November Hot Topics:
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Plan Your Actions - Improving Employee Performance
- How Payroll Service Providers Can Help You Benefit From Section 125 by Fred Patterson, III
- Workers' Comp Rates Increased by 37% by Commissioner Jones! by Eric Sheetz
- Year-End is Quickly Approaching; NOW is the Time to Consider Charitable Gift-Giving by Diane Perusse
- Marketing Strategies for Recessionary Times by Michael Sick
Plan Your Actions - Improving Employee Performance
A key factor in running a successful business is having successful employees. Your job as an employer is to provide an environment that includes opportunities to thrive. At times, however, there will be roadblocks to this success and job performance problems will deem it necessary to create a Performance Improvement Plan (PIP).
While a PIP can give a poorly performing employee an opportunity to succeed, it also holds them responsible for their past performance. Along those same lines, it is good practice to listen to your employees throughout their employment. This practice is especially important if job performance issues arise and it becomes necessary to put them on a PIP. Documenting every step is important and necessary.
Establishing problem areas is the first step towards creating a PIP. Once these areas have been established, a plan of action for improvement should be developed. It is important to be objective and specific when listing areas that are of concern to you. These concerns should be backed up with facts and examples that clearly define the areas where an employee is lacking. Within this improvement plan, the objectives and expectations you hold for the employee should be clearly laid out.
This plan is known as SMART goals. SMART stands for Specific and Measurable objectives that are Accurate, Relevant, and Time-bound. Take into consideration any additional help an employee may need to attain these goals. These resources might include extra time and training. Also, be sure that the consequences for failing to meet these objectives are clear.
Vital to your documentation is an employee's explanation for performance problems. There are several reasons to include this input. When an employee explains their side of the story, it bounds them to it. You don't want the employee to provide an attorney with a different explanation that could appear unfavorable towards you.
Secondly, by showing open lines of communication between employer and employee, it displays a willingness to improve upon the situation. It also shows your willingness to be fair-minded. A mediator or jury would recognize and often-times appreciate this demonstration of fairness.
For your own benefit, an employee's explanation could actually help to better their performance and put them on a path to becoming a more productive member of your staff. Lastly, a reasonable explanation for the poor performance may be disclosed. These discussions between the supervisor and employee or human resources and the employee should occur before the PIP is written.
A Human Resources Professional generally writes the PIP. It should be reviewed by the employee's supervisor to make certain the PIP documentation is clear and concise. Once it is agreed that the document is accurate, a meeting is scheduled with the employee, supervisor and possibly a member of your HR team to discuss the terms of the PIP.
Follow-up meetings between the employee and supervisor or HR are an important factor within the PIP. A discussion of progress, questions and guidance should be a part of each scheduled meeting. These meetings are best scheduled on a weekly basis to be sure everyone is communicating on progress.
It may be apparent that the employee is showing some improvement over time but is still unable to meet pre-set goals. At this time, an employer can extend the PIP deadline, change the goals, or determine the employee is not trying hard enough.
The PIP can conclude in one of two ways: 1) Termination of employment as an employee is unwilling or unable to improve during pre-determined time period, usually 60 or 90 days, or regresses even further in job performance; or 2) it can end with an employee meeting and/or exceeding the objectives and continuing employment.
A positive outcome is clearly the goal when a PIP is instituted.
Even with successful completion of the PIP and attainment of the goals stated, the employer needs to communicate that the employee's future performance should continue to meet department expectations and that failure to meet performance goals in the future may not result in an additional PIP, but may result in termination of employment.
How Payroll Service Providers Can Help You Benefit From Section 125
By Fred Patterson III, District Sales Manager, AmCheck Payroll * HR * Benefits
Section 125 of the IRS code provides for employee salary withholding to cover the cost of certain qualifying types of insurance (Group Life, Medical, Accident, Disability Benefits, Group Legal Services and Dependent Care Assistance Insurance).
This has the effect of reducing the taxable income of employees while also benefiting the employer through reducing FICA matches.
The fact is, however, that many businesses do not make use of the benefits offered by Section 125 because they regard the administration associated with it as too complex.
This problem can be taken care of by making use of the services of a professional and competent payroll services provider. While it is true that IRS Section 125 compliance demands are stringent and complex, experienced payroll service providers will have been around the block a few times and can offer services tailored to your needs. Some of the services they provide include the following:
- Offering advice and documentation to assist in the setting up of qualifying 'premium only plans'
- Providing employee enrollment forms
- Administering employee enrollment and annual re-enrollment (if required)
- Providing guidance and assistance with applicable non-discrimination testing
- Administering payments to qualifying insurers
- Providing detailed reporting to individuals and companies
The provision of information, guidance and a detailed electronic record means that payroll service providers can put companies in a position to benefit from the advantages associated with Section 125 while remaining on the good side of tax authorities.
Good payroll service providers are in a position to offer A-Z solutions when it comes to the administration of Section 125 payments. The ability to offer this kind of service should be a key consideration when you decide on a specific provider. This can be such a complex area that experience and a proven track record should be of critical importance. Making the choice to benefit from Section 125 should therefore be followed by the equally important choice of choosing the best possible service provider. AmCheck will expertly handle all of your payroll, HR and benefits administration, giving you the freedom to focus on your business.
For more information or questions regarding your payroll processes, please contact Fred Patterson III, District Sales Manager for AmCheck, a payroll solutions firm with offices throughout the United States. Fred may be reached at fred.patterson@amcheck.com. (619) 595-7900.
Workers' Comp Rates Increased 37% by Commissioner Jones
By Eric Sheetz, Commercial Insurance Broker, The Michael Ehrenfeld Co.
California Insurance Commissioner Dave Jones today effectively approved a 37% increase in workers' comp rates for 2012. The decision means California employers will pay a lot more for workers' comp next year than they did last year. But Democrat Jones tried using numerical trickery to couch his decision and make it a non-newsworthy event. The reality is quite different from the posturing.
This past spring, Workers Compensation Insurance Rating Bureau, a private organization owned and run by insurance companies licensed and doing the work of the Insurance Department, filed and then withdrew a 39.9% increase for 2012. Then, Commissioner Jones ordered that WCIRB stop benchmarking the pure premium rates from the previous approved rate and instead benchmark it against the average pure premium rates that carriers have currently filed. That's how they arrived at the 1.8% decrease or a $2.33 average rate, which has been approved now as a $2.30 rate.
WCIRB admitted no change in the underlying methodology, aside from the huge disparity, refused to provide an apples-to-apples comparison to its previous filings. It was between Commissioner Jones and reality, or better put, stuck between a rock and hard spot.
Neither the WCIRB nor the California Department of Insurance will answer questions concerning the difference. The end result is still unfortunately the same…a huge increase!
For more information or questions regarding your companies risk exposure, please contact Eric Sheetz, Property and Casualty Insurance Broker for The Michael Ehrenfeld Co. at ESheetz@ehrenfeldinsurance.com, (760) 809-8510.
Year-End is Quickly Approaching; NOW is the Time to Consider Charitable Gift-Giving
By Diane Perusse, Partner, e-Bookkeeping
Planning to make charitable donations before year end? As Thanksgiving and the holidays approach, many people start thinking about making contributions and giving gifts. Americans are known for their charitable giving and the tax break they provide. But the tax laws that govern charitable deductions have changed in recent years. Here are the basic rules. Plus, we'll tell you about a way to get a bigger deduction when you donate a vehicle to charity. Americans donated more than $3.3 billion to charitable causes in 2010, according to The Chronicle of Philanthropy. And while that represents a slight decline from the year before, Americans continue to give generously despite the economy.
The holidays are a popular time to make gifts. If you're getting ready to donate, be aware of the charitable tax deduction rules and some important changes that have been made in recent years.
Monetary Donation Guidelines
To deduct a charitable donation of money, regardless of the amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the organization, as well as the date and amount of the contribution.
Here are some details about substantiation:
- Bank records include canceled checks, bank or credit union statements, and credit card statements.
- If you have a bank or credit union statement, it should show the name of the charity, the date, and the amount paid. Credit card statements should show the charity name, the date, and the transaction posting date.
- Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction.
- For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for monetary donations do not change or alter the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible gift (either money or property) of $250 or more. However, one statement containing all of the required information may meet the requirements of both provisions.
Rules for Donating Clothing and Household Items
To be deductible, clothing and household items donated to charity must be in good used condition or better. An item for which a taxpayer claims a deduction of more than $500 does not have to be in good used condition or better if a qualified appraisal of the item is filed with the return. Household items include furniture, furnishings, electronics, appliances and linens.
Deductions for Donating Vehicles
Tax law limits the amount that individuals are able to deduct when they donate vehicles to charity. (The same basic rules apply to boat and aircraft donations.) This provision has understandably discouraged charitable gifts of used cars.
However, there are exceptions that can result in a better tax deduction.
Years ago, you could deduct the full fair market value of a donated vehicle based on the "Blue Book" value or some other reasonable indicator. But tax officials felt some taxpayers overstated deductions for their run-down clunkers. Now, a charitable deduction for a vehicle valued above $500 is generally limited to the amount the charity receives from the vehicle's resale. Typically, a charity sells the vehicles it receives from donors. Many organizations promote programs specifically designed for this purpose.
There are exceptions that can provide higher deductions:
Exception #1: If the charity certifies that it intends to make a "significant intervening use" of the vehicle, which furthers the charity's stated purpose, you can deduct the full fair market value.
Exception #2: If an organization certifies that it intends to make a "material improvement" to the vehicle, you can also deduct the full fair market value. But simply cleaning, painting, or removing minor dents and scratches isn't enough. The improvement must increase the overall value of the car.
Exception #3: In addition, you can deduct the fair market value if the charity certifies that it intends to give or sell the vehicle to a needy individual at a price significantly below the fair market value. This exception applies only if the gift or sale is in direct furtherance of the charity's purpose of relieving poor, distressed or underprivileged people who are in need of a means of transportation.
Finally, note that a deduction of a fair market value is allowed for a gift of a vehicle valued at $500 or less.
If you qualify under one of the exceptions, the value can be determined through an established used vehicle pricing guide like the Blue Book. The guide must list the sales price for a vehicle based on the same make, model and year in the same condition, with the same or similar options, features, warranties and guarantees.
To help with your holiday-season and year-end giving, here are some additional reminders and rules:
- Contributions are deductible in the year made. So if you make a donation by charging it to a credit card before year end, it counts for 2011. This is true even if the credit card bill isn't paid until next year. Also, checks count for 2011 as long as they are mailed this year.
- It may be better from a tax standpoint to contribute certain appreciated assets to charity that have been held more than 12 months. That way, you avoid paying capital gains tax but can still deduct the full fair market value as a charitable deduction.
- Make sure the organization is "qualified." Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most eligible organizations. The searchable online version can be found at IRS.gov under "Search for Charities." In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in Publication 78.
- Only taxpayers who itemize their deductions can claim charitable contribution write-offs.
- If possible for property donations, including clothing and household items, get a receipt that includes the name of the charity, date of the contribution, and a reasonably detailed description of the donated property. If a donation is left at a charity's unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
- The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500.
- Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
Tax laws change frequently. Contact your tax professional regarding your charitable deductions or for more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Diane Perusse is a Founder and Partner at e-Booking Online. Contact Diane at diane@e-bookkeepingonline.com. e-Bookkeeping provides the benefits of a large company outsourced accounting solution customized to fit your company's specific need and your company pays only for the services it needs.
Marketing Strategies for Recessionary Times
By Michael Sick
While you may remember when the media reported that the recession officially ended in June of 2009, it sure doesn't feel like it with continuing double digit unemployment, slow growth in many industries and fairly regular news coverage of the latest bankruptcy filing.
Definitions of recessions are a technical exercise. The reality is that the world economy is dealing with the effects of credit market deleveraging and the risks of nations defaulting on the staggering debt they have run up to artificially boost their economies. It seems like there is a news story about Greece just about every other day.
Homes are being foreclosed at record rates and commercial real estate has persistently high vacancy rates. As leases come due, rent reductions are a common occurrence and the commercial real estate market has yet to feel the full effects of the economic correction over the past few years.
There is a perspective that the United States has been in a rolling recession for the past couple of decades as various industries were affected by changes in technology, global competition, resource scarcities or other factors. To persons in construction or mortgage businesses, the fall out of the sub-prime market and the decline in real estate prices may appear to be more of a depression than a recession.
One advantage of reaching a certain age is that you have a perspective that dates back to the Oil Embargos of the 70's, the 15%+ mortgage rates in the early 80's and the economic shocks of rapidly moving a half million consumers to the middle East during the first Gulf War. Having experienced firsthand the impacts on a diverse set of businesses provides added insight related to managing businesses during recessionary times.
The following is a short list of “Best Practices” to consider in developing marketing strategies during these changing times.
1. Keep the situation in perspective: Don't over react: Staying cool and not making rash decisions is a key behavior which will enhance the likelihood of success. Stay above the noise. Don't let the headlines or nightly news reports cause you to change your business strategy. Make decisions based on the facts in your business or industry. While high gas prices are going to impact consumer spending, the impact on every business is likely to be different.
2. Seek to expand market share: While this may seem counter intuitive, businesses may need to increase their marketing share if only to maintain flat revenues. In a declining market, businesses need to capture a bigger piece of a smaller pie. Even in good times, margins are under continual pressure and with energy costs increasing in a declining market, margins will be squeezed from every direction. When markets are contracting, the more marginal competitors are likely to leave the market or go out of business. Recessions are an excellent time to expand market share.
3. Maintain or increase your Marketing Budget: While reducing marketing spending may be a quick way to offset short term margin erosion from increased costs or declining sales, reducing customer acquisition efforts is likely to accelerate the sales decline in the future making the longer term prospects more painful or potentially fatal. That's a hallmark strategy of a company that is less likely to be a survivor and certainly not one that will thrive. Seek to make your budgets work harder so that they generate more business. Trying to spend less money to maintain or increase revenues is generally wishful thinking. If you need to acquire new customers to replace those that have reduced purchases or gone out of business, you are likely to incur some marketing costs.
4. Seek customers globally: While this may not be an option for every business, the fluctuating price of the dollar and other currencies has created opportunities for businesses in the United States. Given the ongoing strength in the Chinese currency, domestic opportunities may be increased as the benefits of outsourcing to China are diminished and companies are increasingly bringing back production to the United States. The strong Euro has been defying their economic turmoil and Canada and Australian currencies are enjoying strong relative values to the US. Their strong currencies make them excellent customers.
5. Reinvent your Product Lines and/or Processes: While changing existing products is a decision that should be carefully considered, developing new products is always a way to create competitive advantages. Focus on your core competencies and build flexibility into your system. Be careful about adding permanent staff and seek ways to outsource non-core functions. Build capacity and scalability without increasing your fixed costs by partnering with other firms, using consultants, hiring contractors or adding part- time employees. Each of these strategies enables scale to be increased rapidly when the economy turns. Look at new business models that could appeal to a new set of customers, potentially in a new vertical. This way an existing product can be offered to a new market with little development time and cost.
Whether you or “Hunkering down” or “Hankering for growth”, changes in the economy and recessionary times are likely to impact every business. Having a plan and making fact based decisions will provide better results than failing to plan or shifting strategies after reading the morning's headlines.
Michael Sick is a nationally recognized, innovative Management Consultant specializing in strategic marketing, advertising and business development. He spent 25 years in corporate marketing and was a Marketing Vice President for Jack In The Box, Pearle Vision, Arby's and others. Currently he serves as a part-time Chief Marketing Officer (CMO) for a number of clients around the US.
Contact Michael Sick at (858) 342-0998, Mike@GetTheSickness.com or visit his website: www.GetTheSickness.com
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