways to Save on Business Insurance Premiums

Scott Allen — Wed, 05 Jan 2011 17:24:41 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/12-ways-to-save-on-busine...

From an insurer’s standpoint, every business is unique in the risk that it poses. In order to properly rate a risk, the insurance company must take many things into consideration in an attempt to determine the likelihood of a claim and if there is a claim, the severity of it. The following are the top factors that insurers consider that could cause a business to pay higher insurance premiums. These also represent your best opportunity to keep your insurance costs under control or even reduce them.

1. Loss History

Past claim history plays a major role in the insurance premiums of a business. The insurer will often consider a business that has had several small claims a greater risk than a business that has had one large claim, thus charging a higher premium. A business owner might be better off absorbing small losses and saving the insurance for larger claims.

2. Credit History

Although most insurance companies do not have the ability to apply credit scoring to commercial risks, they do often research the credit history of the company as well as the owners. A poor credit history could be a red flag to the insurer that the business owner is either financially irresponsible or more likely to file a claim since their finances might not be solid enough to absorb small losses on their own. Some insurance companies won’t even consider a commercial applicant that has had a bankruptcy in the past. Cleaning up your personal credit and establishing solid business credit before adding coverage or changing insurance providers could provide substantial savings.

3. Driving History

For commercial auto policies, having employees with poor driving histories will result in higher rates unless the company agrees to exclude those drivers. This could come into play even on a package policy because many commercial package policies provide hired and non-owned auto coverage. You may want to consider this in your hiring practices.

4. Experience

The length of time the company has been in business is also taken into consideration. If it’s a start-up business, the insurer will want to know how much experience the owner has in the same or similar business. If the owner is not experienced in the type of business they are starting, the insurer may apply a surcharge or even refuse to insure them. Having a partner or senior executive/manager with related experience can alleviate this.

5. Location

The location of the business is another important factor in the determination of rates. A business located in a high crime area or in a remote area not easily accessed by the fire department poses a higher risk of loss. Investigate the impact in your insurance premiums as part of your due diligence when considering a new location. You may be able to offset higher rent with lower insurance premiums.

6. Building Characteristics

If the building is older and has not had updates to major systems such as electrical, plumbing, heating, and the roof, the insurance company may apply a surcharge. A frame building will have higher rates than a brick building, and lack of protection systems such as fire alarms, a sprinkler system, and proper exits may even deem the building uninsurable with some companies.

7. Continuous Coverage

One of the most important things a business owner can do is carry adequate insurance and avoid a lapse or gaps in coverage. Prior cancellation for non-payment is especially unfavorably looked upon and could make the business ineligible for coverage with some insurance carriers. Keep this in mind if you ever get in a cash flow crunch and have to start prioritizing bill payments.

8. Safe Working Environment

Companies that do not provide a safe working environment for their employees and do not enforce safety rules are going to pay higher rates because their risk of injury to an employee or visitor is greater.

9. Employee Wellness

Although most group health plans don’t require physicals and medical history for individual employees, insurers recognize that healthier employees cost them less, and they’re willing to pass some of that savings on to employers who implement employee wellness programs. These may include offerings such as on-site exercise facilities, partially or fully subsidized gym memberships, stop-smoking programs, weight loss support groups, and more. While the costs may not be fully offset by reduced health premiums, they almost certainly will by reduced absenteeism, increased productivity, and improved employee retention. Healthy employees are also more likely to be happy employees.

10. Use of Insured Subcontractors

The insurance company might require proof that the business owner only uses subcontractors who carry their own adequate insurance. This is because the business owner could be held liable for the subcontractors’ operations if they are uninsured, thus forcing the insurance company to provide insurance for which they are not collecting a premium.

11. Reporting Correct Information

Many business insurance policies are based upon annual sales and/or employee payroll.

At inception of the policy, sales and payroll figures must be estimated for the next year. At the end of the policy period, an audit is performed to determine actual figures. If the figures were underestimated, whether or not by intention, additional premium will be due.

12. Ask Your Agent

Perhaps the single most effective thing you can do to reduce your insurance premiums is simply ask your agent. While they may make more money on higher premiums, they also want to keep your business, and telling you how to lower your costs is one of the most effective ways they can do that. If you haven’t had that conversation with your agent recently, set up a call or meeting right away.

While the exact formulas insurers use to calculate your premiums may be complex and somewhat mysterious, understanding some of the major factors insurers consider may provide you with multiple ways to save on your premiums.

This article is from Scott Allen of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

20 Percent Time: Offering Your Employees Autonomy

Thursday Bram — Fri, 17 Dec 2010 17:09:35 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/20-percent-time-offeri...

As an employer, it's tempting to want to control each aspect of what your team does over the course of the day. You have things that need to get done — that's why you're paying your employees — but offering your employees at least a little autonomy in their time at work can have beneficial results for your business, as well as keep your employees' morale up.

Google is one of the best-known examples of employee autonomy in action. The company offers its employees what has come to be known as 20-percent time. 20 percent of the time Google engineers spend at work can be directed into a project that directly interests them. The results have included Gmail, Google News, and AdSense (which has lead directly to money in Google's pockets).

Creating a program in a small business that allows for the sort of autonomy that Google encourages may not be as simple as announcing that each employee should take a day a week and use it for pet projects. At the very least, small businesses don't have the margins that Google does, but there are ways to introduce new levels of self-direction into the work that your employees are doing.

Build on Your Employees' Interests

The typical employee would rather not be doing the same thing day in and day out for the rest of their lives. That fact is one of the issues that contributes to many employees feeling that they ought to be constantly looking for new employment opportunities. Offering projects with new levels of responsibility and self-direction can counter that tendency, as well as benefit your business. Tracy Kellner owns Provenance Food and Wine. She's only able to offer her employees so many hours in the shop, but she has found that offering some projects that can be handled at home to one of her employees has provided many benefits.

The employee in question had asked for more hours. "I have 2 to 3 other part-time employees who also wanted more hours, but in this instance, Nicole had expressed to me in a review that she wanted more responsibility and also is thinking about starting her own business at some point," says Kellner. "Since I could not give her more hours to physically work in the shop (thus taking away from the other staff's hours — I couldn't justify putting another staff member on the floor at this point) I gave her the autonomy and responsibility to work up to 5 to 6 hours a week from home, working on our newsletter, Facebook posts, and planning in-store events, all things that did not require being at the store to plan. This has worked out great because I was able to give Nicole a few more hours, free up some of my responsibilities, and still give the other staff members their hours."

The mechanics of the situation wound up being fairly simple to manage: "Nicole and I meet regularly at the shop to review her work, which she logs into a spreadsheet and emails me each week. The spreadsheet details all of the things she's worked on during that time period. I give her regular feedback and as she gets more tenured and comfortable with these duties it frees up more of my time to work on other business-owner responsibilities."

Focus Your Team's Energy

When you have goals your business needs to meet — such as landing new clients — but no preferred strategy to reach those goals, putting the question in front of your employees can be a valuable tactic. Shilonda Downing knew her company, Virtual Work Team, was ready to step up its marketing. "I offered my employees the last portion or 25 percent of their work day to help promote our business and to optimize the marketing avenues in which we were currently engaged. It was optional, and I agreed to pay the team members who accepted this challenge, and all but one employee took the offer and ran with it. I have a small team, and we all work in synergy for clients worldwide, which can sometimes be myopic. Allowing the team to think outside of the box to garner new clients is refreshing to us all. I also offered my team members who obtain new clients for our company a bonus based on the first invoice of the new client they've obtained. I've been blessed with a great staff who took my idea and turned it into new business."

The tactics that Downing's team used varied, ranging from promoting the company online to developing a community-based strategy geared towards local prospects. She did provide some support, like giving out copies of previous marketing materials, so that her team wouldn't have to redo work that had already been done. Mostly, though, Downing was able to turn her team loose and start handing out those bonuses as work poured in.

Create Autonomy in Your Business

For most small business owners, finding the best way to use your employees' time is an ongoing question. It's rare that you'll be in a position to completely turn your team loose, even for one day a week, but identifying even a day a month that you can hand over to the team to talk about the opportunities they see for your business can be invaluable. As an owner, you likely have a good overview of how your business works, but someone down in the trenches may see small changes or opportunities that you can make use of — provided they have the time to think about the matter and speak up about it.

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Plan Now for Your 2011 Retirement Plan

Barbara Weltman — Wed, 24 Nov 2010 18:52:12 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/plan-now-for-your-2011-re...

While 2010 isn't over yet, it's not too early to think about setting up a qualified retirement plan for 2011 if you don't already have one in place. Getting an early start is especially important if you have employees. This will give you time to select the plan that best meets your business and retirement-plan goals. It will also give employees an opportunity to decide whether to participate and how much of their wages to contribute if you choose the type of plan based on employee contributions, such a 401(k) plan.

Why have a retirement plan?

A qualified retirement plan allows owners to shelter company profits while saving for their personal retirement. It also creates a valued employee benefit to attract and retain good workers.

Of course, there is a cost for these benefits. The company must include employees in the plan, and to a greater or lesser extent, make contributions on their behalf on a nondiscriminatory basis; the plan cannot be limited to owners and key employees. There is a cost not only for company contributions, but also for administrative plan-related activities, such as filing annual information returns if required.

If a small business with no more than 100 employees sets up a qualified retirement plan, it can take a tax credit of half of certain administrative costs (such as educating employees about the plan) up to a credit of $500 per year for the first three years of the plan. However, to claim the credit, the plan must cover at least one person who is not an owner or owner's spouse.

Which plan is right for you?

There are many types of qualified retirement plans to choose from. The following are the key types of plans popular with small businesses (discussed in IRS Publication 560, Retirement Plans for Small Business), and their features and advantages. There are a number of variations on these basic types of plans.

Profit-sharing plans
These plans are funded solely by employer contributions, enabling businesses to offset their profits by deductions for contributions on behalf of employees. If a business isn't profitable, it doesn't have to make contributions.

Simplified employee pensions (SEPs)
These are a variation on profit-sharing plans and are widely used by small businesses. The advantages of these plans are no annual filings of information returns for the plans and the fact that they can be set up and funded as late as the extended due date of the return for the year to which they relate (e.g., a 2011 plan of a business owner with a filing extension can be set up and funded by October 15, 2012).

401(k) plans
These plans are funded by employee contributions made on an elective deferral basis (employees agree to add part of their salary and aren't taxed on this contribution). Employers may want or be required to contribute to employee accounts; employer contributions are deductible by the business.

SIMPLE plans
These function much like 401(k) plans, but have lower limits on the amount that employees can contribute. Also, if they are set up as SIMPLE IRAs, there is no annual information reporting as there is for 401(k) plans.

Defined benefit plans
This is a pension funded by employer contributions. The plan promises to pay a set benefit at retirement, and contributions are actuarially determined to meet this benefit promise. For businesses with owners who are highly paid professionals and few or no other employees, this plan can provide significant retirement benefits and tax-sheltering, all or most of which go to the owners.

What's new for 2011?

The IRS has released the limits on contributions and benefits that will apply to qualified retirement plans in 2011; because of low inflation, they are the same limits that applied in 2010. Key figures of note:

Maximum contribution to profit-sharing and SEP plans: $49,000
Maximum benefits provided by defined benefit (pension) plans: $195,000
Maximum amount of compensation taken into account in figuring contributions and benefits: $245,000
Maximum elective deferral to a 401(k) plan: $16,500 (plus an additional $5,500 for those at least 50 years old by the end of 2011)
Maximum elective deferral to a SIMPLE plan: $11,500 (plus an additional $2,500 for those at least 50 years old by the end of 2011)

What to do now?

It's wise to meet with a tax adviser to discuss your plan options and which type of plan works best for your personal situation next year. For example, if the company has a small staff, you may want to use an automatic 401(k) plan so that you, as the owner, can maximize your personal contributions. With this type of plan, employees are automatically included with a set contribution amount unless they opt out or change their contribution amount; the company must make certain minimum contributions to avoid certain complexity. The sooner you make plans, the sooner you and your staff can begin to save for retirement on a tax-advantaged basis.

This article is from Barbara Weltman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways Environment Can Impact Health Insurance Costs

Thursday Bram — Wed, 10 Nov 2010 23:48:44 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/5-ways-environment-can-im...

When you offer health insurance, the costs can be high. Taking steps to keep those costs down — along with the costs associated with employees needing to make use of their health insurance, like missed work days — simply makes sense. It's hard to drop those costs by a lot, but making some changes in your business may be able to improve your employees' environment and reduce costs.

The settings that employees work in can have significant impacts on their health and their need for health insurance. It goes beyond the differences between working at a construction site and in an office, as well: No matter what type of business you run, there may be opportunities to improve the environment. Because health insurance providers set costs based on how much they expect your employees to need health insurance, taking steps to improve your situation and bringing them to the attention of your health insurance provider can be worth the effort. Here are some environmental issues to consider:

Sedentary Positions Can Lead to Health Problems

If an employee doesn't get out from behind his desk much, the likelihood that he will have health problems goes up as a direct result. Research published in Medicine and Science in Sports and Exercise shows that even if an individual exercises regularly, simply sitting for long periods of time can increase his or her risk of cardiovascular disease. The first step to reduce the impact of sitting for long periods of time is to encourage regular exercise, but offices can also be designed to get employees to move around regularly. Something as simple as holding meetings while standing can help.

Cleaner Air Makes for Healthier Employees

Any employee with dust allergies will do better in an environment with cleaner air, and the same is often true for employees with pollen allergies. Both are relatively common allergies and, while they may be minor when compared to other health concerns, there can be cumulative effects. You may even get better productivity out of employees who can breathe easier. You can switch out filters in your ventilation system for a quick fix or bring in an air purifier if your air quality needs to be improved.

Good Eating Habits Are Harder in the Office

It's very easy to run out and get fast food over the lunch break. Packing a brown bag or seeking out a healthy restaurant is harder. Making good decisions gets that much more difficult when there's a vending machine in the break room or the boss brings in pizza when everyone's working late. While you can't be the food police in your office, there are steps you can take to make it easier for employees to take advantage of healthy options. These can include some careful thought about what food is available at the office, as well as making sure that employees have opportunities to get to healthy restaurants or bring in food from home regularly.

OSHA Guidelines Are Minimums

In some ways, the regulations set forth by the Occupational Safety and Health Administration (OSHA) can be considered minimums. There are almost always opportunities to make a work environment safer. For example, regulations regarding floors and passageways state that they have to be clean, dry, and in good repair. But good repair can be interpreted in different ways. Uneven floors can pass OSHA guidelines (when a building settles and in other circumstances), but even a small change in the evenness of a floor can make for a tripping hazard. Little fixes can make employees less accident-prone. Depending on the work your employees do, taking steps like offering additional safety gear can be helpful.

Less-Healthy Behaviors Are Contagious

In a tight-knit company, it's easy for employees to share habits and hobbies. Not all habits are good, though, making it likely that if a few members of your team run the risk of health problems, all of them do. Consider smoking: In some groups, it's a social habit. Even if only one or two members of a group smoke, smoke breaks can be a group activity, ensuring that everyone involved gets a dose of second-hand smoke. Luckily, good habits are also contagious and can be encouraged through setting a good example as well as giving incentives to establish better routines.

The Impact on Your Health Insurance

Some health insurance providers offer incentives for both employers and employees if the employees improve their health overall by joining a gym, quitting smoking, and taking similar steps. It's a good decision, both in terms of finances and health, to find out what opportunities your health insurance provider offers. Even if direct incentives aren't available, it's worth talking to your agent. In some cases, if you can demonstrate that your employees' use of their health insurance has dropped, you can get your rates reduced.

On many of these workplace environment issues, you will need to get your employees' help to move forward. Buy-in is necessary if you want your employees to change their habits, at the very least. While you can easily set policies about healthy behaviors, it can be hard to enforce such policies without causing problems with your staff. Furthermore, in some cases, you need your employees to agree to these changes even when they're out of the office. Take smoking for example: Many businesses now have policies against employees smoking at work. That won't ever stop employees from actually smoking, though — it just means that they aren't smoking in the office. It's worth reminding them that not only would taking some of these steps help them with their overall health, but they could bring down their costs as well, both in terms of what they contribute to their health insurance plan and their out-of-pocket expenses.

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

20 Ways Your Employees Make More Than They Think They Do

Ken Kaufman — Wed, 01 Sep 2010 00:15:15 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/20-ways-your-employees-ma...

You spend a lot of money to compensate your employees, but I bet you don't get credit for a lot of what you spend. According to the Bureau of Labor Statistics Report "Employer Costs for Employee Compensation for the Regions, March 2010," almost 30 percent of the total employee costs of average private employers are for the extra things that most employees don't think about.

In order to make sure employees understand the complete value they receive from their employers, employers should consider showing employees their entire compensation package. Here is a list of the top 20 ways employers compensate their employees in addition to their regular salaries, wages, and bonuses.

1. Social Security. Sure, there is a lot of doubt about the longevity of this program, but it is still a benefit for your employees and it costs you 6.2 percent of the first $106,800 of each employee's earnings, or a maximum of $6,621 per employee per year.

2. Medicare. Health care coverage is getting more expensive, so this benefit is very valuable for retirees. Employers pay 1.45 percent of each employee's earnings with no cap.

3. State unemployment insurance. Somebody has to pay for the right for your employees to make an employment claim. It costs you anywhere from $500 to well over $1,000 per year for each employee depending on your state and your company's unemployment claim experience.

4. Federal unemployment insurance. Employers pay 0.8 percent of the first $7,000 of wages, or $56 per employee per year.

5. State disability insurance and other state and local mandatory benefits. Depending on the state(s) where your employees live and work, you may have to pay into state disability funds or pay other taxes based on the number of employees you have or the amount you pay them.

6. Workers compensation. This is a statutory requirement that provides a benefit to employees who are injured on the job. Depending on the type of work your employees perform and your company's experience with claims, your premium could be as little as 0.25 percent or more than 10 percent of your employees' wages, and some states have no maximums.

7. Health insurance. Most companies who offer health coverage pay for some, if not all, of the employees' premium, which can often be more than $200/month. Some employers also help pay the premium for dependents of the employees, which can sometimes cost more than $1,000 per employee per month.

8. Dental insurance. Some employers pay at least some of the premium, which usually helps to keep participation up and rates reasonable.

9. Vision insurance. Premiums are usually lower than dental insurance, so is often included in health packages.

10. Disability insurance. Group plans, especially those with some level of contribution from the employer, have much better rates than voluntary plans.

11. Life insurance. The cost of the first $50,000 of coverage is usually tax deductible, so many companies pay for at least that.

12. Supplemental insurance. There are many other payroll-deducted insurance and benefit programs that employers pay to administer, and they often contribute to the programs as well.

13. Retirement plan. Although there are many different kinds and types of employer-sponsored retirement programs, some companies contribute 3 percent or even more of the employees' wages into these plans.

14. Paid time off. Also known as PTO, getting paid even while you're on vacation is often forgotten by employees as a valuable benefit.

15. Paid holidays. Many companies offer between six and eight days each year for which employees receive their normal pay but do not require their employees to come to work.

16. Bereavement and extra paid time. In addition to the formal paid time off, many companies also regularly give employees additional paid time off when emergencies or bereavement needs arise, not to mention comp time to make up for extra time worked during prior weeks and/or months.

17. Education reimbursement. Some employers reimburse employees for at least some of the costs associated with furthering their education, especially if the education is work-related.

18. Mileage, cell phone, and other reimbursements. Owning a vehicle, cell phone, and other items can become less burdensome for employees when their employers reimburse them for the portion that is used for company purposes.

19. Wellness programs. Many companies invest into programs and rewards/incentives to help employees get and stay healthy.

20. Training. In the information age, investing in the skills and knowledge of their employees is becoming a priority for employers. Some companies spend thousands of dollars per year per employee.

In some instances it is beneficial to disclose to your employees' their total cost to you, their employer. To help you figure out how much each employee costs, we have a free spreadsheet available. Visit Compensation Calculator for the no-cost download and complete all of the shaded boxes with your company and each employee's information.

This article is from Ken Kaufman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Offering Stock to Your Employees: 5 Key Financial Considerations

Thursday Bram — Sun, 22 Aug 2010 23:31:56 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/offering-stock-to-your...

Most small businesses hire employees, pay them, and offer them benefits. But at the end of the day, those employees aren't closely tied to the company. Whether or not things go well, they'll receive their paychecks. However, that isn't the only option available to small business owners. You can choose to make your employees more involved with your business' future by offering them stock in the company.

It's not a decision to be made lightly, of course. By offering stock, you're offering part ownership of your company, as well as a share in the proceeds. But the benefits can be worth it. An employee who holds stock in the business he works for has an incentive to go all-out when it comes to earning money for the company. If you're comfortable with the considerations that go with a decision like offering stock, it's an option worth exploring.

1. Do you need to tie your employees to your company?

Holding stock in a company can give an employee a reason to ignore job offers from your competitors, a fact that led Alex Moazed to offer stock to his employees. He found that it also helped to bring his employees on board for the business' future development. Moazed says that his employees like the stock program, which has been in place for about a year. "They have responded positively. It makes sense on their end and on my end. They have more motivation and devotion to the company and its goals."

Moazed notes that he does not offer identical stock options to each of his employees. The details for each employee vary, based on what the employee wants and what Moazed is able to offer.

2. How will you change your employees' compensation?

For an employee, the first question is likely to be how a stock deal will change his take home pay. If you're thinking of lowering your employees' immediate income in exchange for offering stock, be prepared to encounter resistance. The problem is that you don't want to put yourself in an awkward financial position by unbalancing the compensation you offer your employees. However, offering stock in place of a raise or a bonus can help you maintain the balance.

Bibby Gignilliat is the founder of Parties That Cook. She chose to offer stock as a bonus for her staff: "In a down economy last year (when I could not give bonuses and raises), I chose to award my staff with equity compensation."

3. How comfortable are you with your employees?

You have to have a certain comfort level with any employee you are considering offering stock to. After all, you don't want to be in a position where you've given stock to an employee who then leaves your company. There are approaches that can reduce risk, but it's important to realize that you're going to have ties to anyone you provide stock to and avoiding creating knots is important.

There are some companies that offer stock plans to new employees right off the bat. Doing so is certainly an option, but it does require even more care when setting up the paperwork to ensure that the offer won't backfire.

4. What sort of stock do you want to offer?

There are a variety of types of stock you can offer, depending on your business structure. The particular types that you may choose can serve different purposes. Gignilliat used two different approaches to create incentives for her staff, who are spread out over three cities. "I awarded staff who were in jobs that involved growth (like city managers), with Stock Appreciation Rights and I awarded staff who I wanted to make sure to retain over the long haul, with Phantom Stock...I chose Phantom Stock for the employees who have been with me the longest and whom I wanted to receive value on the day Phantom Stock was offered. And I choose to offer Stock Appreciation Rights to newer staff members and members who were in high growth jobs so that they would be motivated to grow the business (but the value of their pie would be based on the delta of the starting value to the future value)."

The response to both options has been positive, says Gignilliat: "All of the employees to whom I gave the equity compensation are still with the company. They still treat the company as their own and seem even more invested than before. It is motivating to the staff — they are even more invested in growing the business as much as possible (like I am) to create value for their piece of the pie."

5. Are you comfortable with the paperwork?

You may have a good idea of the terms of the stock deal you want to offer your employees, as Moazed did: "I knew the terms of the plan, but consulted with my lawyer and accountant to set everything up properly." The paperwork involved with transferring stock to your employees requires some careful consideration. You may need to draw up new contracts with your employees, make some changes to your tax paperwork and — depending on your business' structure — make sure that your business is set up in such a way that you can simply transfer stock.

There are companies that will handle the process of setting up a stock plan, such as the one used by Gignilliat: "I decided to hire Tony as a consultant to help me determine what to offer my staff. Over a few months, he helped me structure the whole program and view financial scenarios to see the impact that the plan would have on my business in the long term. Having been through a difficult partnership, I did not want to give away any ownership...We used a legal advisor to review all of the documents that Tony drafted for us. We got a special price from Tony given our connection with Pacific Community Ventures. We also hired a consultant to value the business. Given the down economy, we were able to bargain quite a bit. The whole package cost us about $6000 to implement."

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Get People to Work for You Cheap (or Free)

Scott Allen — Fri, 30 Jul 2010 20:33:08 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/how-to-get-people-to-work...

Payroll is typically the largest single expense in most businesses. It is therefore also the greatest opportunity for cost savings. I'm a firm believer in hiring great people and paying them well, when your budget allows it. But it doesn't always. And when it doesn't, there are several ways you can still get quality people to work for you for very little, or deferred payment, or even free. And once you've tried them, you may find some of these practices beneficial even when you have more cash available.

Let's start with some of the more obvious options and then expand to some you might not have considered.

1. Commission-Only Salespeople

In some businesses, this is the norm, while in others, you'll have a very difficult time finding people to work on straight commission. Of course, this isn't free, but it is always cash-flow-positive, i.e., you only pay people when you get paid. You're going to find that commission-only salespeople generally come in two types. The first are people who are desperate for a job and willing to take a chance rather than do nothing. They'll probably leave if they don't start making whatever is a decent wage by their standard within a couple of months. The others are the master closers. You'll have to pay them better commissions, and they won't stay long if they can't sell your product. Make sure you're really ready before you hire a sales shark.

2. Affiliates and Referral Fees

You may not be able to find people to work for you full-time on a 100% risk basis, but you can almost certainly find related businesses, or happy customers, who will put in a little bit of extra effort for the chance to make a little extra income. Online, there are some businesses that make their money entirely from commissions from selling other companies' products. If you don't have a formal paid referral program in place, you might consider doing so. There are only a few industries (medical, legal) in which it's regulated or prohibited.

3. Co-Founders/Partners

If you're in a position not to take a salary for a while, there are others in your area who are as well. They'll need equity — again, not cheap, but also not cash. People have to be able to cover their living expenses, of course, so you'll have to find people who are either independently wealthy, at least somewhat, e.g., people who have cashed out from another successful startup, or who have very low living expenses and sufficient income (preferably passive) to cover them. Make sure your co-founders can last at least as long as you can without income. Disparity over income requirements is one of the most common problems among co-founders.

4. Deferred Compensation

Employees have to make a living. In some cases, though, fair market salary may be higher than their living expense requirements. In these cases, you may be able to negotiate a deal to defer part of their salary to a later date, or perhaps be paid in equity or stock options. You must pay them at least minimum wage, but anything over and above that should be able to be deferred.

5. Micro-Outsourcing Offshore

Developing nations around the world have a rich supply of cheap, well-educated, skilled labor available for projects small and large. In case you're worried about taking jobs away from your city/state/country, let me ease your conscience. Your company's success will make you more able to hire more people for higher-skilled jobs. Your partners and employees who have equity or stock options will make more money. And you'll all have more money to inject into the local economy as consumers. Sites like Guru and Upwork open up the world's labor market to you. Best advice: Start with a small, low-risk project, divide the work up between a few providers, and see who does the best work. Then hire them for a larger project or ongoing work.

6. The Lowball

Let's say you find a freelancer whose work you really like — say, a writer to ghostwrite a book for you. Get a bid from them. Then figure out what you'd really like to pay and tell them, "I know that's low for you right now, because you're busy. If at some point you're short of work and willing to do it at that price, call me up and let me know. If I don't have this project still, I'll have some other work for you." This only works if you're not in a hurry, but if that's the case, you can get some excellent work done at a substantial discount. Supply and demand in action.

7. Interns

Thousands of high school and college students every year are looking for internship opportunities. They typically work for a little over minimum wage, or a flat stipend at the end of the internship, or in some cases even for free (you'd better be prepared to spend a lot of time training them and probably be able to provide them some job leads). Check with your local university, community college, etc., and find out the requirements for listing an internship with them. There are also online sites like Internships.com, InternshipPrograms.com, and Experience.com that can help you publicize your internship program and find qualified candidates.

8. Crowdsourcing

It's a controversial topic in the freelancing community, but it's a huge boon to small businesses on a budget. The way it works is this: You post a crowdsourcing opportunity on a site like 99designs.com for a fixed monetary award. Multiple freelancers submit their ideas. You choose the best one and award them the money. Multiple people do the work, and you only pay one of them — the one that does the best job.

If you think you can't afford help, think again. There are many ways to find people to work for you without committing cash you don't have. Be creative — think outside the box. If one of the ideas above doesn't exactly work for you, come up with a hybrid that does. The sooner you get that help, the sooner you can focus more of your attention on your high-value activities.

This article is from Scott Allen of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Lifestyle Employee Benefits with Payback

Julie Rains — Sat, 24 Jul 2010 03:07:06 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/lifestyle-employee-benefi...

Wellness programs, employee assistance programs (EAPs), and more hold promise for boosting employee well-being and company profits. Consider free resources along with paid programs to get the highest return on effort and dollars expended.

Wellness Programs

The cost of a wellness program, depending on its components, can range from free to $500 per employee each year. Start by reviewing employee wellness concerns and dissecting health care costs. Then, pinpoint areas such as nutrition, fitness, disease management, and/or tobacco cessation with opportunity for improvements in health and productivity. Take baseline assessments and set measurable goals, both in terms of employee participation and results. For example, you might track attendance at nutrition counseling sessions and quit-smoking clinics, along with reductions (if any) in health care expenses.

If there's little in your budget for wellness or if you'd like to test some ideas, consider low-cost benefits, such as:

Healthy drinks and snacks rather than sodas, pastries, and candy in vending machines and during company meetings
Flextime to give employees time before, during, or after work to exercise
Sponsorship of teams that participate in organized fitness-oriented events such as charity walks, runs, or bike rides
Walking program
Weight Watchers at work (employee paid)
Group discounts at fitness facilities
Lunch-n-learn sessions with speakers on wellness topics from area health care organizations, nonprofit groups, and private providers

Costlier but valuable and more focused programs can include:

Health assessments and screenings with medical recommendations and follow-up sessions
On-site fitness facilities with exercise classes
Classes on health and wellness topics
Nutritional and dietary counseling
Wellness services for the entire family, not just individual employees

Engage a wellness firm to design, package, promote, present, and manage the program; access services offered by your medical insurance company; or find several providers to handle various aspects of a multi-faceted program. Small business owners and employees alike may embrace these activities as welcome opportunities to get support for reaching personal goals; others may resist what they perceive as meddling in their personal affairs. To improve acceptance and get higher payback, offering a high quality program that is aligned with employees' perceived needs and that contains program options (rather than targeting one behavior such as smoking) could be most successful.

Employee Assistance Programs (EAPs)

The cost of EAPs vary depending on how programs are packaged and delivered: Your small business might pay a per-employee fee of $20-60 each year for access to a suite of services plus charges for individual counseling sessions beyond crisis intervention. Alternatively, arrangements might involve no upfront charges through referral-only resources or a flat annual fee for consultations, assessments, and specified number of counseling sessions.

EAPs are often associated with substance abuse treatment but are just as likely to include support on issues such as:

Crisis management (relating to sudden change in circumstances or natural disasters)
Anxiety, depression, and stress
Family and marital relationship difficulties
Childcare and parenting resources including those relating to special needs children
Budgeting and debt management
Anger management, communication, and conflict resolution skills

A small business might not consider an EAP because few, if any, employees will use the services. However, personal problems of just one or two employees can often be distracting and sometimes devastating to the entire workforce. So, even if a formal employee assistance program doesn't seem to be worth a budget line item, consider finding and developing resources that can address concerns of employees. For example, add mental health services to medical insurance; compile lists of community resources; or give extra time off for approved family, school, and financial counseling sessions.

More Programs

Your business might offer work/life benefits, such as:

Concierge services
Adoption assistance
Childcare or afterschool care
Support for higher education

To control costs, offer subsidies rather than bearing entire expenses for programs, require a certain number of years of service for program eligibility, and create a cafeteria plan to allow employees to use pre-tax dollars for certain services (childcare and adoption, for example).

Why bother?

Benefits can attract and retain talented employees, but the right benefits can also improve day-to-day productivity and even lower health care costs. Set policies that support confidentiality and fair treatment of all employees.

Be careful to offer the right mix for current employees and those you'd like to bring to your company. All might appreciate healthier food choices in the break room while many will be divided on needs for childcare-eldercare, fitness programs, and budgeting. Having a menu of lifestyle benefits demonstrates commitment to all, rather than a select few, employees.

Measure payback by looking at the big picture of employee morale and details such as the number of employee absences, time spent handling personal issues at work, production in terms of sales and project completions, and insurance rates.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: