General Business News for May 2004

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Being the Boss Isn’t a Walk in the Park
If you are like any other red-blooded American, you dream, or have dreamt, of being your own boss. Just imagine being able to come and go as you please, not having anyone to answer to at work, and making all the rules. Man, that would be the life...

Now imagine the screeching of locked tires followed by a loud crash as a car slams into the truck in front of it. That’s the sound of the perception most folks have of the boss’s life running into the reality of the boss’s life. While it’s true the boss doesn’t seem to answer to anyone, depending on the company structure, the boss does have to answer to bankers, numerous government regulators, customers, maybe other stockholders and numerous other people. Oh, by the way, the boss does answer to other employees - every payday, if at no other time.

We’ve talked about financing your business and we’ve talked about products, customers and marketing, but we really haven’t keyed in on attracting and retaining good employees or the rules affecting that process. So, let’s talk about these issues now.

One of the first things you will find in most markets is that hourly or salaried pay is only part of the overall cost of being an employer. Health, retirement and other benefits are on the minds of most potential employees and you might as well make up your mind that you will need to address these issues in the hiring process.

Not too long ago, the only real question on a prospective employee's mind was how much he or she would bring home every payday. This isn't the case these days. Probably the second question out of a prospect’s mouth will go something like this, "What benefits do you offer and how long will it be before I can sign up for the company health plan?"

Notice that this question simply assumes your company has a health plan. Most prospective employees understand that health benefits are very valuable and they expect a prospective employer to offer group benefits. Just like receiving a check each pay period for the work performed is a right, health insurance has almost achieved the status of a right in many employees' minds. Unfortunately, health insurance is becoming more expensive by the minute.

From an employee retention standpoint, health plans can be like gold, if they are affordable to both the company and the employee. Unless your company is very large, you will most likely be forced to purchase a standard plan from a licensed insurer. If cost is your only concern, you will most likely do better with an HMO that gives very little in the way of out of network benefits. The downside of HMOs are they provide very little choice to the patient and it's generally necessary to get a referral to a specialist from your primary care physician. If you skip a step, there will be a penalty and that penalty can be severe.

On the other side of the spectrum is the traditional indemnity plan. This is one that has a deductible and certain levels of "out-of-pocket" expenses. Once the deductibles are met, though, coverage is generally pretty good and the patient has the freedom to use whatever doctor they choose.

In between the two extremes, are numerous other plan designs and types. Your best bet is to find an agent you trust and stick with them. If you can afford a health plan, you and your employees will be vastly better off if you invest in it.

Retirement arrangements are also becoming sought after benefits. The types of arrangements are numerous and the compliance requirements for some of them are overwhelming. There are two general types of plans. A defined contribution plan is one where the employee, employer or both make contributions based on a plan formula, but there is no guarantee of the ultimate benefit amount. SIMPLE Plans, SEPs, 401(k) and similar plans are examples of defined contribution plans.

A defined benefit plan is one where contributions are made in order to fund a specified retirement benefit amount. Many times that amount is expressed as a percentage of an employee's earnings times the number of years the employee worked. The complexity and expense of such plans have made them nearly extinct among small employers. There are, however, some plan designs that favor older employees (like owners) nearing retirement age that may be of use in some situations. An actuary and plan design specialist can assist you in setting up a plan to provide the maximum benefit to key employees and minimize the cost to the company.

Paid vacation and sick time are benefits that many prospective employees routinely expect. If you don't already have a policy, think about instituting such a policy. In your deliberations, think about whether you want to allow vacation to carryover from year-to-year or be lost if not used. What happens to accrued vacation if an employee leaves? Will they be paid for it or simply lose it? Will your sick leave be available only for sickness or will the company call it personal time and allow the employee to use it in any manner he or she desires? Will this leave build up over time and, if it carries from year-to-year, what is the maximum amount of time that can be accumulated? What about bereavement leave? Will paid time off be provided to employees so they can attend a close relative's funeral? How close of a relative must the deceased be in order to qualify for paid time off?

Believe it or not, we have now discussed the easy decisions. Here is a tough one - how will you pay your employees? Will they be salaried, hourly or will it depend on the employee's position. In some instances, you may actually benefit from designation of an employee as salaried, but be careful. The Fair Labor Standards Act is pretty stringent on how you pay salaried personnel. For instance, where an hourly person who works only one hour in a pay period will be paid for one hour, the salaried person will be paid for the entire work period. As you might imagine, having salaried employees could get expensive far beyond your wildest dreams.

Before starting college, most of us would think that any reference to COBRA was talking about a deadly snake. Ok, there may be those who thought of a particular model Ford or a set of golf clubs. This isn't so in employment law. The short and long of the situation is that COBRA allows an employee who is terminated to stay on the company insurance plan for 18 months. You don't have to pay a dime of the terminated employee's premium, but if your company is subject to COBRA, failure to properly notify a terminating employee of their rights can subject the company to major liability.

Depending on your company size, there may be numerous federal and state laws to which it is subject. In many cases, failure to adhere to these laws can subject the company to high liabilities. Don't be caught holding the bag if you fail to adhere to all applicable federal and state employment laws.

Being the owner/boss is not all it's cracked up to be. When you are the boss, you are basically answerable to just about anyone, including the government. Are you having human resources problems? Give us a call and let's discuss your situation. Perhaps together we can relieve a few of your headaches.

Have a great May and please keep our troops in your prayers.


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