Employee Types

Do You Employ Salaried Employees?  

Hourly Employees?  Both?

 

The compensation structure of your company affects many aspects of the business.  In addition to determining your human resources costs the compensation structure can facilitate good relations between employees or foster envy and distrust.  How you manage the compensation of your employees is very significant and should be considered carefully. 

There are benefits to salaried, hourly, and combined compensation structures.  No matter which compensation structure you employ make sure to have specific standards for each type of compensation and each level.  The standards you use can be experience based including education and work experience, performance based including sales and personal productivity, or a combination of experience and performance standards.  For more infrmation see the Wages post. 

Other things to consider when performing an audit on your compensation plan or developing a new compensation plan are overtime, benefits, and tax issues: 

Overtime can become very expensive for the company especially if it is not truly necessary.  Sometimes workers shirk some responsibilities during normal business hours so they can make a little more money by completing tasks during overtime.  If overtime expenses are high it might be time to consider hiring an additional employee to pick up the extra work.  Overtime can also cause issues with salaried employees who are not compensated for more time at work.  A little overtime here and there is acceptable but too much can cause significant problems with salaried employees and their families.  If only one or two of your employees are working overtime they may be having issues with time management, an increased workload, or problems delegating work to others.  No matter the reason for overtime it is important for managers to realize that it is happening, why it is happening, and what can be done to prevent it in the future.  Employees always appreciate managers that take the time to figure out what is going on. 

 Benefits packages for employees can run from simple health plans to complex health, retirement, and vacation options.  If your business has both salaried employees and hourly employees your benefits decision is even more complex.  Not only are benefits packages expensive they can also greatly affect the morale of the employees.  As long as the benefits package is well written, consistent, and employees know and understand what they will receive and what they are responsible for accomplishing to get their benefits all should be well. 

 Deciding whether to hire hourly employees, independent contractors, or salaried employees is even further complicated by the tax code.  With changes to the tax code being made on a yearly basis it is hard for any manager to fully grasp which form of employee is best for the company’s bottom line and current situation.  The best bet is to consult a tax and legal professional to determine the options for your business.  Things to consider when deciding which type of employee to hire are reporting costs, payroll taxes, FICA taxes, unemployment insurance, etc.  

Most employees don’t realize the costs associated with their employment with a company.  It might be a good idea to sit down with each and every employee to explain to them all of the costs that the company incurs in addition to their salary or hourly wage.  By further explaining what it actually costs the business to have them employed may make them support changes in the political environment to making it more favorable for small businesses.  Employers and employees should realize that the extra tax burden on the employer should be considered part of the costs associated with the individual employee and hiring and termination decisions should include these figures.   

Filed Under Human Resources | Leave a Comment  | February 26th, 2010

How Many Employees

How Many Employees Do you Have?

 

It is difficult for many businesses to determine how many employees to hire.  When starting out most businesses are just the sole-proprietor and maybe even some friends and family members.  Once the business grows to a certain degree the need for employees enters the equation.  All entrepreneurs ask at some point How many employees do I need?  What should they be responsible for? Etc. etc. 

 As an established company it is important to consistently review your employee needs and assess the profitability of maintaining the level of employment, decreasing the level of employment, or increasing the level of the employment by the company.  Hiring and firing employees is the most difficult part of any management type job.  As entrepreneurs work with employees they build relationships and friendships.  When this happens it is sometimes difficult to make the tough decisions.

Before considering the tough decisions just analyze the number of employees that you have.  

 Sometimes your business may be able to achieve economies of scale with more employees.  For example, hiring a couple more employees might not only increase your business’ productivity but it also might place your business in the next tier of benefits packages to decrease the cost of health benefits for all employees.  This marginal increase in the number of employees may be able to greatly benefit the business without breaking the bank.  

Your business may be able to operate using temp services, seasonal workers, or independent contractors which may help increase your productivity while at the same time reducing your compliance costs, tax liabilities, and benefits expenses.  Many temp and employment services act as a Human Resources Department for your business eliminating the need to hire your own HR Director.  Other considerations of the sheer number of employees are desk and office space, technology, software-licenses, tax liabilities, and security.  

Filed Under Human Resources | Leave a Comment  | February 24th, 2010

Business Departments

How Many Departments Does Your Business Have?

 

What are Their Functions?

 

This question is important for many reasons…First, its always a good idea to know the number of sections or departments in your business but it is also important because with the knowledge of how many departments you have and what each department is responsible for you may be able to determine some cost cutting measures or efficiencies. 

Let’s look at the diagram back in the post Business Philosophy  where we show that all departments are actually a part of marketing operations.  Even a simple business, like the one in that diagram may be able to make small changes that will improve the business.  Does one department overlap responsibilities or tasks with another department?  I know, another question but that is the process of improving any business…asking better questions.  In general, the fewer departments a business has the more efficient and cost effective it will operate.  There is a definite need for having multiple departments in order to take advantage of specialization of tasks and procedures but don’t get carried away with creating too many departments that are similar in task and responsibility.  

Filed Under Business Structure | Leave a Comment  | February 19th, 2010

Go Along to Get Along?

Does your Management Team “Go Along to Get Along”?

 

Many managers and business owners face the pitfall of being too close to other managers within the company.  It is wonderful for people to go to work everyday and absolutely enjoy the people they work with.  In fact it is highly desirable for owners, managers, and employees to all get along well and be friendly with each other.  However, with this friendliness many owners, managers, and employees are fearful of presenting dissenting opinions or fresh ideas.

 It is very difficult for some people to “make waves” or disagree with friends and co-workers.  When people in an office suffer from “groupthink” or a “go along to get along” attitude the whole company will suffer.  I’ve seen many instances where employees, managers, and even business partners sit silently by while someone else in the company makes either a redundant, unnecessary, or poor decision.  By not “rocking the boat” the people that had the potential winning idea or strategy are hurting the business by not speaking up.  There are a few ways to fix this issue and they all revolve around management and the culture of the business.  

 Owners, managers, and employees that are friends in a business should understand that although they are friends (sometimes even family) their primary goal while at work is to help the business succeed.  Maintaining professional relationships while at work is necessary and leaving work at work on the weekends and other social times is just as important.  It is also important for managers to listen not only to each other but everyone in the chain of command to hear potential winning ideas and strategies for the future.  

 The culture of your business plays a large role in how decisions are made and whether or not group-think becomes an issue.  Letting employees know that they can respectfully disagree with management and communicate to management their concerns or differences of opinion through a specified channel is a good way to get fresh ideas and opinions.  It should be noted however that this disagreement and communication should take place in private away from other employees so that the manager’s role as a leader is not questioned.  If the employees idea is a winner managers must give credit where credit is due. 

 Positive personal relationships at work are a blessing and should be nurtured however, citing personal relationships as a means to go along with poor ideas and decisions does not help anyone within the company.  Most companies would benefit greatly if more people stood up for what they believed was right and if management had a process in place for letting people present their ideas.  Be sure as a business owner, entrepreneur, or manager to make yourself open to other ideas and even criticism of your own ideas from others within the business.  Your example will foster an enormous amount of goodwill, fresh ideas and good decisions.  

Filed Under General Business | 1 Comment  | February 13th, 2010

Goal Setting

Do You Have Goals for Your Business?  What are

your Business’ Goals?  What are the Goals for

You, Your Managers, and Your Employees?

 

Knowing where your business and your employees need to be in one, five, and ten years is essential to the planning process for any business.  An important exercise for business owners and managers is to determine where they would a) like to see the business go in the next year, five years, and ten years and b) like to see where they as individuals would like to be in the same time periods.  

The best way to perform this exercise is through brainstorming and research.  First research your company’s past performance, goals, and trends in the market.  Once you have that research completed brainstorm with your management team for goals to attain.  Organize the goals into different categories such as short-term and long range.  You might also want to organize the goals you come up with by function, market, or objective.  During this time of brainstorming for goals do not throw out goals as unattainable, unrealistic, or unworthy of pursuing.  The whole purpose of this exercise is to expand your thinking and utilize all ideas to formulate a statement of goals.  Through this exercise you will be able to develop written and quantifiable goals for your business and the individuals within your business.  Once you have determined the goals that you would like to attain it is a good idea to place it into a document for the rest of the company to see and understand.  An example of a generic goal statement may be:

By the end of the year we will have reduced variable expenses by 5%, contacted 100 new business prospects, and created an action plan for entering a new market.  In the next three years our business will enter a new market for our current product/service, develop one or more new uses/purposes for our product/service, and reduce our overall expenses by 7% compared to 2008 expenses.  

 The above goals statement provides a glimpse of where we would like the business to go in the next three years.  Along with a goals statement it is a good idea to include an action items list.  This list will define exactly what your business needs to do in order to reach the goals set forth in the goals statement.  Some cost-cutting action items might be reduce travel, improve processes, etc.  But within each action define the executable measures that your business will perform to reach the goals.

 In addition to setting goals for the business, each manager should meet individually with each employee to determine goals for that particular employee, taking into account the individual’s life circumstances, experience, desire for responsibility, and motivation towards success.  This goal setting can be performed during performance reviews or even during the initial hiring process.  By clearly defining goals for employees a stronger partnership is formed with the company and both entities know what to expect from the other.  Setting goals with employees also provides them with the clarity to know what to expect in the future.  In this process it is also a good idea to determine action items and executables for the employee to follow to stay on track towards reaching the goals.   

 Goal setting shouldn’t be taken lightly and much thought should go into each goal statement.  You should ask questions such as:  Is this goal realistic?  Is it attainable?  Is it profitable?  It should go without saying, but I’ll say it anyway, you should only choose goals that are realistic, attainable and profitable.  Knowing where your business wants to go and having the action items to get there are important steps toward business Success.  

Filed Under General Business | Leave a Comment  | February 11th, 2010

Employee Attrition

How Frequently do you Lose Good Employees?

 Good employees are sometimes expensive to hire, hard to locate, and time consuming to train.  With these three facts we understand how important it is to retain our best employees and keep them for as long as possible.  Good employees naturally want to excel, they want to grow, and they want to prosper.  As employers it is important to realize that opportunities for employees to grow prosper and succeed must be evident within the company.  Employees must see that they have an opportunity to achieve at a higher level within the company or their productivity will stagnate, their morale will decline and they may leave to find another position.  The proper compensation, promotion and reward plan will help lower the attrition rate of good employees.  Extra costs associated with an increase in your compensation, promotion or reward plan may be better than losing an experienced workforce and hiring new, untrained employees. 

  It is certain that every now and then a good employee will have to move on.  Whether it be through a family move, and change in personal preferences, or an offer of a much better position; good employees will sometimes move on.  If your business is losing more than a couple of good employees a year there may be an issue with one portion of your company.  When an employee leaves your business make sure to have an exit interview with them to find out specifically why they’re leaving. 

 Losing employees may also impact the way outsiders view your company.  Especially in small towns and rural areas a business that loses a prominent employee to a competitor or other position may affect your business’ financial health.  Losing a personable employee that creates accounts may be very expensive if your customers associate themselves more with your employee than your company.  Adjustments to your compensation, promotion, or even your business plan may be necessary to prevent an exodus of good employees and an impact on your bottom line.  

Filed Under Human Resources | Leave a Comment  | February 9th, 2010

Locations

Is your business local? National? Multi-national?  How

many locations does your business have?

 

One of the most common challenges a growing business faces is determining the scope of the business.  Most businesses, such as restaurants and retailers start out local, or with multiple locations within a specific geographic area.  As the business’ customer base and sales grow most businesses are tempted to expand to a more regional or national, possibly even international scope. 

 As businesses expand new challenges develop such as where to locate a central office, human resource procedures, tax compliance issues, local statutes and ordinances and on and on.  It is very important for a growing business as well as an already large regional or national business to make sure that the business is operating as efficiently as possible and abiding by all of the statutes and ordinances at each specific location.  For example some jurisdictions have sign ordinances that may prevent your business’ standard sign from being prominently displayed.  This type of ordinance may affect how your business is marketed in that area as well as the brand image of the entire company.  As your business grows and you develop more locations in different areas make sure that your signage and your policies and procedures can be adapted to new locations. 

 Another aspect of multiple locations in different regions or nationally that businesses must deal with are tax compliance, business license, and permit issues.  As your company grows you will be able to save valuable time and money by examining the financial and legal environment of each new location to determine the costs associated with moving into a specific area.  Varied tax rates, building permits, business licenses, local ordinances and statutes will all play a key role in the profitability of your business.  

In today’s business environment it is entirely possible for a small business to not only compete internationally but be entirely successful in the international market.  With current technology any business can reach customers around the world.  This is especially true of niche products and specialized services.  As internet sales increase businesses that sell products definitely need to consider selling their wares overseas.  Key things to consider when selling internationally are shipping and customs costs, time in transit of products, distribution channels, translation issues, customer service, and of course…tax issues and compliance. 

 We all know that shipping products overseas is more time consuming and costly than normal shipping, therefore be sure to include the extra expenses in your calculations to make sure that the international sales will be profitable.  It is also important to provide international customers with the same level of customer service as local customers therefore, hiring native language speakers may be an important move for your business.  As international sales grow your business may be able to cut costs by locating distribution facilities internationally and you may be able to specifically target different countries with country/culture specific products and services.  Doing business internationally also creates a host of tax issues that only professional tax advisors can evaluate so make sure to get help when necessary to determine the potential profitability of selling in the global marketplace.      

All in all selling on the regional, national and international scope may be the best option for a growing local business.  With expansion the target market will grow exponentially as will the potential for sales.  It is always a good idea to consider expanding nationally and internationally if the product warrants but business owners and managers need to be confident that the new markets will be profitable and service to current areas will not be reduced.  International selling is exciting and if done properly, profitable.  

Filed Under Business Structure | Leave a Comment  | February 6th, 2010

Business Travel

Do you travel frequently for business?

 

Business travel is very expensive and time consuming.  In today’s environment one might have to wait idly in an airport for three or more hours for flights to attend a half-day or shorter meeting.  If your business travels frequently it might be worthwhile to consider some of the budding technologies for meeting online.  This software is easy to use and affordable. 

 If however, travel is an absolute necessity for your business, try to schedule meetings on unpopular travel days if possible to save time and money.  It might also be helpful to use a rewards credit card to gain valuable travel points for traveling and scheduling multiple meetings during a single trip will also save time and money.  Assessing your business’ travel needs may be an important factor in saving a serious amount of money for the company and time for you or your employees.  

 

Filed Under General Business | Leave a Comment  | February 3rd, 2010