Employees and Small Business

Five little Gremlins sitting on your desk!

Here are some QT (Quick Tips) for productivity improvement for your gremlins on Halloween: 
Lost Items - we spend 2 weeks a year looking for things. QT - Learn 5S .
Interruptions - make us "lose our place".  QT - Keep a log based on Urgency and Importance for a week and study the what, when, where and why of your gremlins. 
Meetings - unclear purpose, too long, no follow-up. QT - Have an agenda.
Email - this gremlin is a huge time waster.  QT - Sort, prioritize, then read on your own schedule.
Social Media - a great time sucker.  QT - have a plan and schedule your time.

Happy Halloween and may all your gremlins behave.

PROS and CONS of Employee VS. Independent VS Contractor

Recently, I talked with a business owner that ended up having a worker be reclassified as an employee from an independent contractor. He had to retain a lawyer and in the end, paid no penalties but did have to pay back taxes and payments to federal and state agencies.

 

How did this come about?

The worker got injured on the job, had no health insurance and at the urgent care facility said "Yes, this was work related" and the process started with Workers Compensation against the company because the worker never got his own policy. If you use independent contractors, having a contract with them clearly stating they are responsible for their own benefits and taxes is key.

Previously, we discussed how the Internal Revenue Service views if your workers are employees or contractors. This week, we explore the PROS and CONS of each.

Employees:

PRO

• Potential loyalty which may yield greater productivity
• Multiple roles or cross training of skills
• Improved work flow as the staff is "shovel ready" every day
• Employee is covered by workers comp and state and federal unemployment

CONS

• Added responsibility of employees is almost like adding to your family AND payroll is not for the inexperienced.
• Extra overhead and need for employee tools, desks and other stuff. Don't forget benefits and taxes for the privilege of having employees.
• Being a manager/boss and dealing with the reality of all that human resources stuff.
• Rules are everywhere and vary depending on the number of employees, the employer is expected to know these.

Contractors:

PROS

• Overhead costs may be less as a contractor will usually have their own tools and equipment
• No benefits to be paid. A company has no requirement to pay any benefits to an independent contractor, in fact, if paid, that action in itself will cause the worker to be viewed as employee.
• Contractors work when you need them. This is a better match to the cash flow of the some company's job or project flow.
• Contractor has own profit motive - your success and theirs are intertwined.

CONS

• Lack of control over time. The fact the worker is called an independent contractor means that the contractor will work for others, too. Your job's priority may not match the contractor's work schedule.
• Lack of control over pay. The contractor will set the rate and they can vary from project to project. Also, since the contractor is paying their own employment taxes, benefits and for tools, you should expect to pay more than employee.
• Misclassification of worker. If your company is found to have classified an employee as a contractor, there will be back taxes, penalties and interest.  

The choice is yours and different jobs will require different workers.  Making sure you are following the law and building your business for sustainability will be key.

Useful books: Remember a book is not a replacement for a good attorney and you would be wise to connect with one before you need one. These books can give you a start and ideas of what is involved with business law.

Nolo's Legal Business Contracts and Forms

Encyclopedia of Small Business Forms and Agreements 

Business Contracts Kit for Dummies 

Linda Fayeweather

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I Quit. The Have To VS the Want To -- Employer's Point of View

Are you prepared?  When an employee announces they are leaving, the employer should be prepared. As we talked last week, leaving employees fall into two categories. The ones that Have To Leave and the ones that Want To Leave. The majority are the ones that Want To Leave and just become dead weight for their current employer very quickly. So what can be done from a company stand point?

First and foremost, make sure the employee no longer has access to sensitive data and information. Next, review the job description and job processes already written down for this particular position. A meeting could be held to go over the current job description, job processes and status of work in process with the soon to be ex-employee making sure nothing is missed.

For the companies who aren't prepared, take the next few days to learn everything you can about that person's position. Don't waste time. Meet with the person who is leaving, meet with other managers, and anyone who deals with the exiting employee. Gather information and build a job description and the job processes. Don't rely on the exiting employee to create a job description or write out all their job processes on his own as his attention is elsewhere.

A second meeting will be held with owners, managers and HR (in house or outsourced human resource assistance) to make sure nothing was missed and the position, job description, and job processes are in line with what the company wants and needs for the future.

Then it is time for the company to move on by starting the hiring process, promoting someone, dividing the current job processes up along other employees, etc. The soon to be ex-employee can be held on to finish up critical tasks if necessary, if not, he may be let go even if the two weeks aren't complete.

The exiting employee is often dead weight and will do little to benefit the company, especially the Want to Leave employee. A harsh reality, but a reality none the less. Just remember to do this tactfully, the exiting employee isn't being fired and shouldn't be treated as if he is. He is leaving and the sooner the company moves on and fills the void, the better.

Jeff Mendelsohn

liquid@liquidmechanix.com   

I Quit. The Have To vs. the Want To -- Employees Point of View
Recently I had a friend tell me that he took a position at a new company. He gave his current employer a little over two week notice. Which is courteous. Don't want to bur Quitn bridges.

By the end of the first week, my friend confessed to me that he had completely checked out. He had no desire to do any work for the current employer. He was ready to move on but felt obligated to stay and muscle (unwillingly) through the remainder of his time there.

That got me thinking, when someone is leaving a company, they fall into two type of categories. The ones that Have To Leave and the ones that Want To Leave.

The Have To Leave are leaving due to circumstances out of their control such as, they are moving, they have to take care of someone, or illness. They don't want to leave and would prefer to stay. They may need the money and would like to keep in good standings so they might be able to come back one day. Those are the people who usually give it their all because they still feel it is their job and have a connection to the company. These people are few and far between but should be kept on as long as possible while the company prepares for what's next.

The Want To Leave, the majority, are the ones who are leaving because they want to. They are moving on to something they consider better. They only gave two week notice because it's the courteous thing to do. If they are not already checked out, they will be shortly.

As I told my friend what I thought, he agreed and laughed that he was taking a two week work vacation. He was right. He become dead weight to his current employer. Although he didn't mind the two week work vacation, he did mind not starting his new job and a company he wants to work for and the significant pay raise. But he still felt obligated to stick out the two weeks.

So what could he have done?

Email us or send us a comment about how you would handle this if you were the employee.
Next week, we explore this from the employers view.

Jeff Mendelsohn

liquid@liquidmechanix.com 

Employee VS Independent Contractor
"I hate having employees - I will just make them all be contractors" said the small business owner to the business coach.

If that sounds like a good idea, think twice. In the old days (1980s and 1990s) the IRS had a list of twenty questions they asked. If you could answer YES to one, the person was likely an employee.

The current view of who is an employee falls into three categories of evidence - sounds so forensic!

Behavioral Control

--Instructions - do you give instructions
--What tools are used and who owns the tools
--Who hires any assistants to work with the worker
--Who and where are supplies purchased
--Do you train the worker or is the worker arriving already trained

Financial Control

--Does worker have other customers
--Does the worker invest in their own success
--Is worker reimbursed for expenses
--Can worker incur a loss
--Does worker have own workers compensation insurance

Type of Relationship

--Does worker have a written contract about the extent of the work
--Does worker receive any benefits such as insurance, pension or paid leave
--Does worker provide invoice for work done

Each case is unique, but 90% or more of cases brought to the IRS attention are found in favor of the worker being an employee.

Publication 15-A and Publication 1779 detail this and both can be downloaded and read at your leisure.

Designing your business for your future means putting the right people to work in the right manner. Outsourcing has its place as do contractors AND employees may be a good idea, too. Just putting the plan in place before you leap is always better than cleaning up the mess later.

Linda Fayeweather

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A Taxing Matter - Tax Workshop for Small Business

The Business Department at the Toledo-Lucas County Public Library presents: A Taxing Matter - Tax Workshop for Small Business Saturday November 12, 9Am to Noon Main Library 325 Michigan St - Toledo IRS enrolled agent, Linda Fayerweather, will discuss tax matters that effect the small busines sowner. A Question and Answer session will follow the presentation This is a free workshop, but registration is required by calling 419.259.5209

Planning to Excel

You work hard for your business.

You have a great vision for your business future.
You are passionate about what you provide your customers.

Still, your staff just doesn't get it! You will need dedicated employees - employees that behave as if this is their business, too. In both Stomp the Elephant in the Office and Ownership Thinking , the theme runs strong that attitude is everything and attitudes can be changed both for the positive and negative.

Furthermore, you want your customers to be raving fans and dedicated to your success, too. 

I regularly say, you have to have a plan. . . but sometimes, you will find that a simple checklist can keep you and your staff on track. A checklist is based on a plan and is easiest to read each day before life starts getting crazy.

Tips to keep in mind while building your checklist:

1. Tell your Passion. With the passing of Steve Jobs, I am reminded daily that his story was not just Apple, his teams put tools in our hands that were elegant, useful and full of surprises.
2. Know and Share your Metrics. These go back to the plan and graphically say what we are going to do. Think graphs. Increase profit in 2012 is not a goal because $1 more of profit would make that true. Instead, management may want to see a monthly graph tracking actual profit. Or maybe each job is checked for gross profit.
3. Hire right - yes, this is hard, and taking an extra two weeks may seem like an eternity, but the resulting employee that fits and stays is a cost savings in so many ways.
4. Provide leadership - set the example, be humble, treat others they way you want to be treated.
5. Invest in what is needed. Have the right tools for the job.
6. Protect and Project your Standards. Standard Operating Procedures, Policies and Procedures, Employee Handbooks; these are words that you breathe life into each time your create new, enforce old and leave no room for variation.
7. Instill Discipline. Discipline leads to standard outcomes and efficient production. Discipline is a way of behaving in business internalized by your staff.
8. Meetings are action driven and action creating.
9. Ask often - will this waste time? money? energy?
10. Will what you do this day bring you energy?

"Have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary." --Steve Jobs

Linda Fayeweather

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Paying Your Employees What they are Worth Part 2
When you are replacing an employee, most businesses understand the role an employee played and will have a job description but they often don't understand the skill and knowledge that evolved over time for that employee. That is true for any job - jobs grow and change regardless of the description. Ask yourself:

*Am I actually paying my employees what they are worth?

*Are my employees worth what I'm paying them?

　

As a small business owner, it is tough to know what the cost will be if a long time employee leaves. You might find someone who is better for the position, you might not.

Questions to consider:

*Am I prepared if this employee leaves?

*What will it cost to find someone with the same skills?
*Will it cost more to hire someone new and train them versus matching the offer so my employee will stay?
*Does the employee actually want to stay?
*If I match the offer will the employee do more? Will they be worth what I am paying them?
*Is this person right for the position and my company?

When a employee comes and says "I have an offer," it is usually too late to keep them and sometimes, the employee has out-grown the job and you will not be able to keep them happy or employed at your firm. Regular job reviews and work reviews will help you know where your vulnerabilities are.

Jeff Mendelsohn

liquid@liquidmechanix.com  

Employees and Visions

Behavioral Metrics
You know when you have walked into a company that understands the importance of training employees because as a customer, you will feel heard, helped and valued even if you purchase nothing. Behavioral Metrics are measurements that help companies monitor the actions and attitudes of employees. Effective ways to measure the attitudes of those working for and with you may be project feedbacks, meeting evaluations, employee appraisals and peer evaluations.

When you do these evaluations or feedbacks, the categories you will monitor are:

1. Commitment - adherence to policies, level of participation, and efforts to provide training.

2. Communication - surveys of employees and customers; error elimination caused by ineffective communications; and recognition of outstanding communication of employees.

3. Cooperation - shared financial risks and regards; effective problem resolving and reporting efforts, formal recognition of cooperation.

Your business's long-term success is possible only when employees' behavior is aligned and everyone works for the benefit of the company as a whole. Even if you are a micro business with few employees, your attitude will shine through in the tone and tenor of your communications and your commitment to customer satisfaction.

Linda Fayeweather

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Paying Your Employees What they are Worth

Recently, a friend of mine changed jobs. He worked for a great company, small but great and was treated well. He was able to express ideas and actually see those ideas come to light. His work was rewarding and he enjoyed what he did. But in the few short years he was there, he outpaced his position - his talent and skills grew but his position did not. After 6 years my friend was still being paid as a junior analyst. He had gotten some raises some years, and some years not.

On a whim, my friend interviewed for another job more in line with his skill level. The position turned out to be a low level analyst position. The salary started off at 1.5x his current salary. My friend stepped up his search and within a 6 months had found another job. It was a mid level analyst position, 1.7x his current salary with less overtime, better benefits, and at a similar sized company.

When he told his current employer that he was leaving, they were shocked. My friend kept in contact with a few old co-workers, who kept him appraised of the status of the company. After a month, the company hired someone new. The company couldn't afford someone with the same skills as my friend. Not even close. They ended up with another junior analyst.

The company suffered. Projects took much longer to complete. Work that my friend use to do, never got done. Work had to be redone. Work flow hit a bottleneck. Profits slowed.

This wasn't because my friend was irreplaceable. Everyone is replaceable. The problem is he grew the job and often in small business, as long as people do their job and don't rock the boat, they keep working regardless of their value to the company.

Yearly reviews and occasional job analysis will sometimes save you from replacing employees. The average cost to replace an employee is $17,000 unless they are making over $60,000 in which case it starts at about $30,000. Keeping your employees coming to work is more than just having a desk at the office.

 Jeff Mendelsohn

liquid@liquidmechanix.com  

Leadership

The Month of October is dedicated to Stomping the Elephant in the Office. Now is the time for Small Business owners, managers and workers to take the economy in their own hands and become the businesses that make a difference. Businesses that maintain profitability and have low employee turnover usually are doing many things right. This starts at the top with leadership that is in tune with reality.

I recently saw a CEO of a local company leaving one of his retail facilities. He did several things:

1. He stopped and chatted with the store greeter,

2. He picked up some litter as he walked out the door, and
3. He helped a customer break loose a shopping cart from the corral.

Even if I had not known who this person was, I would have smiled and enjoyed watching this engaged individual. The customer likely did not know who he was, but several employees that were nearby did and will remember. Simple acts of respect to the world around us are hard to ignore and often cause others to respond similarly. Not all people will follow our good examples, but the more we try, the harder it will be to ignore out leadership.

An engaged leader leads to engaged employees who will work with passion and connection to their company. They drive innovation and move an organization forward.

Linda Fayeweather

 

The Toxic Employee. I'm sure you have worked with a few coworkers or had a few employees that could be considered "Negative", "Not a Team Player", or somebody you just avoid. They cause drama, or feed drama. They are employees that don't promote a healthy work environment and usually the ones that complain the most. Whatever they are, they are toxic. They drain other employees desire to work, they hurt the company, and generally sabotage their own work.

The most common types of Toxic Employees are the:

         Office Gossip or Tattletale - passing rumors around or informing to your superiors
        Pessimist - everything is doom and gloom
        Social Butterfly - social beyond "I really like to work here", often have very long stories
        Corporate Climber - the one that casts moral scruples aside for personal gain
        Not my Job - person who believes just the job description and nothing but the job description
         Bad Boss - Career Builder survey shows that 26% of managers are unsure of their own abilities as a leader.

Being a leader is a choice, not something selected for you. You know you are a leader if people are following your lead. The toxic employees can become leaders if allowed to live in your organization - not the leadership you want.

Jeff Mendelsohn

liquid@liquidmechanix.com