Creating Your Employee Handbook

Every employer has different ideas about what their employees should expect while employed for them. It is important to put this information in writing. By placing all the rules and policies into a well-drafted, updated employee handbook, an employer can give new employees important information and provide them with legal notices that could save them large legal fees down the road. Having everything laid out and in writing is important for everyone involved with the business. The following are a few areas that should be covered when creating an employee handbook.

  1. At-Will Notice: If you do not have your employees sign a contract, and very few employers do, establish an employee-at-will notice in the handbook. It will notify the employee that their job is not contract and they are able to be terminated at any time. An at-will notice also established that nothing in the book is intended to create a contract between the employee and the company.
  2. “Equal Opportunity” statement: This is the statement that shows employees that you do not discriminate against race, gender, color, religion, national origin, age, disability, or genetics. As long as the employer shows good faith in their efforts to comply with the anti-discrimination statement, then they cannot be held liable for discrimination, and the equal employment opportunity statement is the beginning of that good faith.
  3. Sexual Harassment Policy: This falls in line with the other harassment policies. An employer can be held liable if any employee commits sexual harassment. Having a statement about the consequences of harassment shows that the employer is willing to protect the employees from unwanted advances. A solid anti-harassment policy allows the employer to enforce the policy with procedures effectively managing harassment cases.
  4. Reservation of Rights or Benefits Disclaimer Clause: This is the part where the employer reserves the right to revoke, suspend, or amend any policy, benefit, plan, or procedure at their own discretion. This is further evidence that the employment handbook is not a contract. It also allows the employer to make changes in response to incidents that happen in the company.
  5. Safe Harbor Policy: This policy establishes rules for employers to deduct money from an employee’s paycheck. It protects the employer if the make a good faith efforts to uphold the policy and return any improper deductions. It also protects the employer if the employee has an exemption under the Fair Labor Standards Act.

All the policies are in place to protect the employer and employee. It is important to go over the handbook and clear up ambiguous language. How the employer approaches these issues is very different from each other. The policies need to fit your company and be relevant to the employees.

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What to Say If an Employee Asks for a Raise

Last month we talked about asking for a raise. What if you are the employer and an employee is asking you? How do you respond to their request? The employee believes that they are working above their current pay, and you hold the power to grant or deny their request.

It is a very rare case that an employee is granted a raise entirely on what they believe is fair. There are many decisions that go into the decision of a pay raise. The outcome must be beneficial to both, your company and the employee. If you give a raise to one, then others will ask causing a ripple effect has major consequences for the company.

  • Don’t react right away: give yourself some time to process the request. Don’t lash out at the employee for or give instant praise. You may not be the person to make the final decision, so giving yourself some time to answer is better than making promises you can’t keep. Watch your body language and facial expressions.
  • Ask for more information: The best way to respond to the request is to ask for more information. Find out why they want the raise, and if they have good reasons to ask for the request. By asking for more information, you are not dismissing the case outright, but you are also not answering. Take notes while they are explaining their “why.” It communicates that you are taking their request seriously. Remain neutral; you are Switzerland.
  • Acknowledge their courage: It take a lot of courage to ask for a raise, so be sure to acknowledge the effort they put into the request. This employee may feel vulnerable, so even if you are irritated, it is important to acknowledge their courage.
  • Evaluate the arguments: When the conversation is over, evaluate the arguments to see if they have a case for a raise. A good argument is one where the employee can demonstrate their pay does not reflect their value to the company. You then have to determine if the pay matched up with that of their peers or the open market. Gather your information about the industry and consider how important the person is to you and the company.
  • Know the limit: Every company has limits on salary. Does the employee deserve a one-time bonus for hard work on a special project, or is their performance above and beyond the everyday. There are other way to compensate employees if they are doing great work, and it may not be a raise.
  • Talk to the right people: Talk to your boss or HR to determine what the current salary is and if there is anything else that could be appropriate for the situation. Shift the responsibility away from you onto someone else that has the power to make the decision.
  • Go to bat: If you have an excellent performer and you are concerned about retention, then step up for them. Go that extra length to keep them in the company. It is hard for HR to say no when you know your employee better than they do. Make you case and back up your arguments with facts.
  • Deliver the news: Good or bad, you need to be fair and diplomatic with your deliver. Congratulate them if they are given the raise and let them know just how valued they are to the company. If the new is bad, let them know why. They are compensated fairly compared to others in the same position, but don’t make them feel bad for asking. Give them tips on how to improve their performance over the next six months and then have them try again. It is important not to give up.
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Employee Evaluations

Feedback for employees is important to everyone. It gives information to the employee and employer on their performance in the work place. What employees are doing well, and what they can improve upon is vital to the survival of the company. Your company is only as good as your weakest link, and by having an evaluation system that promotes development within the company will farther the growth of the company. Success should be measured on the improvements of the person. So a good evaluation system is the key to improving your business and your employees. So how do you improve your feedback and evaluation system? The following are simple ideas that can help make your system better:

  1. Simplify and reduce: Most performance reviews are two long. They take too much time to complete, have too many rating systems, and are too complicated for many work place settings. If you run a small business, you do not want to spend all your time evaluating your employees’ performances. Instead, eliminate all the extra parts that are redundant, robotic, and that tell you nothing.
  2. Eliminate your multirating questions: Many of these systems are based on an odd scale that leaving some people in the middle with no expectations at all. There are detailed examples for every attribute and the rater tends to rate subjectively and randomly based on their perception of the employees performance. This does not seem fair. If you want to keep these types of ratings, be sure to provide a through list of attributes the define each category. Each should be clear and concise based on what you want to see from your employees.
  3. Change up the way you evaluate: Look for a simpler framework. A popular one that is developing is the “Keep, Stop, Start” evaluation. This is a super short appraisal system that gets to that heart of what many employees want to know.

The evaluator answers three simple questions: “What is this person doing they should keep? What is this person doing that doesn’t work, and they should stop doing? What would we like to see this person start doing going forward?” The first question on what the person is doing right should be filled out with as many things as the evaluator can think of. This leaves the person knowing exactly where they are meeting expectations and what they should continue. The next two questions about what they should stop and what they should start doing should be limited to three items. It is too hard to assimilate to more than three changes at a time. This also gives them something to concentrate on that is important to the company and will improve how you operate in the future.

  1. Increase the frequency: If you chose a simpler evaluating system, you can increase the amount of time you give feedback. Feedback should not just be given once or twice a year, it should be done on a regular and continuing basis to allow employees time to make changes, and improve on their work habits.
  2. Teach how to give feedback: If you are not the person giving feedback, then ensure that the person giving the feedback is trained to deliver positive and responsive feedback to the employees. The training needs to be regular and reinforce opportunities for feedback.

Feedback is the best way to improve how people see themselves in your company. It needs to focus on the strengths, while highlighting the improves needed. It can make a difference on the way your company operates and conducts itself within the business world.

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Business Tax Changes for 2016

Over this year, there are some important tax changes for businesses taking effect. Many of the changes are in response to new acts, such as The Protecting Americans from Tax Hikes (PATH) Act of 2015, the Bipartisan Budget Act of 2015, and the Trade Preference Extension Act of 2015. The following are some of the changes that will effect businesses this year:

  • Enhancements for Sec. 179 expensing: This provision changes the investment ceiling and the maximum expensing limit. In 2014, the dollar limitation on expensing deductions was $500,000 and the investment-based reduction dollar limitation only effected property placed in service in the tax year that exceeded $2 million, which was the investment ceiling. Starting in the tax year beginning after Dec. 31, 2014 the maximum expensing limit was to have dropped to $25,00 and the investment ceiling should have dropped to $200,000. Under the PATH Act, the $500, 000 limitation and the $2 million investment ceiling amounts were retroactively extended and made permanent.
  • De minimis expensing safe harbor for taxpayers with no AFS (applicable financial statement) was raised: Under Sec. 162, the final tangible property regulations that permits small businesses to expense their outlays for “de minimis” business expenses. If they were eligible for the de minimis safe harbor, and choose it, the amount paid to acquire or produce any eligible unit of property (or eligible material or supply) is deducted in the year it incurred. This included building improvements that also received a bonus depreciation. Under the prior law, leasehold improvement property qualified for the bonus depreciation, but under the PATH Act, qualified leasehold improvements property is no longer eligible for bonus depreciation. Instead, any property placed in service after December 31, 2015, qualified improvement property is eligible for bonus depreciation. The PATH Act makes this easier by allowing any building improvement to be eligible for depreciation even if the improvements are not property; the improvement no longer needs to be placed in service more than three years after the date the building was first in service; and structural components that benefit a common area are no longer excluded from the qualifying improvements.
  • Research credit for qualifying small business may offset payroll tax: For years beginning after Dec. 31, 2015, qualified small businesses may claim a credit for a portion of their research credit as a payroll credit against their FICA tax liability. This would offset their tax liability.
  • More eligible for differential wage payment credit: Eligible small business employers that pay differential wages can claim the credit. To be eligible for the credit the business must: (1) making payments to employees for periods that they are called to active duty with the US uniformed forces (for more than 30 days) that represent all or part of the wages the employee would have otherwise received from the employer and (2) the employee must be employee for 91 days preceding the period of differential pay. The differential wage payment credit is equal to 20% of up to $20,000 of differential pay made during the tax year.
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Cyber Liability: Are You Covered

With all the data breaches in the news, do you ever wonder if your information will be next? Many of the world’s largest companies have had hackers breach their defenses. If it can happen to them, then how can small business keep their information safe? The answer may be in the form of cyber liability insurance. This relatively new product goes by different aliases and offer a varying amount of coverage, but a few basics are worth thinking about.

For larger firms, an internal technical department can insure that themselves, constantly working against cyberattack. For smaller business, purchasing a stand-alone policy or other cyber insurance policy. Like all insurance policies, the coverage and pricing vary depending on what the company’s needs.

There are two different types of coverage, first-party insurance, and third-party insurance. Frist-party insurance covers the company for loss of its own data or income due to a data breach or cyberattack. This coverage usually includes the legal and technical investigations and any cost to remedy the damage, such as a breach or attack, business interruptions, payments to extortionists, or loss of data in the cyberattack or breach.

Third-party insurance cover your clients. The policies can cover responses to civil lawsuits and government inquiries; payment of government fines and penalties; notification of clients and victims; public relations and credit monitoring of clients. Companies looking to purchase a policy need to consider what the consequences will be if a breach would happen. There could be loss of client that are exposed and the reputation of the company is on the line. Some insurance policies may have minimal coverage, but there are holes that will need to be filled.

Make sure that your company has the coverage it needs to protect not only itself, but clients as well.

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Employers Could Obtain Consent for Employment Tax Refunds Electronically

The IRS issued a proposal to change a revenue procedure that would permit employers who file refund claims for overpaid Federal Insurance Contributions Act (FICA) and Railroad Retirement Tax Act (RRTA) taxes to obtain their consent to the refund claims electronically.

The employers are required to use reasonable efforts to obtain employee consent before filing for the refund, but many times the employee cannot be found or may fail to respond to the employer. Employers may correct overpaid employment taxes by either making an interest-free adjustment or by filing a claim for refund on Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return, or Claims for Refund. [Read more…]

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Questions to Ask to Keep Top Clients

Business is a competitive field full of land mines and glory, but how do you achieve that glory with your clients? There are ways to keep client satisfied with the services that your company offers. One way is by asking questions. There are three questions businesses should ask clients on a regular basis to ensure that your business is meeting their needs.

Companies have brainstorm sessions to throw out ideas that will help provide more quality services for their clients. In the brainstorm session, it is important to answer the three questions: 1) Am I meeting all the needs of the client; 2) Am I aware of all the client’s needs; 3) Am I committed to grow my company to meet the needs of those clients? These three question can lead to open opportunities for the company that may not have been explored in the past.

The brainstorm session is a way to create ideas in a safe and open environment where everyone has a chance to share and throw out ideas. By putting yourself in the place of the client, many business can identify flaws in their services and work towards ways to fixing those flaws. Some questions that can be discussed during the brainstorming session are:

  • How does the client define a successful relationship?
  • What do they value the most about our services?
  • What have we done for the clients that goes above and beyond?
  • How can we add value in a nontraditional way?
  • How are we capitalizing on the loyalty factor?

By orienting your business goals to fit the clients, you can maximize on what the client wants and increase your business at the same time. By regularly asking questions on business practices will keep your business relevant to your clients.

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Discussing Internal Controls

In every business, there are control systems in place to maintain security. These internal controls are put in place to help prevent fraud and maintain the integrity of the company’s financial statements. With many smaller companies, these frameworks are as simple as separation of duties, but as you get into the larger companies, they can take a roll in the process of protecting financial records.

The Committee of Sponsoring Organizations (COSO) defines internal controls as “a process, affected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.” There are five components of internal:

  • The Control Environment: This is the set of standards, process, and structures that provide the basis for carrying out internal control across the organization.
  • Risk Assessment: This is a dynamic and repetitive process for identifying and assessing risks to achieve objectives.
  • Control Activities: The established actions through which policies and procedures ensure that management’s directives are carried out to achieve the objectives.
  • Information and Communication: Ensures that information is available for the company to carry out the internal control responsibilities that support the objectives.
  • Monitoring: Ongoing evaluations, either separate or combined, to ensure that eh other components are being carried out and are function for the intended purpose.

Each part of the internal control components have goals related to efficiency and effectiveness of operations including processes to minimize errors and time spent correcting errors. Each entity will have its own set of controls that work for the company, but good internal controls should be the cornerstone of the business. The discussion of establishing internal controls for a company should begin with the importance of integrity, ethical values, structure, authority, and responsibility. They should be developed with the company’s values in mind and each component should enhance the way the company runs with minimal additional cost.

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Attracting New Clients

In the competitive world of business, attracting new clients is vital to sustaining any company. Having the skills or services that meets the client’s needs, attracts them to you in the first place, but why do they pick your company? What sets you apart from the rest of the choices? Is there something you can do that will convince them to pick you? The answer is yes, and they pick your company because you can offer them skills or services they cannot do themselves.

When facing a prospective client meeting, how you prepare is as important as what you prepare. Many times the client is coming to you because they know what services or skills you have. You can highlight you credentials, past successes, the team of knowledgeable experts, but in the end they want to know how you will take that and make it work for them.

Many times a common misconception is the knowledge is what separates competitors from each other, but the truth is that it is not just the knowledge; it is how you make the knowledge work for your clients. The one thing the separates one business from another is how they relate to their clients. If the business centers on how well they work with and provide the best value for the client, then it sets them above other businesses in the same field.

To know what the client needs, there are a few ideas that will improve your chances.

  1. Listen First: Listen to what the client needs, how they would like thing to work for them. They already know the basics of what you can do. Find out what is giving them problems and offer ways to fix those problems.
  2. Focus on Values: Following laws and regulations is great for you, but that does not the client needs to know all the regulations. They just want to know how you will use you will use your resources to solve their problems. Focus on the values and outcomes of the service you are providing instead of how to get there. Your client will appreciate your attention to details without actually seeing the details.
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Preparing for Tax-Time

It is still early to be thinking about tax time, but it is just around the corner. There is still plenty of things that you can do to prepare for the opening of tax season. It is better to start planning now then wait until the last minute. Below is a list of steps you can take to be better prepared to for tax time.

  1. Gather up work receipts: If you purchased any item for your job that your employer does not reimburse you for, that item is deductible. These items include but are not limited to uniforms, legal fees related to doing your job, licenses and regulatory fees, education that is required for employment, subscriptions to professional journals and magazines, medical exams required by your employer, etc. If you car self-employed you can also deduct  items such as computers, desks, manufacturing equipment, tools, advertising fees, electricity, gas, etc. It is important to save all your receipts and keep them in a safe place. Having them all in one location will help you find what you can deduct from your taxes that is work related.
  2. Save pictures, receipts or records of charitable donations: The holiday season is coming up shortly and it is also the time where many people chose to donate to organizations. One of the added benefits to donating to a charity is the ability to deduct the contributions on your taxes. Save all records of the donations. If donating a substantial amount or item to charity it is important to document that donation with a few pictures. Formal pictures are not required, but a picture is worth a thousand words. It will also substantiate your deduction to the IRS.
  3. Gather mortgage receipts: Even thought your mortgage company will provide you a 1099 detailing the interest you have paid on your house payment, it is important to keep the receipts to make sure that the bank is accurate while providing you will some sense of what the size of the deduction will be for the year.
  4. Proof of energy efficient goods: There is a deduction of 10% of the cost of the qualified energy efficient improvements. These improvements may include adding insulations, energy-efficient exterior windows and doors, and some roofs. The credit has a lifetime limit of $500, with $200 going towards windows. The qualifying residence must be the principal residence of the taxpayer and be located in the US. New construction and rental propertied do not apply to this deduction.
  5. Locating last year’s tax return: This is probably the most important step. Locating last year’s tax return allows you to review the return. This can provide you with a wealth of knowledge and valuable items that may need to be included on this year tax return. It can tell you tax loss carry forward information, withholding information, and information on how to treat certain income such as capital gains or traditional income.
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