December 2011
W-2 & 1099 Information

Small Business Blog

Brought to you by Steve Strauss

December 2011

Top ways to avoid legal hangovers this holiday season

Between parties, shopping, time off, and goofing off, it's a wonder any work gets done this month at all. And while that respite from the regular grind is a welcome change for employees, employers need to be vigilant, especially with regard to that time-honored event - the office holiday party. Consider these statistics:

  • 79% of employers plan to hold office parties,
  • 60% plan to serve alcohol, and
  • Nearly 40% of employees have either embarrassed themselves at a holiday party or know someone who has

Yet even so, about one quarter of all employers have no policy on alcohol consumption at work-related events. And that can be dangerous. I recently spoke about this issue with Rosemary Gousman, the managing partner at the New Jersey offices of Fisher & Phillips LLP, one of the country's top firms when it comes to employment law.

According to Ms. Gousman, the smart business will take the following steps to make sure their holiday party is safe for all involved, including the employer:

  1. Create an Event Planning Team. It is important to have at least one supervisor who is sensitive to potential issues as an active member of the team. Equally importantly she says, "train team on company policies, including complaint system, harassment, etc."
  2. Carefully Choose the Venue and Entertainment: Ms. Gousman says that while it is less expensive to host party in office, it can increase the legal risk. Also, as you choose a place, avoid venues that might tarnish the company's reputation or are not comfortable for and welcoming to all employees.
  3. Consider Timing: "The later in the day or evening the event, the more prevalent the serving of alcohol, and the more likely inappropriate and unsafe behavior will occur."
  4. Be Sure to Invite Spouses and Significant Others as it encourages appropriate behavior if they attend. "Inter-office flirtations are less likely."
  5. Consider Steps to Avoid Alcohol-Related Mishaps: For instance, you might want to:
    • Have drink tickets
    • Avoid an open bar or serving hard liquor
    • Have designated drivers
    • Get a licensed bartender, and
    • Offer food and soft drinks
  6. Consider the Religious Aspects of the Events: It is wise to not only consider the timing of religious holidays when planning the event, but also, avoid religious aspects in your party.
  7. Communicate About Behavior Expectations for Event: Let people know what is considered acceptable use of alcohol and make sure everyone understand that driving under the influence of alcohol is not tolerated. Similarly, you should explain that your office has zero tolerance of discrimination or harassment.
  8. Consider Avoiding Gift Giving: "Gifts have the potential of being perceived as romantic," she says, and gag gifts may be offensive to some.

While this may sound like a lot of "don'ts", the important idea is that you can offer your staff a fun holiday party and protect your business from potential liability with just a little extra planning and communication.

Downsized? The secret to becoming a successful consultant

In this tough economy, one option people may be looking at in the new year is becoming a consultant. And that makes sense as it is a low-cost, potentially high-profit business. Essentially, there are four types of consultants:

  1. Executive coaches assist clients, with a variety of business issues - everything from human resources to accounting, to time-management to success strategies.
  2. Expert consultants help resolve problems within a specific area of expertise because of the consultant's experience, training, and education.
  3. Process consultants assist clients with business methodologies - creating a business plan for instance.
  4. Project consultants help on a particular project, such as writing a grant or conducting a survey.

But just having a background in the industry is usually not enough to successfully hang a consultant shingle and be successful. What many consultant's have found is that the secret ingredient, the way to increase their value to their clients and thus the amount they can charge, is to obtain extra training and get additional work-related certificates.

Think about it. Why do businesses hire consultants? Because consultants bring an expertise and perspective to the table that regular employees do not. Well, one of the best ways to increase your value to both current and prospective clients alike is to distinguish yourself by becoming even more exceptional, more invaluable. Increased training does that.

The more you can say, "I am the only person you are interviewing who . . ." the more distinctive you become, the more you can charge, and the more money you will make.

Take the case of my pal Jeremy, an executive who dropped out of MBA School many years ago to take an attractive job with a Fortune 500 firm. But after 10 years on the job, he was laid off. Jeremy then decided to become a marketing consultant, and thereafter worked for some of the same companies he had worked with earlier. But without the cache of his former employer behind him, Jeremy found that he consistently could not make enough money. So he went back to school at night and finished his MBA. While it took him two years, after it was over, he became a very highly sought-after marketing consultant.

In The Seven Habits of Highly Effective People, author Stephen Covey calls this "sharpening the saw," and he uses this analogy: "Suppose you were to come upon someone in the woods working feverishly to saw down a tree.

'What are you doing?' you ask.
'Can't you see?' comes the impatient reply. 'I'm sawing down this tree.'
'You look exhausted!' you exclaim.
'How long have you been at it?'
'Over five hours,' he returns, 'and I'm beat! This is hard work.'
'Well why don't you take a break for a few minutes and sharpen that saw?' you inquire. 'I'm sure it would go a lot faster.'
'I don't have time to sharpen the saw,' the man says emphatically. 'I'm too busy sawing!'

By attending adult education courses at your local community college, by attending a training and getting a certification, by going to seminars and workshops, by finishing up that degree, you are sharpening the saw. Not only will potential clients see how sharp your saw is, but they will not be surprised or dismayed (well, at least not much) when you charge commensurate fees to go along with your increased stature and value.

Cutting health insurance costs

As President Obama's health care law winds its way through the court system, and as the law is not yet due to take full effect for some time, small businesses are still left wondering what to do about ever increasing health care costs.

Making matters worse is the fact that, unlike some larger businesses, small businesses usually don't have the capacity to absorb significant healthcare-related cost increases. While a larger business may have the margins to be able to pass such expenses onto their customers, small businesses usually don't. So what are you to do?

There are options, although none of them are all that attractive. Some are better than others, but in all honesty, these days too many options for reducing health care costs relate to cutting benefits or shifting costs onto your employees. While that may help you keep costs down, it doesn't make for a happy workplace, so while I list a couple of those options below, they should be the options of last resort.

The first and easiest thing to do is shop around. For example, www.ehealthinsurance.com is a good site for comparing health plans. Also, speak with your insurance agent. The plan you bought a few years ago may have cheaper alternatives today. By shopping around, you can compare quotes for scores of different plans.

Beyond shopping, here are some other ways to reduce your health care costs:

  • Cut out the extras: If your plan offers dental and vision for example, you may want to consider reducing those. Your employees will still be covered in the areas where it really counts. No, I certainly do not enjoy advising you to cut employee benefits, but I also understand that health care costs are a major concern for many small businesses, and cutting benefits is better than cutting jobs.
  • Increase visit and prescription co-pays: The higher the co-pay, the lower the premium.
  • Create a Medical Savings Account (MSA): MSAs are like medical IRAs. Pre-tax dollars are deposited into these accounts and the earnings are tax-free while sitting in the account. MSAs must be created in conjunction with an IRS qualified "high deductible" health plan. What is a high deductible? It can range from roughly $1,500 for an individual upwards of $5,000 for a family. Once the amount saved in the MSA reaches these levels, the employee can use these pre-tax dollars to pay for what is typically a much lower cost health plan.
  • MSAs are a relatively new option and have several things in their favor. They lower your premium. The savings for your employee are tax-deductible and earnings are tax-free. Medical expenses paid out as a result are tax free. And, upon a disability or the age of 65, the funds saved can be taken out and used for anything, without penalty (although taxes will finally come due at that point.)
  • Join a health purchasing alliance. This is another recent phenomenon that can reduce your premiums while offering employees options. Here, instead of joining one health plan, you join a ready-made alliance of many health plans all of which are being jointly administered. Because they are all competing for your healthcare dollars, you get the best possible prices, and are able to shop for various coverage options under one roof. No, none of these are perfect. Whatever you choose to do, it is important to know that employees consistently rank "health care benefits" as the most important extra benefit they get from employment. So as you make your choices, you must weigh carefully your need to rein in costs against your employees' needs for adequate health care.

Year-end business reviews

I recently saw a survey that said that, while many small business owners are busy with increased sales and demands during the holidays, what they would prefer to spend their time on right now is year-end administrative tasks like getting final bills out and planning for next year.

It's not hard to understand why. Planning makes sense. I find that thinking about and discussing the year in review is actually a good first step in planning for next year. It helps you see whether you got to where you wanted to go, and if so, why, and if not, why not. It enables you to step back and look at what seems to be working and not working and thus to make adjustments as necessary.

A good year-end review will also allow you to:

  • Review last year's plan for this year (if you have one) and see how closely it was followed. Why was it followed, or why wasn't it followed? Was that smart?
  • Decide whether you put your time, energy, and resources towards the right goals. How successful were you in reaching those goals? Why or why not?
  • Look at where you have been to see where you are going.

We find the review process always useful because it allows us to take a step back from the business and look at the big picture. Many small business people get so caught up in running their business on a day-to-day basis that they fail to see the forest from the trees. But it is precisely this sort of big-think that can make all the difference. An annual year in review can become your time to do just that.

But don't just take it from me. Here's another pretty successful entrepreneur who famously engaged in a similar activity:

Twice a year, when he was CEO of Microsoft, Bill Gates engaged in what he called his "Think Week." These seven-day events found him holed-up alone in a secluded cottage in the Pacific Northwest, contemplating the future of technology, his business, its work, and so on.

His employees were encouraged ahead of time to draft white papers for Gates to review and peruse. Reading as much as 18 hours a day, Gates' record for one week is 112 such papers. And it worked. For instance, inspired during Think Week 1995, Gates ended up drafting a paper called "The Internet Tidal Wave," directly leading to the creation of Microsoft's Internet Explorer and eventually, Microsoft's .NET framework.

So business review and preview can take any form you want it to take. Maybe it's a group meeting for a half a day in the conference room, maybe it's a weekend at the shore with your partner, and maybe it's a week alone in the rainy Northwest. The important thing is to think big, think about what works best, and noodle a bit on how you could make more money and have more fun in the process next year.

That sounds like a process that could create some resolutions worth keeping.