Archive for December, 2009

Small Business Forecast for 2010? Uncertainty Certainly Lies Ahead.

Wednesday, December 30th, 2009

Current reports indicate economic growth in the 3rd and 4th quarters and continuing improvements as we move into 2010. However, despite some early optimistic views of 2010,  current research clearly shows that small and medium sized businesses, are taking a “wait and see” approach when making strategic decisions regarding expansion, hiring and other business expenses.

The Bad News

Lagging economic indicators like employment rates are still dismal. National unemployment rates are over 10% (in California it is 12.3%) and the Federal government has created great uncertainty with continuous discussion of health reforms, interest rates, and small business lending. This turbulence directly affects many companies’ management who require stable market conditions to make intelligent business decisions. The overall sentiment is that the recession is not quite over and pessimism prevails among many small business owners.

Looking at the Bright Side

On the other hand, the Labor Department said in early December that although employers continued to shed jobs in November, they only cut payrolls by 11,000 jobs, the fewest since the recession began in December 2007. The department also said the average workweek rose and the temporary-help sector expanded for the fourth month. Aside from the silver lining in the slowing tide of job losses, leading indicators like the stock market are also telling a happier story. Last January the Dow Jones Industrial Average was under 9000. Today, it trades well over 10,000. Significant market movement can be seen as a predictor of the overall direction the economy is headed.

What does this mean for Small Business?

With all the uncertainty 2010 offers, it is clear that small employers must continue to find ways to reduce costs, increase productivity, and look to rebuild lost talent. However, with all the demands of digging out of 2009, many multiple-hat wearing owners find the prospects daunting. One of the hottest trends throughout the recession is Human Resources Outsourcing. HR Outsourcing firms have the internal staff and know-how to assist small companies in all three of the above-mentioned areas. And they can it quicker, simpler, and more cost-effectively than a small business could do on their own. In our next posts we will review how HR Outsourcing firms can assist in these three areas.

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Sexual Harassment Training a Must-Have for Employers

Tuesday, December 22nd, 2009

Despite great strides to combat sexual harassment over the past decade, the problem continues to plague the workplace, as recent,  high-profile cases illustrate. Just this month for example, actress Liza Minnelli settled a 100-million-dollar sexual harassment lawsuit filed by her former chauffeur, M’Hammed Soumayah, who accused Minnelli of beating him  and forcing him to sleep with her. A confidential agreement between Soumayah and the singer was reached. This case illustrates that no individual or organization is immune to sexual harassment, and that companies must do more to educate their managers and staff.

California Assembly Bill (AB 1825)

Over two and a half years ago, commencing January 1, 2005, a California Assembly Bill (AB 1825), was signed into law requiring all California employers with 50 or more employees to provide two hours of sexual harassment training for supervisors, managers and lead employees every 24 months. Employers also have a responsibility under California law to provide workplace harassment prevention training to non-supervisory employees as well. However, that very same year, the EEOC received close to 13,000 charges of sexual harassment, with the average costs recovered in monetary benefits increasing dramatically. In 2006, total monetary compensation paid out in sexual harassment related cases exceeded $48.8 million, which was 31% higher than the $37.1 million paid out in 2004.

While common wisdom, and the law, would dictate employers would begin training their staff on proper behavior in the workplace, the reality doesn’t match up. According to a recent study by TrainRight Solutions, 41 percent of U.S. employers still don’t provide preventive training for sexual harassment, with cost the leading factor for ignoring education in this area.

Employer Responsibility

The Supreme Court deems training “essential” and the EEOC guidelines state that it is the responsibility of all employers to train all employees. Respect in the workplace, when properly demonstrated, can not only boost employee moral and productivity, but can greatly reduce the potential liabilities of an employer. Legal experts agree that the more pro-active an organization, the more likely they will reduce their employment liabilities.

Many HR consulting and outsourcing firms provide answers and assures employers that taking preventive measures is the right approach. Helping companies establish appropriate policies and deal with complex sexual harassment issues is key to minimizing employer risk.

Sexual Harassment Training is a Must

A comprehensive Sexual Harassment training course should cover the following topics:

* The laws that prohibit unlawful harassment in the workplace
* Specific forms of harassment
* How to prevent harassment and hostile environments
* Identify retaliation and why it is illegal
* The rights and responsibilities of all staff members
* Consequences of harassment suits
* What to do in the even of a harassment charge
* How to conduct an investigation

While at first glace it may appear that implementing sexual harassment guidelines may be costly, employers should recognize the higher expenses related to fines or penalties for an ill-educated workforce. And aside from protecting the business for lawsuits, training the staff on preventing unlawful harassment is just the right thing to do.

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Key Human Resources Outsourcing Drivers

Monday, December 21st, 2009

As we complete a turbulent 2009 , small employers are looking for ways to reign in costs and prepare for recovery in 2010. One of the hottest trends in the small business environment today is Human Resources Outsourcing.  According to Hewitt Associations, a world-wide provider of HR consulting services and research data, the most common reason for engaging an HR Outsourcing firm is to reduce overhead. This is accomplished by accessing the HRO firms’ economies-of-scale in areas such as insurance products, HRIS infrastructure, or payroll systems.

Size Counts.

Economies of scale are the primary method through which an HRO firm can reduce a business’ operational costs. By pooling hundreds, and even thousands of businesses, HRO firms aggregate health benefit plans, retirement plans, workers’ compensation insurance, and legal expertise. Additionally, they can manage routine HR tasks more efficiently as the talent and infrastructure is already in place. When a small business joins the HRO firm, they simple access these existing programs at reduced rates and a minimal time investment. They can jump onto the HRO’s programs and platforms with little start-up time or expense, and can hit the ground running.

Other reasons to outsource human resources include:

  • Access to outside expertise
  • Improving service quality
  • Ability to focus on core expertise
  • High cost of remaining up-to-date with rapidly changing environments
  • Eliminate high volume of low-value transactional activities
  • Reduce Management distractions away from core business
  • Leverage existing staff to focus on key competencies
  • Reduce transaction costs

The HR Outsourcing R.O.I.

Studies indicate that once HR operations are outsourced, many companies show a strong return on investment. IDC, a global provider of market intelligence, conducted a survey of American executives and reported that almost 85 percent of the respondents saved as much as they spent on outsourcing. Over a quarter reported a savings of twice as much. And the savings, according to nearly 95 percent of the respondents, went toward operational performance and innovation.

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Telecommuting – 5 Tips for Creating an Effective and Well-Balanced Policy. Part 2.

Thursday, December 10th, 2009

In our last post, we reviewed the Pros and Cons of permitting employees to telecommute. Telecommuting is a great way to increase productivity and save the company money; however, there can be some risk, so finding the right balance of benefit and risk is crucial.  Here are 5 tips for managing telecommuters, which can help ensure that the telecommuting experience is a productive and successful one.


1.     Have clear guidelines for the telecommuting program.

The guidelines should indicate to employees and managers what the criteria are for selecting telecommuters, how to request consideration as a telecommuter and what the requirements are for ongoing participation.  You should also have a “telecommuting contract.”  Include hours the employee is expected to be available by phone or e-mail, times the employee will need to report in to the office, equipment that will be provided by the employer, safety issues, performance expectations, training, etc.
2.     Clarify the “ground rules” for the telecommuting relationship

Telecommuters must be measured on results and the attainment of established goals.

3.     Have a formal training program

Training of both telecommuters and their managers is essential.  Training should focus both on the technical aspects of telecommuting (how to use the equipment, etc.) as well as the relationship aspects (how and when to contact the office).

4.     Make your expectations clear

Be clear and specific about your expectations in terms of the output you expect from telecommuters.  Consider ways that you can quantify the deliverables you will expect.


5.     Communicate!  Provide frequent and constructive feedback

Since telecommuters are away from the office and not part of the informal communication and feedback process that often takes place between managers and employees, it is important to establish formal channels and processes for providing feedback on performance.

A well crafted and balanced telecommuting policy can go a long way in establishing a positive working relationship with your staff, saving your company money, and increasing corporate productivity and efficiency. If you require assistance in creating a policy, please contact our Human Resources Consulting department to schedule an appointment.

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Telecommuting Continues to Grow… But has its Risks – Part 1.

Tuesday, December 8th, 2009

In light of  a difficult economic year, more employers are embracing the idea of employees spending at least some of their working hours out of the office. Telecommuting makes both financial, and motivational, sense. In our next two posts we will review the recent statistics, why employers and staff would consider telecommuting, and how to create a policy that will help the employee, and protect the employer.

Telecommuting Statistics

  • The number of Americans who worked from home or remotely at least one day per month for their employer (“employee telecommuters”) increased from approximately 12.4 million in 2006 to 17.2 million in 2008. A 39% 2 year increase and 74% increase since 2005. [1]
  • In 2008, nearly nine out of 10 (87 percent) said they telecommuted from home, up from roughly three out of four in 2006. [2]
  • Five million employees work from home most of the time, another seven million do so at least once a month. [3]
  • 50 million U.S. workers (about 40% of the working population) could work from home at least part of the time yet, in 2008, only 2.5 million employees (not including the self-employed) considered home their primary place of business.[4]

There are numerous reasons why employees and their managers would take advantage of a telecommuting policy. However, with these benefits, come risks.

Pros of Telecommuting for Companies:
1.    Improves employee satisfaction.  People are tired of the rat race, eager to take control of their lives, and want to find a balance between work and life.  A growing number of employees would choose telecommuting over a pay raise.

2.    Reduces attrition. Losing a valued employee can cost an employer in the tens of thousands.  The annual cost of employee turnover in the United States is a staggering $5 trillion[5].

3.    Decreases unscheduled absences. A large percentage of employees who call in sick, really aren’t. They do so because of family issues, personal needs, and stress.  Unscheduled absences could cost employers’ thousands of dollars per employee/per year.

Cons of Telecommuting for Companies:
1.    Management mistrust. Most managers say they trust their employee, but a small percent say they’d like to be able to see them, just to be sure. Company culture must embrace the concept of telecommuting at all levels.

2.    It’s not for everyone. For some, social needs must be addressed. Telephone, email, instant messaging are a solution for some. Innovative answers such as virtual outings and online games can be creative resolutions.

3.    Career Visibility.  Successful telecommuting programs overcome the ‘out of sight, out of mind’ issue with performance-based measurement systems, productivity versus presenteeism attitudes. Telecommuters who maintain regular communications (telephone, email, instant chat, even the occasional face-to-face meeting) with traditional co-workers and managers find career impact is not an issue.

In our next post we will review the steps required to create a well-balanced and risk free telecommuting policy.

Sources:

[1] Telework Research Network, http://undress4success.com/research/people-telecommute/

[2] [3] Gartner Dataquest Telecommuting Forecast for 2009

[4] BrightHub, “Telecommuting Trends in the 2009 Economy”, August 11, 2009

[5] www.talentkeepers.com

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Government Announces Plans to Crackdown on Illegal Independent Contractor Usage

Monday, December 7th, 2009

If you are like most employers, the chances are you use Independent Contractors. Employers engage the services of Independent Contractors (IC’s) instead of employees for numerous reasons. Mostly, to save money on a range of employment costs, such as:

  • federal and state tax,
  • workers compensation insurance,
  • unemployment insurance,
  • employee benefits,
  • overtime, vacation and sick pay.

However, now more than ever, employers must be aware that federal and state lawmakers are beginning to crack down on employers who hire ICs that do not meet the strict IRS requirements.

What are the guidelines to be an Independent Contractor?

The following are excerpts from the IRS website, Section 762 – Independent Contractor vs. Employee:

  • Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means.
  • Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. This includes:
  1. The extent to which the worker has unreimbursed business expenses
  2. The extent of the worker’s investment in the facilities used in performing services
  3. The extent to which the worker makes his or her services available to the relevant market
  4. How the business pays the worker, and
  5. The extent to which the worker can realize a profit or incur a loss
  • Type of Relationship covers facts that show how the parties perceive their relationship. This includes:
  • Written contracts describing the relationship the parties intended to create
  • The extent to which the worker is available to perform services for other, similar businesses
  • Whether the business provides the worker with employee–type benefits, such as insurance, a pension plan, vacation pay, or sick pay
  • The permanency of the relationship, and
  • The extent to which services performed by the worker are a key aspect of the regular business of the company

Government crack-down

As the government is looking for ways to bring in revenue in a down-economy, they are paying serious attention to the losses incurred by the usage of ICs. Reports estimate the misuse of ICs lowers income tax revenues by about $4.7 billion annually. In Illinois, for example, the  University of Missouri–Kansas City Department of Economics estimates that from 2001 through 2005, the state lost $124.7 million PER YEAR year in income taxes as a result of IC misclassification by employers.

In August, Congress began reviewing several bills that tighten restrictions on the use of ICs and exact tougher penalties on employers who bend the rules. The IRS also announced plans to randomly audit six thousand businesses nationwide to curb abuse.

Don’t take shortcuts

If your company engages the use of ICs, don’t let the lure of bypassing a few tax and insurance dollars distract you from the real-life risks at hand. You should take the time to seriously review your IC relationships and determine if they do, in fact, match the IRS guidelines. If you are uncertain where to begin, there are professional human resource outsourcing and consulting firms that specialize in these employment relationships and can guide you to make the right decision for your company.

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