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  • Employer Obligations to Employees Following a Disaster
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    Julia Child said: “Any disaster is a learning process.” With Hurricane Dorian recently behind us, it’s a good reminder about being sure to understand what employers owe to employees after a disaster. The matter is complicated by various factors: the type of employee involved (exempt or non-exempt), whether or how long you’re closed for business, and federal versus state and local laws. Do you have to pay employees for the time your company was closed? Under the federal Fair Labor Standards Act (FLSA), you must continue paying the regular salary to exempt employees (managers and others not subject to federal overtime rules) for a closure of less than a week. After that, it’s up to you. If, after the disaster, the business opens but an exempt employee does not show up, an employer can dock the employee a full-day’s pay. (There’s more information below about showing up after a disaster.) Caution: deducting less than a full-day’s salary is inadvisable because it can jeopardize the employee’s exempt status. For non-exempt workers, there’s no requirement to continue paying wages when no work is performed (there’s an exception for employees who receive fixed salaries for fluctuating workweeks). So, when the business is closed or, following a disaster, such worker doesn’t come to work (i.e., no work is performed), there’s no obligation to issue any paycheck. Of course, employers can voluntarily continue making payments. Be sure to check state law to see any other rules that may apply. For example, in some states, exempt workers must be paid if they show up even though there is no work performed. And factor in today’s tight labor market in deciding whether to continue issuing paychecks to help employees (many of whom live paycheck to paycheck) and engender loyalty. Are there special payment requirements for any employees that are on call during a disaster? The FLSA requires employees who are on call to be paid even though the company is closed due to a weather emergency. This rule only applies if they cannot use the on-call time for personal purposes. And state laws may have different on-call pay requirements. Can employees claim unemployment compensation while the company is closed? Each state has its own unemployment rules specifying eligibility for claims. So, as a general statement, if the company is closed for a long enough period, claims are permissible provided an employee has not been discharged for misconduct.… Read more »
  • Developing Leadership Qualities: Being Openminded
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    George Bernard Shaw said: “Those who cannot change their minds cannot change anything.” Being able to change your mind is a quality of good leadership. It means listening to other points of view and, where appropriate, moving in a direction that differs from your original course. Being openminded is a way to gain the trust and respect of your staff. And it certainly can lead to new ideas to help your business grow. What do you need to do in order to be openminded? Ditch old habits Thinking in a certain way is a product of doing things routinely. Get out of your rut and look at things from a different point of view. For example, if you follow the same schedule every day, shake things up and re-order your tasks (to the extent you have the flexibility to do so). Listen to others Solicit input from employees, customers, and other business associates to get their perspective on an issue. Be proactive about this. You can do this informally through conversation or in a structured way (e.g., at a meeting). Be curious In order to be openminded, you need to be curious about other options. You may not have thought about possibilities that may turn out to be preferable to what you’ve been thinking and doing. It’s wise to keep learning new things to satiate your curiosity. The more information you have, the more likely you’ll be to accept new ideas. Show respect People in leadership roles, such business owners, should remember that it may not be easy for others to express their views. They may fear being ridiculed. They may fear reprisals. It’s up to a good leader to show acceptance of other people’s opinions and ideas by listening respectfully and considering carefully what’s been communicated. Final thought If you want to see whether you’re openminded, take a 10-question quiz from Brainfall. The results may surprise you. Last month’s blog concerned grit. Next month’s blog on developing leadership qualities addresses patience.  The post Developing Leadership Qualities: Being Openminded appeared first on Barbara Weltman. Read more »
  • Record Retention: When Is Enough?
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    “What the world really needs is more love and less paperwork,” said Pearl Bailey. Of course, she was right. But the government doesn’t see it that way. Different agencies have different record retention requirements. And in addition to this, there are other recordkeeping requirements for your business. Here is a roundup of some of the records you need to keep and for how long. Company records As a business, you need to keep a number of records. These include: Incorporation or limited liability company formation receipt from your state: keep permanently. Bylaws and corporate minutes: keep permanently. Licenses and permits: keep permanently. Contracts: keep at least 7 years. Leases: keep at least 6 years. Trademarks, copyrights, and patents issued by the federal government: keep permanently. Annual financial statements (P&L, balance sheet): keep permanently. Real estate purchases (deeds) and leasehold improvements: keep permanently. The retention period for other business records—customer records, purchase orders, inventory records, expense records—should be kept as long as you think they are useful to your business. It’s generally advisable to keep these records for at least 7 years. Records related to fixed asset purchases must also be maintained for tax reporting (including figuring depreciation), balance sheet reporting, and maintenance schedules. It’s probably wise to keep these records permanently. IRS The IRS has specific time requirements for record retention for various purposes. Keep copies of federal income tax returns, plus supporting documents for 3 years (6 years if more than 25% of gross receipts is omitted). This applies for: Form 1040 Form 1065 Form 1120 Form 1120S Note: It’s highly advisable to retain a copy of the return and proof of filing forever, since there is an unlimited period for an audit if no return is filed and it may happen that the government doesn’t see that you filed. Keep copies of federal employment tax returns, plus supporting documents (e.g., time sheets) for a minimum of 4 years after the due date of the return for the period to which the return relates (tax experts suggest 7 years). This applies for: Form 941 Form 942 Form 944 Form 945 Keep copies of information returns issued by your company, including: Form 1099-MISC Form 1099-R IRS forms for qualified retirement plans are discussed below under DOL. DOL The Department of Labor has its own record retention requirements. Keep copies of employee benefit and retirement plan forms, plus supporting records, for 6… Read more »
  • Salary History: Can You Ask?
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    What about a job applicant's salary history? Labor Day is the time to celebrate the American worker. One of the issues that has come to the forefront in recent years is the matter of a job applicant’s salary history. There has been a growing number of states barring employers from inquiring about past salary history. But not all states are on board. Be sure to understand what you can and cannot ask a job applicant about his or her salary history. States barring inquiries Proponents of a ban on questions related to salary history argue that the questions discriminate primarily against women who’ve taken time off to raise their children; the questions perpetuate gender inequality in pay. Proponents further argue that employees should be paid according to the work performed (the duties, skills required, etc.) and not according to previous pay scales. Starting in 2016, Massachusetts became the first state to prohibit questions about current or past salary and/or benefits. The ban extends to questions of job applicants, their current or former employers, agent of the applicant (e.g., an employment agency), and even a search of public information. Now, the following states have similar bans for employers in the private sector: Alabama (effective September 1, 2019) California Colorado (effective January 1, 2021) Connecticut Delaware Georgia Hawaii Illinois (effective September 29, 2019) Maine (effective September 17, 2019) New Jersey (effective January 1, 2020) New York (effective January 6, 2020) Oregon Vermont Washington Besides these states, there are 19 localities that ban questions on salary history. States barring bans on inquiries Not all states prohibit employers from asking a job applicant about salary history. Michigan and Wisconsin permit employers to ask what they want to know when it comes to a job applicant’s prior salary history. What to do Determine whether you have a ban on salary questions in your locality. If such a ban is in place, be sure to eliminate the question(s) from any job application form and educate employees conducting interviews to not broach the subject of salary history in any way with a job applicant. Note that job applicants are not barred from voluntarily disclosing their salary history or raising the subject with an interviewer, which is something that an applicant may do to elicit information about what the new job pays. If you have questions, consult an employment law attorney. The post Salary History: Can You Ask?… Read more »
  • Make Your Holiday Plans Now
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    Holiday sales are expected to grow, so be prepared If you’re planning to take a vacation or travel to see family at holiday time, it’s a good idea to book now. But even more important, if the holiday season is an important sales period for your business, now is the time to get started. It’s predicted that holiday sales are expected to grow 3.7% over last year and, for the first time, reach $1 trillion. Watch the calendar The holiday shopping season unofficially starts in October. But even in the summer months, there are Christmas-themed items for sale at retailers. In making holiday plans for your business, keep these other key dates in mind: November 28 is Thanksgiving and the start of holiday discounting (although some discounting usually begins before this day). November 29 is Black Friday, which is the biggest shopping event of the year, with in-store retailers having greatly extended hours and holiday discounts. One source is predicting a 25% increase in online spending from the last Black Friday. November 30 is Small Business Saturday, which is a movement to encourage consumers to shop locally at small businesses. According to an NFIB/American Express survey, 104 million shoppers spent $17.8 billion on this day last year. December 2 is Cyber Monday; a day of online deals and sales. December 3 is Giving Tuesday and kicks off the charitable season by encouraging to donate time, money, and goods to worthy organizations. December 9 is Green Monday; one of the biggest sales days of the year (green refers to money and not the environment). It isn’t a designated day, such as Small Business Saturday, but historically it’s been a day for significant sales revenue. December 14 is a critical shipping day to ensure delivery before December 25. It’s the last day to ship by USPS Retail Ground, FedEx Ground, or UPS Ground. December 20 is another critical shipping date. It is the deadline for USPS Priority Mail, FedEx 2 Day, and UPS 2nd Day Air. December 22 is the first night of Hannukah. December 25 is Christmas Day day when in-store retailers are closed. December 26 is Boxer Day in Canada and a public holiday when most stores are open and sales abound. Budget for marketing How are you going to market yourself? What can you afford to spend on your marketing activities? These are key questions you need to answer now… Read more »
  • Is Bitcoin Right for Your Business?
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    Introducing Bitcoin Bitcoin, which began in 2008, has entered the vernacular. It’s not the only virtual currency out there, but it’s the one that most people know about. At present, a number of major companies, including Microsoft, Intuit, and Shopify.com, accept Bitcoin as payment. The question is whether you should too. Understanding Bitcoin Bitcoin is one type of an Internet-based “digital currency.” It is based on a protocol that enables payment to be made between parties without an interim, such as a bank or credit card company. The value of Bitcoin fluctuates, so it can’t be said that one Bitcoin equates to a fixed dollar amount. In fact, the current value of Bitcoin is now part of the daily market quotations, along with stocks and bonds. As of August 16, 2019, the value of Bitcoin was a little over $10,000. Pros and cons for your business Here are some good reasons to consider accepting Bitcoin (adopted from Bitcoin’s site), as well as some cautions: Pros: There are less processing fees than other payment methods, such as credit and debit cards or PayPal. There are no chargebacks, as can occur with credit and debit cards or PayPal. It can be used worldwide. There is accounting transparency. You can provide information to verify your transactions through the blockchain. It can be a marketing tool to promote your business as being in the digital world. Cons: The value of Bitcoin changes throughout the day and can be downright volatile. It reached an all-time high on December 18, 2017, at $20,089. It’s currently valued about half that, but it’s expected to go higher (John McAfee predicts it will be valued at $1 million in 2020). Bitcoin can be stolen by hackers. For example, it was reported that 7,000 Bitcoin valued at over $40 million was stolen from Binance, a major cryptocurrency exchange. The federal government views it as property, not as currency (see Tax Implications, below). I listed this as a con, but it’s really not a negative, just a hassle. Tax implications The IRS treats virtual currency as property, not as currency. Thus, if you’re self-employed and accept it as payment for goods or services, it’s self-employment income. It’s also taken into account for self-employment tax purposes. If you’re incorporated, the business similarly includes payments in virtual currency in its income. The amount you report is based on the fair market value of… Read more »
  • Business Etiquette 101
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    What does "business etiquette" mean? Business etiquette is an umbrella term that includes not only business manners in the workplace (including business dining), but also business communications, business attire, and more. As someone who’s been around for a while, it’s amazing to think that a blog on the subject of business etiquette could be helpful, but I think it is. How many times have you been in a meeting when an attendee gets a phone call…and takes it right there and then? How many times have business associates shown up late to a meeting with you? These situations demonstrate poor business etiquette. Why business etiquette matters To boil it down, etiquette is about being respectful for others. In a business context, it means showing this respect by the way in which you interact with employees, colleagues, and other business associates. By using good business etiquette, you show your own integrity. As Theodore Roosevelt said: “Politeness is a sign of dignity, not subservience.” The value of good business etiquette to your company can be enormous. It can improve the company culture and make employees feel more comfortable in the workplace. Perhaps even more important, good business etiquette can translate into better business relationships, which in turn, helps your business grow. What to be mindful of Don’t think of business etiquette as a do’s and don’ts list. Rather, look at it as the business embodiment of the golden rule. Here are some ideas to get you started: Be considerate of others in everything you do. This means showing up on time, keeping promises, and showing respect in talking and treating others. Follow the rules of proper communication. Whether in person or by phone, text, or email, stay professional. Understand some basic rules, such as writing with proper grammar and punctuation, avoiding all caps (which can be interpreted as yelling), knowing when to use cc or bcc in your email, and responding to all communications in a timely manner. Conduct yourself properly. How you look and act creates an impression of who you are (whether fairly or not). So, dress the part, even if this is casual. Use good table manners whether in the break room or dining with customers, prospects, vendors, or anyone else. Final thought I can recall childhood lessons about how to behave at the dinner table, to use my napkin, and to chew with my mouth closed. I guess… Read more »
  • The Minimum Wage Conundrum: What Can You Do?
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    Small businesses consider their options in the face of rising minimum wage rates Currently, the federal minimum wage is $7.25 hour. But many states and some cities have higher minimum wage rates. The highest one is in San Francisco, where the rate is $16.30 per hour. With calls to raise the federal minimum wage rate to $15 per hour, what can small businesses do to cope with this added cost of doing business? The options aren’t easy. Background on minimum wage rate hikes The minimum wage rate is climbing in some localities. For example, in New York City, the rate is $15 per hour for employers with 11 or more employees. It’s currently $13.50 for smaller employers, but will also be $15 per hour starting on January 1, 2020. Other states and cities have enacted $15 per hour legislation, including California (employers with 26+ employees in 2022; 25 or fewer employees in 2023), Connecticut (in 2023), Illinois (2025), Maryland (2025), Massachusetts (2023), New Jersey (2024), and the District of Columbia (July 1, 2020). There may also be an increase in the federal minimum wage (which applies if it’s higher than the state’s minimum wage). The House (H.R. 582) passed a $15 per hour minimum wage bill in July. Whether the Senate will vote on the measure is uncertain. And a higher minimum wage is part of the 2020 election discussion. The higher minimum wage isn’t going away. Cut staff or hours Where the minimum wage rate has risen significantly, some small business owners have been forced to reduce the number of employees on their payroll. Alternatively, they have limited overtime for their staff, which results in lower overall pay for some of their employees. Perhaps more problematic is what to do about employee hourly rates when you want to pay more than the minimum wage? Do you adjust pay according to minimum wage hikes for all of your employees? A conundrum. Raise prices Another option to adjust to a higher mandatory hourly pay rate is to raise your prices. The problem is how much of a price increase will customers tolerate? Obviously, it depends on where you are and what you sell. A conundrum. Cut your profit margin If you don’t believe there’s room to raise prices and you can’t operate effectively with staff reductions, you have to face the fact that your profit margin will be reduced. The problem… Read more »
  • What Are ARPs and How Do they Work?
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    The U.S. Department of Labor issued a final rule that will expand accessibility of affordable retirement plans to small businesses. The rule, which has an effective date of September 30, 2019, may be changed after comments to it from the public are reviewed (the deadline for comments is October 29, 2019), but here are some facts to explain what association retirement plans (ARPs) are about so you can decide if they are a retirement plan option for your company going forward. Background The Bureau of Labor Statistics found that 38 million employees (approximately 53%) working for small and mid-sized companies do not have access to retirement savings. A Pew Charitable Trusts survey found that the main reason for not offering a retirement plan was cost. I’ve seen estimates that plans with less than $10 million in assets pay 4 times as much in administrative costs. What are ARPs? In order to offer small businesses the ability to afford a retirement plan, the DOL’s rule permits groups of employers to band together in an Association Retirement Plan (ARP). The ARP operates as a multiple employer plan (MEP). It’s referred to as an open MEP because it operates on behalf of unrelated employers. The group—a trade association or chamber of commerce—can offer their members that are small employers the option of obtaining a retirement plan at a cost similar to what large companies obtain. The ARP reaps economies of scale for administrative costs (e.g., there’s less paperwork and professional fees because the association does the required filings with the DOL and IRS rather than the individual employer) and can offer a wide array of investment options. The type of plan that can be offered by the ARP is a defined contribution plan, such as a 401(k) plan. The rule does not encompass a defined benefit (pension) plan. The final rule makes it clear that employers using an ARP do not have to be in the same industry or within the same geographic area. And sole proprietors and other business owners without employees can participate in an ARP. What you should do? If you don’t have a retirement plan in place for your business and want to start one, keep ARPs in mind. Check with your local chamber of commerce or a trade association to which you may belong. The group may offer an ARP for 2020. And watch for more details about… Read more »
  • 10 Things to Know about Bonus Depreciation
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    To run your business efficiently, you need good equipment and machinery. You may want to add to or replace what you have now. Newer versions usually run faster and smarter, and may be more energy efficient.  In order to help businesses afford investments in such property, the tax law permits special write-offs up front. There is a Sec. 179 deduction (called “first-year expensing”), which is capped at an annual dollar amount ($1,020,000 in 2019 for most types of property). There is also a special allowance you can take to write off the cost of certain property, which is referred to as bonus depreciation. Here are 10 things to keep in mind for claiming bonus depreciation. Bonus depreciation isn’t an extra write-off. It merely accelerates what you’d be able to deduct over the life of the property through regular depreciation. It is 100% of the cost of qualified property bought and placed in service in 2019. There is no dollar limit on the annual deduction. But the percentage for bonus depreciation is scheduled to decline as follows: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and no bonus depreciation in 2027 unless Congress extends it. It can be used for both new and pre-owned property. In the past, the write-off had been limited to new property. But as long as the property isn’t acquired from a “related party,” even used property can qualify for bonus depreciation. It  can be used regardless of whether the purchase is financed in whole or in part. For example, if you buy a machine costing $20,000 in 2019 and finance $15,000 of the purchase price, you can deduct $20,000 using bonus depreciation in 2019. Bonus depreciation applies automatically. No special election is required. However, if you don’t want to use it (e.g., perhaps you expect to be more profitable in the future so that deductions become more valuable to you later on), you must elect out of bonus depreciation for all property within the same class that’s placed in service in the same year (e.g., all 5-year recovery period property placed in service in 2019). The election is made by attaching your own statement to the tax return for the year in which the property is placed in service. Once you make the election, it’s irrevocable. It is claimed on Form 4562. Section II is used for this purpose for most property. But… Read more »
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