Have a way with words? If you dream of writing for a living, but feel stifled in your everyday job, there are some top home based businesses for writers that you should consider. The demand for good writing is very high, so finding one of the top home based businesses for writers that fits your needs just takes a little digging.
One of the five top home based businesses for writers is being an advertising writer. If you have a flair for writing that sells, then being a copywriter may be your niche. Advertising agencies, private companies, non-profit agencies and more are all looking for someone to sell their products and services through ad copy, making copywriting one of the top home based businesses for writers.
The second of the five top home based businesses for writers involves creating a resume writing service. Not all job seekers have what it takes to create an effective resume, and having a talented resume writer on hand can be a blessing to them. If you find that you have a knack for putting together resumes that get people in the door, then you should take advantage the second of the top home based businesses for writers.
E-book writing and publishing is another of the top home based businesses for writers. In our technology soaked society, you can immerse yourself in the e-commerce boom by writing fiction or non-fiction e-books. The sheer number of topics available is endless. More and more people are looking to purchase their literature on the net, which makes writing e-books another one of the top home based businesses for writers.
Business writing is also one of the top home based businesses for writers, and it can be one of the most lucrative home based businesses. Companies are always looking for writers to create brochures, annual reports, sales letters, direct mail pieces, instruction manuals and more. The fact that there are all kinds of businesses out there means that this is one of the top home based businesses for writers just out of the sheer volume of writing available.
Finally, freelance article writing is another of the top home based businesses for writers. When people think of freelance writing, they most often think of magazine writers, but there are a number of people who will use freelance writers to create articles for their websites, e-zines, magazines, newspapers, newsletters, and more. The sheer volume of periodicals both online and on paper make this one of the top five home based businesses for writers.
Still, no matter what type of writing you love, you need to remember that your writing is your business, and you want it to be one of the top home based businesses out there. Make sure you stay abreast of current trends and hone your writing skills before you take advantage of any of the top home based businesses for writers. In order to sell your work and build your reputation as having one of the top home based businesses, you need to produce quality work on time, every time.
Top Home Based Businesses for Writers
Ease Your Financial Pressures With Business Property Loans
Majority of the population is involved in business today. Business requires capital investment. It is not that easy to run a business without sufficient finances. If you face a situation where you require money urgently, you tend to borrow from outside. Borrowing money from relatives could be embarrassing. Now who can provide you such a huge amount? If you think of taking a loan, you are on the right move.
As you want to invest money into your business, therefore opting for business property loans will be a wise decision. These loans can help you meet the urgency of money.
Business property loans are designed for the entrepreneurs, who want to expand or improve the existing business, raise the operating capital, purchase an asset for the business or start up new projects.
As the name suggests, business property loans are secured against a property. The security can be a worthwhile asset of the entrepreneur. It can be the equity in home, car, business premises or bank statement. The lender has the authority to seize the borrower’s property if the repayments are not made on time.
The borrower has the freedom to draw money ranging from £10000 and £10million. The amount however differs from lender to lender. The rate of interest and monthly installments are decided according to the income and repayment capacity of the entrepreneur.
Business Property Loans are also available for entrepreneurs who are going through adverse financial crisis. If you have witnessed the problem of arrears, defaults, County Court Judgments or bankruptcy, opting for the loan will help you overcome the crisis. If you make a judicious use of the loan by using it for debt consolidation you can not only clear off your multiple debts but also improve your credit score.
While applying for business property loans certain documents are to be presented for the valuation of property. Details like business profile, nature of business, length of ownership, and current income are also important in the approval of business property loans. If the entrepreneur is planning to start up a new venture, he must discuss the business plan with the lender and how will it help him repay the loan.
Numerous lenders offering business property loans exist in the market. Approaching local banks and financial institutions is quite a messy affair. They demand lot of time and efforts. Plenty of documentation work is also there.
An alternative to these physical lenders is the provision of hassle-free online lenders. Online lenders facilitate the entrepreneur with a speedy loan approval. A simple online loan application needs to be filled up. The borrower need not worry about the confidentiality of the information given by him in the application form. It remains secured.
Make best use of your property and avail easy finance. Business property loans are there to ease your financial pressures.
Your Affiliate Business - Peripherals, Software, Computers
I have always been interested in computers, but in the beginning, I would not venture any further than to the software end of learning. However, learning only the software side, and knowing nothing about the hardware side, can open you up to some costly times at the shop.
When I was selling peripherals, I happen to ask my immediate supervisor how he would go about learning the hardware side of computers. He looked at me and flatly stated, "Like I did -- learn by doing – build a computer from scratch".
Well, that is exactly what I did. And I'll give you a tidbit of what I learned and the problems I encountered.
Lessons Learned
1. I tried to put a floppy drive from my old unit into my new unit. I blew up the floppy drive. Lesson learned – do not put outdated computer components into a new system. Duh!
2. Some of the old programs are not compatible with the new operating system. Did cost me some extra money and time.
3. Don't build a new system from scratch – it cost more than a manufactured unit, unless you have money to burn, want to learn more about computers, or you are going to repair computers for a living.
What do you need in a computer?
Since you are going to run your business from your computer – you want to make sure you get the best you can get, at the price you can afford.
1. When money allows, piggyback an additional hard drive onto your primary hard drive for backup. Needless to say, your primary hard drive will not
last forever.
2. CD-ROM – (Self explanatory)
3. Hard drive – Make sure your hard drive has enough memory -- I have several 40 GB hard drives.
4. Floppy drive – good for quick copies of an Excel, Word, etc.
5. Printer – A quality printer. When looking for a printer, make sure it is compatible with the operating system you have and the operating system that is currently out on the market. Why? It saves you time – you may have to look for an upgrade for your printer online for the new operating system – sometimes it's free, sometimes it's not, or sometimes the computer will not support the printer with the new operating systems. They want you to buy a
new unit.
6. Power supply – some suggest that the computer unit should have 300+ voltage to give your operating system a lot of snap.
7. Fans – The new units usually have additional fans to cool the CPU – which will help extend the life of your computer.
8. Networking capabilities – you'll never know when you want to add an additional unit, it's always good to be prepared – and trust me it will happen
eventually.
9. If you have to buy a new operating system, I would suggest going with Microsoft XP Professional. I found it very stable, and less likely to crash.
Suggestions
If you start adding everything up, you will realize that I spent more on a "build it yourself unit" versus that of a complete unit. And the complete unit my friend, is definitely the way I will go from now on.
I have bought several units, and through hard knocks (rebates not received, wrong unit sent – poor customer service) – learned that the best deal that I have encountered was from Dell Computers. They offer different computer units, peripherals, printers, etc. with instant savings on select Dell PCs -- great weekly deals – reasonable prices and honored rebates. Okay, as you can see I'm sold on Dell – if you want to take a closer look you can go to my website
at www.myaffiliateplace.biz to see for yourself what they have to offer.
To conclude, when you buy a computer unit online always be aware of what you're buying, what you will be using it for and with, and where you are buying it and from whom. Sometimes you have to take the hard knocks to learn, which is okay, however, when the hard knocks include an outlay of money – it's always good to have some good advise before making a decision.
Write on your business card
Like the majority of sales people, I visit a huge number of clients and prospects every month, some end up buying some do not, but every single one of them has my business card. I attend business breakfasts, seminars and other networking event in my search for new contacts and ultimately new business, each person I meet also gets a business card.
One day a few years ago I realised that I not only hand out a huge number of cards, but I also receive a fair few myself. I decided to go back through some of the older ones to see if I could find some new prospects. As I started to sift through them I began to realise that most peoples cards are actually meaningless in isolation. Unless you work for one of the few companies who’s name actually reflects what you do, you may as well be writing your telephone number on a piece of paper and forgetting to add your name.
ABC Company
Mr Bob Jones
General Manager
Telephone number
Mobile number
Fax number
Email address
Website
Without going online and looking at every single website I have no idea what the companies do!
Likewise, all those people I had been diligently handing my business card too had every conceivable method of contacting me, written there in black and white, but no idea what I do! It’s my job as a sales person to “put my face about”, make sure I am always contactable and remember as much as I can about all my prospects (with perhaps, a little help from my CRM). My prospects are also everyone else’s prospects, they do not need to remember me, and so they need a little help.
I realised the solution is simple. WRITE ON YOUR BUSINESS CARDS!!!
Here’s the scenario: The prospect gets back to the office one day and is told they need a new supplier for widgets, it’s his job to find one. He remembers speaking to a few suppliers at the seminar but can’t remember exactly who, so he quickly flips through the cards collected, then, he comes across one, he can’t remember the name or the face to match it, but, in nice clear writing it says “Widgets, budget to high end” Who gets invited in for a meeting?
I'm one of those people who guard my business cards at meetings. I don't like meaningless cardboard connections (exchanging business cards without a purpose). I'm put off by someone who says, "Hello, my name is.... Here is my business card, can I have yours?" My suspicion is that I'm going to be put on someone's junk mail list. However, by first striking a chord, you've accomplished something very important in your networking mission -- you've found a reason to extend the relationship beyond the event at which you met.
Not all prospects you meet are going to fit your ideal client (or center of influence) profile. This is especially true for me, since I have a highly specialized niche. Focus your attention on those who meet your criteria. Jot down notes on the back of the card (the reason for the solid connection), and then you'll have a conversation point in which to build your relationship at the next meeting or in your correspondence. Follow up quickly after the meeting by sending information you promised.
The Term "cardboard connection" was coined by Anne Baber and Lynne Waymon authors of "Make Your Contacts Count" www.ContactsCount.com
Turning E-books Into Successful Business Opportunities From Home
If you have spent any time on the internet you have probably come across the phrase “e-book” and you may have even downloaded one. So just what the heck is an e-book and why in the wide world of sports would you want to write one?
An e-book is simply a book whose contents are in an electronic format. With the explosive growth of the internet, e-books have carved out a niche for self-published writers. There are no expensive production costs, no having to dig up a publishing deal and NO REJECTION. You can write what you want and distribute it on your website or someone else’s.
That also means that you are responsible to deliver on the success of your e-book. Your content, the topic(s) that you are writing about should be relevant to something you are knowledgeable about and already has an existing market. Another option is looking for business opportunities in the marketplace that bigger companies are overlooking. For example, the current rage on the internet is online dating, but it is mostly targeted towards young people, what about creating an e-book on successful dating tips for seniors? You could tie in a dating service and all kinds of extras.
The advantages of selling an e-book are hard to beat; no shipping charges, instant download for the customer, instant cash for you and most importantly a source of passive income that works for you even while you sleep. Passive income simply means earnings which you are not actively involved in. Once you have developed your e-book and have a digital distribution method for it, you are no longer actively involved in the operation of it. You can just sit back and watch your bank account get bigger. Go for a trip or on holidays, it doesn’t matter, this will still make money from you even when you are not there.
Now that you have a general understanding of what an e-book is and why creating one can help generate wealth for you and your family, there are some options that you can use to distribute it. You can sell it on a website, have it bundled as a bonus for another product you are selling, or use it as a promotional item like a free course to help build your subscriber list.
If you have a website and you are selling items on it already (e-commerce) than you probably know all about Clickbank at www.clickbank.com. If you do not have a sales mechanism in place, ClickBank is the way to go. They take care of all the credit card sales, they have an affiliate network and they have an existing marketplace for you to add your product. All you have to do is set an account with them and they will generate the HTML code for you to place in your website that allows people to order your product online. Once this is set-up, it is an automatic process, customers order your e-book and ClickBank sends you a cheque.
Yellow Pages Advertising New Business Generating Phone Calls
Yet many small business owners are unsure about how to get the most out of their Yellow Pages advertising. is that business owners shell out more than 11 billion dollars every year on Yellow Pages advertising... Remember, effective Yellow Pages advertising design has only one objective: to bring you new business by generating phone calls. If you've got a local business, make no mistake about it: Done well, yellow pages advertising, while competitive and "tricky" ... Place your business under the Yellow Page advertising spotlight and listen to your phone and cash register sing!
Remember, with Yellow Page advertising you are at a much different point in the sales process the close. Clever headlines can be extremely effective early on in the sales process, but statistically speaking, they don't generate huge Yellow Page advertising response. He is also adamant on the importance of setting an advertising budget before talking with the Yellow Pages sales rep. In all reality, it's just best to ignore any advice your Yellow Pages advertising sales rep might give you.
While the purchase of other advertising media can often be simple and straightforward, the same thing cannot be said about yellow page renewals. If a media, such as the Yellow Pages, loses its effectiveness, I'll shift my client's advertising dollars to a more that is more effective. Finally, consider eliminating your advertisement in the Yellow Pages and placing your money in a more effective advertising media. The Yellow Pages medium provides a powerful return on investment for advertisers and can serve as the cornerstone of an integrated advertising media mix.
If you're advertising now and don't think you are getting the response you should be, talk with your Yellow Pages representative. They may even make the leap and assume that they aren t getting any calls from their Yellow Page advertising program at all. I get calls every week from lawyers saying they're not getting calls anymore from yellow page advertising. I get calls every week from lawyers saying they're not getting calls anymore from yellow page advertising.
http://www.advertising-internet-online.com/advertising-page-yellow/
Supporting Your Spouse As They Begin A Christian Home Based Business
Your beloved spouse comes home from another day at the grind and announces, “I’ve had enough! I’m going into business for myself.” Before you start hoarding food and stashing money in the mattress, stop and pray.
Remember that God is sovereign and that He will provide for you. This new venture may be exactly what God has planned for your life. Surrender your will to Christ and pray. He may give you a peace that calms your fears and alleviates your concerns. Anxiety is a natural reaction to change, but as Christians we are to fight back with God’s truth.
The changes that come about in your spouse may surprise you, especially if they are following a prompting from God to leave the traditional work force. Pray with your spouse and be honest about your feelings. Discuss your excitement over the possibilities that a new business can provide. Vent your frustrations and fears about the changes and instability that will come in days ahead. Keep the communication open, between you and your spouse, and you and God.
This does not mean putting on a smile no matter what happens and ignoring the realities around you. It does mean that you should live beyond your circumstances and trust God. Be supportive of your spouse through the ups and downs. Encourage each other, pray together, talk with other couples who have started a home business together.
Do some research in your spouse’s chosen area of business. Learn the associated jargon. Be familiar with the product or service provided by the business. Make yourself available to help with menial tasks like errands and printing shipping labels. Talk up your spouses’s bravery and professionalism every chance you get. Announce the birth of your new business at church, to your friends and family, to anyone who will listen. Be your spouse’s biggest fan. You will need to be knowledgeable of the business so that you can take calls on busy days and answer questions on the street when approached by curious neighbors and passers by.
Go to the library and research small business management and marketing, condense the books into a divided binder full of notes on the topics your have researched. You can present it to your spouse as a “business warming” gift. This information should be easy to read and condensed down to useful facts. You can even sneak in personal notes of encouragement, scripture verses or inspirational quotes.
Going the extra mile to show interest in what is important to your spouse will help hold you together through the storms of life and will allow you ti build a strong, Christ centered business that can be passed down for generations to come.
You Can Find A Stay At Home Business That Suits You With Three Simple Questions
The ability to stay at home is increasing rapidly as new opportunities appear constantly with positions from sales representative opportunities to customer service and more. Finding the stay at home career that suits you can be as easy as asking yourself three simple questions. What do I truly enjoy doing? What amount of money or what is my budget for this business? What resources and tools do I have at hand that can be applied toward the business? Asking these three questions will allow you to narrow down which field or areas of home business would best suit your interests as well as your personal needs.
Job Enjoyment
If you do not enjoy the job field you are in, over time you will begin to regret your job choice. It will become displeasure to go to work each day. The dissatisfaction of your job will lead to a decline in attitude and personal happiness, which can affect your relationships with family and friends as well as co-workers. Your job performance will also lack due to this feeling of dissatisfaction. Allowing yourself to understand what areas of work or business you enjoy will allow you to enter a job position knowing that this is a career you can perform every day and it will not lead to total dissatisfaction. There are always days where we do not feel like going to work even if we are in a dream job, but an enjoyable position is a must for job longevity.
Business Budget and Income Levels
When entering into a home business you have to take the necessary time required to thoroughly study your budget and income needs. You need to have enough savings to live within the means required to pay your bills, purchase personal items such as food and any other needed items for a minimum of three months. This allows enough time for your business to become established and to provide a flow of income. You also have to understand the required amount of funds needed to begin your business. What is the cost of materials, advertising, web hosting and so on? You want to provide an adequate amount of funding for each area of your business thus allowing a sturdy base for your business to be built upon. The majority of home businesses fail within the first year often due to lack of budgeting.
Resources and Tools
You also have to take the time to consider what tools or resources that you may possibly already have on hand. Consider computers, Internet access and a home phone line. These items are generally already on hand and in use daily. With these three tools you can begin the home businesses building process.
Once you have the answer to each of these questions you will be able to make the most knowledgeable choice for your home business. This will allow you to begin your business by putting your best foot forward on solid ground. Taking the necessary time to prepare for your stay at home job will ensure that your business will thrive and succeed.
Playing politics with NY pension funds
Employee Benefits: How To Handle Them
Many companies offer a variety of employee benefits to their staff in order to keep them satisfied. The types of benefits include, but are not limited to, health insurance, retirement plans, vacation and sick leave. This Financial Guide provides an overview of the types of benefits that businesses provide for employees and what's involved in offering them.
Table of Contents
What Is An Employee Benefit Plan?
Why Offer Your Employees Benefits?
Health, Disability, And Life Insurance Plans
Balancing Cost, Quality And Accessibility
Retirement Benefit Plans
Leave
Perquisites
Flexible Compensation or "Cafeteria" Plans
Employee benefits play an increasingly important role in the lives of employees and their families, and have a significant financial and administrative impact on a business. Most companies operate in an environment in which an educated work force has come to expect a comprehensive benefits program. Indeed, the absence of a program or an inadequate program can seriously hinder a company's ability to attract and keep good personnel. Employers must be aware of these issues and be ready to make informed decisions when they select employee benefits.
Designing the right benefit plan for your employees is a complex task. There are many issues to consider, including tax and legal aspects, funding, and finding the right vendors or administrators.
This Financial Guide describes the basics of an employee benefits program.
Tip: You may want to contact your insurance carrier, broker, or benefits consultant for assistance in designing and implementing your benefit plan.
What Is An Employee Benefit Plan?
An employee benefit plan protects employees and their families from economic hardship brought about by sickness, disability, death or unemployment. It also provides retirement income to employees and their families. And it provides a system of leave or time off from work.
Mandated Benefits
The employer must pay in whole or in part for certain legally mandated benefits and insurance coverage:
Social Security.
Unemployment insurance.
Workers' compensation.
Funding for the Social Security program comes from payments by employers, employees and self-employed persons into an insurance fund that provides income during retirement years. Full retirement benefits normally become available at age 65. For younger individuals the date for maximum benefits is being adjusted to age 67. (These benefits are discussed in more detail in the Retirement Benefit Plans section of this Financial Guide.) Other aspects of Social Security deal with survivor, dependent and disability benefits, Medicare, Supplemental Security Income and Medicaid.
Related Guide: For a detailed discussion of these benefits, please see the Financial Guide SOCIAL SECURITY BENEFITS: How To Get The Maximum Amount.
Unemployment insurance benefits are payable under the laws of individual states from the Federal-State Unemployment Compensation Program. Employers contribute to the program based on total payroll.
Workers' compensation provides benefits to workers disabled by occupational illness or injury. Each state mandates coverage and provides benefits. In most states, private insurance or an employer self-insurance arrangement provides the coverage. Some states mandate short-term disability benefits as well.
Optional Benefits
A comprehensive benefit plan can include the following elements:
Health insurance.
Disability insurance.
Life insurance.
A retirement plan.
Flexible compensation (cafeteria plans).
Leave.
A benefit plan can also include bonuses, service awards, reimbursement of employee educational expenses and prerequisites appropriate to employee responsibility.
Why Offer Your Employees Benefits?
Here are some of the reasons employers offer benefits:
To attract and hold capable people.
To keep up with competition.
To foster good morale.
To keep employment channels open by providing opportunities for advancement and promotion as older workers retire.
A combination of benefits programs is the most effective and efficient means of meeting economic security needs. For many employers, a benefit plan is an integral part of total compensation, because employers either pay the entire cost of a benefit plan or have employees contribute a small portion of premium costs for their coverage.
Health, Disability, and Life Insurance Plans
Employers might offer medical and dental plans, disability benefits, and life insurance.
Medical and Dental Plans
A serious illness or injury can be devastating to an employee and his or her family. It can threaten their emotional and economic well-being. Thus, adequate health insurance is important to employees and is part of a solid group plan.
Group health plans help attract and keep employees who can make your business a success. They relieve your employees of the anxiety of health care costs by providing the care they need before illness becomes disabling, thus helping you avoid costly employee sick days.
Group health plans usually cost less than purchasing several individual policies with comparable coverage. Moreover, there are tax advantages to offering health care benefits: your contribution as an employer may be deductible and the insurance is not taxable income to your employees.
As an employer, you can choose either an insured (also known as an indemnity or fee-for-service plan) or a pre-paid plan (also known as a health maintenance organization).
Traditional Indemnity Plans. An indemnity plan allows the employee to choose his or her own physician. The employee typically pays for the medical care and then files a claim form with the insurance company for reimbursement. These plans use deductibles and coinsurance as well. A deductible is a fixed amount of medical expenses an employee pays before the insurance plan reimburses any more expenses. The average deductible in 2010 hovered around $1,000; however, more and more employers are offering high deductible plans tied to Health Savings Accounts where the average deductible is closer to $2,000. Coinsurance is a percentage of medical expenses the employee pays, with the plan paying the remaining portion. A typical coinsurance amount is 20%, with the plan paying 80% of approved medical expenses. Listed below are the most common types of insurance arrangements (indemnity plans) providing health care to groups of employees.
A basic health insurance plan, covering hospitalization, surgery and physicians' care in the hospital.
A major medical insurance plan, usually supplementing a basic plan by reimbursing charges not paid by that plan.
A comprehensive plan, covering both hospital and medical care with one common deductible and coinsurance feature.
Health Maintenance Organizations. Health maintenance organizations (HMOs) provide health care for their members through a network of hospitals and physicians. Comprehensive benefits typically include preventive care, such as physical examinations, well baby care and immunizations, and stop-smoking and weight control programs.
The main characteristics of HMOs are as follows:
The choice of primary care providers is limited to one physician within a network; however, there is frequently a wide choice for the primary care physician.
There is no coverage outside the HMO network of hospitals and physicians.
Costs are lower, due to limited choice. Physicians are encouraged to keep patients healthy; accordingly, they often are paid on a per capita basis, regardless of how much care the patient needs.
The employer prepays HMO premiums on a fixed, per-employee basis.
Employees do not have to apply for reimbursement of charges, but they may have small co-payments for medical services.
Preferred Provider Organizations. Preferred provider organizations (PPOs) fall between the conventional insurance and health maintenance organizations, and are offered by conventional insurance underwriters. A PPO is a network of physicians and/or hospitals that contracts with a health insurer or employer to provide health care to employees at predetermined discounted rates.
Some of the key elements of a PPO are:
It offers a broad choice of health care providers. Because of the broader choice of providers, PPOs are more expensive than HMOs.
It may have less comprehensive benefits than HMOs, but the benefits usually can meet almost any need.
PPO providers usually collect payments directly from insurers.
Although there is no requirement for employees to use the PPO providers, there are strong financial reasons to do so.
Dental Benefits. Medical insurance frequently includes dental plans. Most plans cover all or portions of the cost for the following services:
Cleaning, x-rays and oral examinations.
Fillings.
Crowns and dentures.
Root canals.
Oral surgery.
Orthodontia (these portion of the cost covered here are generally quite limited, if at all)
Health Savings Accounts. The HSA allows employees to deduct contributions to the HSA even if they do not itemize deductions. The HSA plan allows employees who are covered by a high-deductible health plan to contribute pre-tax amounts that will be used to cover medical expenses or used later for retirement. Qualified amounts contributed to an employee's HSA by an employer can be excluded by the employee. Distributions from the HSA are not taxable as long as they are used for medical expenses.
Disability Benefits
A disability plan provides income replacement for the employee who cannot work due to illness or accident. These plans are either short-term or long-term. They can be distinct from workers' compensation because they pay benefits for non-work-related illness or injury.
Short-Term Disability. A short-term disability is usually defined as an employee's inability to perform the duties of his or her normal occupation. Benefits may begin on the first or the eighth day of disability and are usually paid for a maximum of 26 weeks. The employee's salary determines the benefit level, ranging from 60 to 80% of pay. You, as an employer, may specify a number of days of sick leave paid at 100% of salary. The employee can use these before short-term disability begins.
Long-Term Disability. Long-term disability (LTD) benefits usually begin after short-term benefits conclude. LTD benefits continue for the length of the disability or until normal retirement. Again, benefit levels are a percentage of the employee's pay, usually between 60 and 80%. Social Security disability frequently offsets employer-provided LTD benefits. Thus, if an employee qualifies for Social Security disability benefits, these are deducted from benefits paid by the employer.
Life Insurance
Traditionally, life insurance pays death benefits to beneficiaries of employees who die during their working years. There are two main types of life insurance:
Survivor income plans, which make regular payments to survivors.
Group life insurance plans, which normally make lump-sum payments to specified beneficiaries.
Protection provided by one-year, renewable, group term life insurance with no cash surrender value or paid-up insurance benefit, is very popular. Frequently, health insurance programs offer this coverage.
You should use the same principles for selecting a life insurance program as you do for selecting health insurance. Finding a benefit plan that meets your budget constraints and fills the needs of your employees is crucial. Among the sources to check are:
Your local chamber of commerce.
Independent insurance agents.
Trade associations of your business.
State departments (or commissions) of insurance.
Community business leaders.
Benefit consultants or actuaries.
Service Corps of Retired Executives (SCORE) (affiliated with the U.S. Small Business Administration).
Tip: To reduce risk, select insurance underwriters with top ratings from Best's (Best Insurance Reports: Property-Casualty Ed. and Life-Health Ed. Published annually by A.M. Best Company, Oldwick, N.J.). HMOs and Blue Cross/Blue Shield are not rated by Best, but are regulated by state governments .Please refer to Standard & Poor's Financial Strength Ratings, in order to select the right insurance underwriter.
Tip: Check with other users and state regulators on the history of the particular plan you are considering.
Self-Insurance
Rising costs are prompting small business owners to take a look at a form of health care coverage previously considered an option only for big business: self-insurance. With self-insurance, the business predetermines and then pays a portion or all of the medical expenses of employees in a manner similar to that of traditional health care providers. Funding comes through establishment of a trust or a simple reserve account. As with other health care plans, the employee may pay a portion of the cost in premiums. Catastrophic coverage is usually provided through a "stop loss" policy, a type of coinsurance purchased by the company.
The plan may be administered directly by the company or through an administrative services contract.
The advantages of self-insurance are listed below:
Programs can be flexible. They are designed to reflect employee needs, including medical and dental care, prescriptions and so on.
Mandated benefit laws and state insurance premium taxes do not affect these plans.
The employer retains control over the timing and amount of funds paid into the plan and can manage costs more directly.
Administration of these plans can be more efficient.
Over time, these plans can save money.
The drawbacks to self-insurance include the following:
Health care is costly and heavy claims years may prove extraordinarily expensive.
Commitment for the long haul is necessary to achieve significant savings.
Caution: While insurance can be a viable option for small businesses, it should be undertaken only after careful study.
Balancing Cost, Quality and Accessibility
In summary, when deciding on a health, disability, or life insurance plan, consider what you and your workers want in a plan. Determine all costs associated with the plan. Investigate the quality of potential insurance carriers.
Examine the quality of each plan, including the benefits and restrictions:
Hospital coverage (inpatient care).
Outpatient services.
Physical coverage.
Substance abuse treatment.
Prescriptions.
Check on underwriting and other restrictions that may exclude you from the health plan:
Employee medical histories.
Minimum employer contribution.
Minimum participation by eligible employees and dependents.
Waiting periods.
Proof of employee status.
Purchase of other benefits.
Other limitations - what isn't covered.
Check on the extent to which your company can control costs. This might include prior review of hospital admissions to determine necessity of hospitalization. Or it could mean concurrent review of hospital stays to confirm continuing need of hospitalization.
Management programs for catastrophic cases might be used. These programs arrange for the most cost-effective care.
Questions To Ask Before Signing a Benefits Contract
Who is the insurance company?
Is it committed to small business?
How solvent is it? What is its rating?
What is the carrier's reputation for customer service?
What is the choice of doctors and hospitals?
How does the company manage health care costs?
Who administers the plan?
What information must the employer provide?
How are the employees enrolled?
When Problems Arise
From time to time problems arise with benefit delivery. Patience on the part of the provider, the employer and the employee usually brings a resolution.
Occasionally, unusually prolonged and difficult problems develop that do not yield to resolution. Such instances should be brought to the attention of your state's insurance department or commission, which is responsible for regulating insurance companies.
Retirement Benefit Plans
A financially secure retirement is a goal of all Americans. Since many of us will spend one-fourth to one-fifth of our lives in retirement, it is more essential than ever to begin preparations at an early age. Many financial planners report that an individual requires about 75% of his or her pre-retirement income to maintain the same standard of living enjoyed during one's working years.
Social Security, employer-sponsored retirement programs and personal savings are the three sources of post-retirement income.
Social Security Benefits
Social Security provides retirement benefits for most persons employed or self-employed for a set period of time (currently 40 quarters; about 10 years). Benefits paid at retirement, traditionally at age 65, are based on a person's earnings history. The age at which you can retire at full benefits increases depending upon your current age. For younger individuals full benefits begin at about age 67. Payments may begin at age 62 at a reduced rate or, if delayed beyond full retirement age, at an increased rate.
For a person with earnings equal to the U.S. average, the benefit will be about 40% of pay. For someone with maximum earnings, the benefit would be about 25% of the portion of pay subject to Social Security tax.
Tip: Every worker should understand Social Security retirement benefits. By completing Form SSA-7004, "Request for Social Security Earnings and Benefit Estimate Statement," you can receive a projection of benefits. Forms can be obtained through Social Security Online, local Social Security offices or by calling 1-800-772-1213.
Planning Aid: To obtain an immediate copy of this form, please click on Request for Social Security Earnings and Benefit Estimate Statement.
Employer-Sponsored Retirement Plans
A retirement plan makes good sense and can attract and reward employees. The benefits and tax advantages of supplementing Social Security with a qualified retirement plan are significant.
A qualified plan is one meeting IRS specifications. Currently, such contributions are tax-deductible and earnings accumulate on a tax-deferred basis. In addition, benefits earned are not part of the participant's taxable income until received, and certain distributions are eligible for special tax treatment.
Whether you are a sole proprietorship, a partnership or a corporation (employing many people or only yourself as the owner/employee), there are a wide range of options available. These can range from simple plans, which you establish and maintain, to complex versions, which require an actuary, attorney or employee benefits consultant. If you are active in the business, you can be included as a plan participant. Accountants, banks, insurance and investment professionals, as well as other financial institutions, can provide information on retirement plan products.
Tip: Several provisions of the tax law encourage employers to involve professionals on plan issues. Specifically, the law:
Subsidizes the paperwork costs for small businesses setting up a plan. It grants a tax credit for half the cost up to a credit of $500 a year for each of the first 3 years. Since such costs are already deductible, the deduction (less valuable than a credit) will be for the amount of the expenses less the credit.
Waives (for 5 years) the fees IRS charges for issuing determination letters (rulings) to plan sponsors on the tax status of their plans.
Makes employer-provided retirement planning advice a tax-favored fringe benefit (tax-free to employee and spouse, deductible by employer).
Depending on whether you are a sole proprietor, a partnership or a small corporation, the following plans are available:
Defined benefit - A retirement plan favoring older, more highly paid employees.
Profit-sharing - A flexible plan based on profits and contributions that can be discretionary from year to year.
Money purchase - A method that often favors younger workers. Steady plan contributions are required.
Individual retirement accounts (IRAs) - A simple plan; allowing modest contributions.
Simplified employee pension (SEP) - A plan for small businesses combining features of IRA and profit-sharing plans, offering flexibility and easy self-administration.
401(k) - The most popular plan today for businesses with employees, providing employees with the ability to save for their retirement with pre-tax dollars. Can be at low cost to employers.
SIMPLE Plans - A new type of plan which combines IRA and 401(k) features.
Stock bonus - Benefits in the form of company stock.
Employee Stock Ownership Plan (ESOP) - Another plan based on company stock.
Designing the Right Corporate Plan
Selecting the right pension plan for a corporation results from a process of identifying business needs and expectations, including
Need for flexibility.
Current age of key employees.
Current number of employees and plans for growth.
Maximization of retirement benefits.
Although there are many different types of retirement plan options available to corporations, they fall into two general categories: defined benefit plans and defined contribution plans:
Defined Benefit Plans. With this plan, the benefits an employee will receive are predetermined by a specific formula--typically tied to the employee's earnings and length of service--and indexed for inflation. The law allows a pension of up to $205,000 a year in 2013 ($200,000 in 2012). The employer is responsible for making sure that the funds are available when needed (the employer bears funding and investment risks of the plan).
Such a plan can generally provide larger benefits faster (through tax-deductible contributions) than other plans. The price of providing a higher degree of tax savings and being able to rapidly shelter larger sums of retirement capital is having to meet additional reporting requirements. Defined benefit plans typically cost more to administer, requiring certifications by enrolled actuaries, and insurance payments to the Pension Benefit Guaranty Corporation (PBGC), which may review plan terminations.
Defined Contribution Plans. Also known as individual account plans, defined contribution plans specify the amount of funds placed in a participant's account (for example, 10% of salary). The amount of funds accumulated and the investment gains or losses solely determine the benefit received at retirement. The employer bears no responsibility for investment returns, although the employer does bear a fiduciary responsibility to select or offer a choice of sound investment options.
Tip: Defined benefit plans are typically better for older employees (usually age 45+). For example, these plans can provide the ability to fund for years of employment before the inception of the plan. While some contribution flexibility is available, factors determining the cost of promised benefits (e.g., number and ages of employees, rates of return on investments) will mandate the level of required deposits to the plan.
There are several basic types of defined contribution plans, including (1) simplified employee pension plans (SEPs), (2) profit-sharing plans, (3) money purchase plans, (4) 401(k) plans, (5) stock bonus plans, (6) employee stock ownership plans, and (7) SIMPLE plans.
1. Simplified Employee Pension Plans. A simplified employee pension (SEP) suits many small corporations. It requires no IRS approval, no initial filings and no annual reporting to the government. Although SEPs are called "pensions," they are actually IRAs, except that contributions to them aren't subject to the IRA dollar limits. The total deferral per employee each year can be up to $51,000 in 2013 ($50,000 in 2 indexed for inflation or 25% of his or her annual earnings, whichever is less. There is also a limit on how much of an employee's earnings may be included in the percentage computation.
Contributions must be made on a nondiscriminatory basis to all employees who are at least age 21 and who have worked for any part of three of the past five years earning a minimal amount. Contributions can vary from year to year - you may even skip entire years. To be deductible for a year, contribution must be paid no later than the due date of an employer's income tax return for the year, including extensions. Once made, the entire contribution is owned by the employee.
Tip: Complete specifications for the plan can be found in IRS Form 5305. The form itself serves as the plan document, requiring only the insertion of business name, the checking of three boxes and a signature. The form is not filed with the IRS, but rather copied for all employees and then placed in the firm's files. Many employers instead use plan documents provided by financial institutions.
2. Profit-Sharing Plans. Similar to a SEP, a profit-sharing plan offers the flexibility of making contributions - up to the lesser of $51,000 in 2013 ($50,000 in 2012) or 25% of compensation.
Tip: Alternatively, rather than selecting a percentage, a flat amount (for example, $100,000) could be allocated among eligible employees, generally proportionate to compensation. Historically, contributions could only be paid out of profits; this is no longer required.
Profit-sharing plans differ from SEPs in several distinct ways. An employer can apply a vesting schedule to the company's contributions, based on an employee's length of service with the company after the contribution is made. If an employee is terminated before becoming "fully vested," his or her funds will revert to the plan (reducing future contributions) or be reallocated among the remaining participants. In addition, profit-sharing plans permit the exclusion of part-time employees, and can allow participants to borrow from the plan.
Profit-sharing plans, as all other qualified retirement plans, require the preparation of formal master documents as well as annual tax filings. A standardized master or prototype plan will often satisfy requirements and will typically be less expensive and simpler to set up and operate than an individually designed plan.
3. Money-Purchase Plans. With a money purchase plan, the employer is usually committed to making annual contributions equal to a designated percentage of each employee's compensation. This percentage may not exceed 25% of compensation, with a maximum contribution per employee of $51,000 a year in 2013 ($50,000 in 2012), indexed for inflation. Contributions must be made even in years in which there are no profits.
4. 401(k) Plans. These tax-deferred savings plans have become highly popular in recent years. The basic idea of a 401(k) is simple: it is a profit-sharing plan adopted by an employer that permits employees to set aside a portion of their compensation through payroll deduction for retirement savings. The amounts set aside are not taxed to the employee and are a tax deductible business expense for the employer. Set-asides (called "elective deferrals") for any employee can't exceed $17,500 in 2013 ($17,000 in 2012) indexed for inflation. Elective deferrals don't count in figuring the employer's deduction limits. Thus, the employer's contribution up to the profit-sharing deduction limit plus the elective deferral, are tax-sheltered.
An employer's discretionary matching contribution can provide incentive for employee participation as well as serve as an employee benefit. Employer contributions can be capped, to limit costs, and a vesting schedule can be applied to employer deposits (employees are always 100% vested in their own contributions).
For employees, the opportunity to reduce federal - and often state and local - taxes through participation in a 401(k) plan offers significant benefits. While savings are intended for retirement, certain types of loans can provide employees with access to their funds - employees repay borrowed principal plus interest to their own account.
Caution: Special non-discrimination tests apply to 401(k) plans, which may limit the amount of deferrals that highly compensated employees are allowed to make. To avoid these limits, some employer contribution on behalf of lower-paid employees may be required.
Some employers automatically enroll employees in the 401(k), giving them the right to opt out. After 2007, automatic enrollment arrangements (with right to opt out) can escape the nondiscrimination tests, if certain prescribed minimum employer contributions are made and certain prescribed investment types are available.
401(k)s can allow employee deferrals to go into a Roth account (based on a Roth IRA concept). Withdrawals from an account maintained 5 years or more can be tax-free after age 59 1/2. The amount deferred into the Roth 401(k) is currently taxable (unlike amounts deferred into the regular 401(k)).
Tip: Tax professionals consider that the Roth 401(k) favors high-income individuals. If that describes you, consult your tax adviser on deferring into a Roth 401(k), where this is offered.
5. Stock Bonus Plans. This is similar to a profit-sharing plan. The plan invests in employer stock, which is generally distributed to participants at retirement.
6. Employee Stock Ownership Plans. A special breed of qualified plan, an employee stock ownership plan (ESOP), provides retirement benefits for employees. In addition, an ESOP can be used as a market for company stock, for financing the company's growth, to increase the company's cash flow or as an estate planning tool.
ESOP funds must be primarily invested in employer securities. ESOPs are stock bonus plans or stock bonus combined with money purchase plans. Tax deductible contributions to the plan are used to buy stock for eligible employees. On retirement, the employee may take the shares or redeem them for cash. Complicated rules must be adhered to in the establishment and maintenance of an ESOP plan. Expert advice should be sought.
7. SIMPLE Plans. Employers with 100 or fewer employees can establish "Simple" retirement plans. The SIMPLE Plan combines the features of an IRA and a 401(k). Employees can contribute to the SIMPLE Plan, pre-tax, and the employer must make either a matching contribution for employees who contribute or a contribution for each eligible employee. The limit on the employee's contribution is $12,000 in 2013 ($11,500 in 2012), indexed for inflation. The penalties for withdrawing money from the Simple before age 59-1/2 can be higher than with other plans.
Plans Available to Non-Corporate Employers
Non-corporate employers can adopt any of the plans listed above that corporate employers can, except, of course, those based on stock in the employer corporation (stock bonus and ESOP plans). Defined benefit, profit-sharing, money purchase and 401(k) plans sponsored by non-corporate employers - that is, self-employed persons - who participate in the plans are often called "Keogh" plans.
Contribution limits for unincorporated businesses are the same as for corporate plans of the same type, except for contributions on behalf of the self-employed owner - sole proprietor, partner or LLC member, who for this purpose is treated as an employee. Contributions for a self-employed owner are based on the owner's self-employment net earnings. The contribution ceiling for money purchase, profit-sharing and SEP plans are the same: in effect, 20% of earnings (technically, 25% of earnings reduced by the contribution) up to a maximum contribution of $51,000 in 2013 ($50,000 in 2012, indexed for inflation. For defined benefit plans, a self-employed owner's benefit is based on self-employment net earnings less deductible contributions.
In plans such as 401(k)s or SIMPLEs where employees defer part of their salary, self-employed owners are deferring part of their self-employment earnings. For employees, deferred salary is excluded from taxable pay; for self-employed owners, deferred self-employment earnings are deducted.
Keogh plans, like comparable corporate plans, must be established by the end of the year for which you are making the contribution. Once established, you have until your tax return filing date - including extensions - to make the contribution.
SIMPLEs generally must be established by October 1 of the year they go into effect.
A SEP may be established by the tax return due date, including extensions, for the year it goes into effect. Thus, a plan effective for 2012 can be created in 2013; contributions to that plan in 2013 will be deductible on the 2012 return if designated as for 2012 and made by the 2012 return due date including extensions.
Employee contributions. These are important elements of many employer plans, allowing employees to make their own tax-sheltered investments within the company plan.
In many cases such contributions are "pre-tax"-that is, from salary (reducing taxable pay), as in the case of 401(k)s, SIMPLEs, and certain SEPs, called SARSEPs, formed before 1997. Pre-tax "employee" contributions can also be made by self-employed owners, in which case they reduce taxable self-employment earnings. The ceilings on such contributions are discussed above (SARSEP and 401(k) ceilings are the same).
Additional pre-tax contributions are allowed for participants age 50 or over. The ceiling amount of such contributions, called "catch up" contributions (misleadingly, since the amount or lack of prior contributions is irrelevant), for 401(k)s is $5,500 in 2013 (no change from 2012), for IRAs it is $5,500 (no change from 2012), and for SIMPLE IRAs, the amount is $2,500 (no change from 2012).
Employee contributions may also be after-tax. That is, they are not excludable (where made by employees) or deductible (where by self-employed owners) but still grow tax-free once invested, until withdrawn. The contributions come back tax-free; only the earnings are taxed.
Employee after-tax contributions may be attached to a plan, such as a 401(k), or be to a standalone plan (maybe called a savings plan) for employees' contributions alone, or with some employer match.
Credit for low-income participants. "Lower-bracket" taxpayers age 18 and over are allowed a tax credit for their contributions to a plan or IRA. Credit is allowed on joint returns of couples (filing jointly) with (modified) adjusted gross income (AGI) below $59,000 (up from $57,500 in 2012). Credit is a percentage (10%, 20%, 50%) of the contribution, up to a contribution total (considering all contributions to all plans and IRAs) of $2,000. The lower the AGI, the higher the credit percentage: the maximum credit is $1,000 (50% of $2,000). Head-of-household filers get 75% of the credit allowed on a joint return; singles get 50%. The $59,000 amount and the AGI credit percentage ranges are indexed for inflation.
Credit is allowed whether the contribution is pre-tax (credit is in addition to a deduction or exclusion) or after-tax.
Review plan decisions. There have been a number of recent law changes, especially in the already popular 401(k).
Those lacking tax-favored retirement plans should give plan adoption a new look. Those with such plans already should review the options, and what's required to take advantage of them. Professional guidance is essential and, as pointed out above, encouraged by the law.
Individual Retirement Accounts. An employer may establish IRAs for its employees to which the employees contribute, though this is not usual. An employer may establish IRAs for employees within an employer plan. But virtually all IRAs are set up by the individual worker, employed or self-employed (occasionally for the worker's spouse) without involvement of any employer.
An IRA is a tax-favored savings plan that allows workers to make contributions with pre-tax dollars (where deduction is allowed, see below) and defer taxation on earnings until retirement.
There are several limitations to IRAs:
The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,500 or the amount of your taxable compensation for 2013 (up from $5,000 in 2012). This limit can be split between a traditional and a Roth IRA but the combined limit is $5,500. If you are 50 years of age or older before the end of 2013, the maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,500 or the amount of your taxable compensation for 2013.
Contributions may be made only up to age 70 1/2.
The account holder may not use funds to purchase life insurance or collectibles (except gold or silver coins issued by the U.S. Government).
IRA contributions up to the ceiling are deductible if neither the taxpayer nor his or her spouse is covered by a corporate or unincorporated retirement plan. Deduction is limited (phases out) at prescribed income levels (which increase each year) where the taxpayer is covered by a plan or where (using higher levels) the taxpayer's spouse is covered though taxpayer is not. Nondeductible contribution is allowed in other cases, and nondeductible contribution is allowed to Roth IRAs subject to income limits. Also, low-income taxpayers are allowed the up-to-$1,000 tax credit described above (under Employee Contributions) for IRA contributions.
Related Guide: For details on Roth IRAs and how they compare to other retirement IRAs (called traditional IRAs), see the Financial Guide: ROTH IRAS: How They Work And How To Use Them.
Where to Get Pension Information
The variety of plans and related regulations are numerous. You should consult with your professional advisors regarding which options are available to you and which one best first your company's needs.
Questions To Ask Before Finalizing a Pension Plan
Does the plan require a given level of contribution each year?
Do the plan provisions (eligibility, hours of service and vesting of employer contributions) meet current and future needs?
What are the costs of establishing and administering a plan and trust, including providing annual employee reports?
What investment options are offered?
Are there any loads (charges) associated with deposits (front-end charges) or surrenders (rear-end charges) from the plan?
Can - and should - employees make individual investment selections? What types of reports do participants receive?
Leave
The old concept of "two weeks with pay" has given way to a wide variety of paid and unpaid leave plans for all businesses. Among the typical options are
Annual leave.
Holidays (national and state).
Sick leave.
Personal leave (birthday, other reason of choice).
Emergency leave.
Compassionate leave (funeral, family illness).
Religious observance.
Community service (voting, jury duty, court witness, National Guard, Civil Air Patrol, volunteer fire department).
Education/training.
Leave without pay.
Leave of absence (paid or unpaid).
Parental (formerly maternity) leave.
In a strict sense, paying people for not working is a costly, unprofitable concept. However, time off from the grind is a tradition of the American workplace, and rightly so. Benefits can far outweigh costs. Among the many benefits for the employee are rest, relaxation, a new perspective, travel, pursuit of hobbies and release from daily tensions. The employer also benefits - the employee returns refreshed from the break in daily routine, possibly with new ideas and renewed energy for doing a better job. Employers also can observe the performance of employees in new situations, as they fill in for their vacationing coworkers, potentially leading to better allocation of work force talents.
Eligibility for Leave
In determining employee eligibility for leave, an employer must find the answers to many questions, including the following.
How much paid leave time can the company afford per year?
How many categories of leave should there be?
Can employees carry over unused leave from one year to the next? If so, how much?
Are there leave rights during probation?
Who gets first choice of dates in scheduling annual leave? How are conflicts resolved? By seniority?
Can employees borrow leave in advance?
At what point does extended/borrowed paid leave become unpaid leave and extended/borrowed unpaid leave become unemployment?
Are employees eligible for more leave after a certain number of years with the company?
Employers must determine when eligibility for leave begins: immediately? After the first year? Many employers establish a paid annual leave schedule by declaring employees eligible for so many hours leave after they have worked a specified number of hours; for example, two hours leave for every 80 hours worked or one day for so many weeks worked.
Tip: Limits on sick and other leave are vital. You should restrict sick leave to illness or medical examinations and treatment. It must not become an extension of annual leave. Accordingly, it is wise to reserve the right to require physician certification of an illness.
Although the vast majority of employees will not abuse time allowed for compassionate, emergency or other leave categories, clear policies should be established on requesting such leave and on its duration.
Budget Considerations
Granting paid or unpaid leave is a costly benefit. Depending on the nature of an employee's work, you may need to require overtime from other employees or hire temporary employees to cover the absence. Extended leave situations pose special problems.
Questions To Ask Before Finalizing a Leave Plan
Is the business open on all holidays? If not, on which ones?
If the business is open on holidays, do you work with full or limited staff, paying them double time as may be required by law?
How many hours/days are allowed as leave for voting, jury duty, religious observance, funerals, etc?
How are insured benefits handled during unpaid leave?
Which state laws affect leave?
Perquisites
While all employees are usually eligible for benefits such as health and other insurance, retirement plans and leave, key employees have come to expect certain additional benefits related to their increased levels of responsibility. Among the perquisites (perks) employers may want to consider for top performers and key, or even all, employees are:
Company automobile.
Extra vacation.
Special parking privileges.
Personal expense accounts.
Spouse travel on company business.
Sabbaticals (with pay).
Professional memberships.
Professional publications.
Loans/mortgages.
Estate planning.
Legal services.
Medical expense reimbursement.
Physical examinations/health screening.
Physical exercise facilities.
Executive dining room.
Matched donations to universities, colleges and/or charities.
Tuition programs.
Dependent day care (on- or off-site).
Merchandise discounts.
Holiday gifts.
Employee assistance programs (EAPs) (substance abuse, debt, interpersonal relationships, psychological, financial, other types of counseling).
Service awards.
Credit unions.
Like basic benefits, perquisites help attract and keep good employees. You can balance the far higher cost of providing some perquisites with expectations of increased production from the employees who benefit.
Key employees responsible for generating contacts for new business should receive consideration for company automobiles, personal expense accounts, professional memberships and publications, club memberships, spouse travel on company business, credit cards, home entertainment allowances, end-of-year bonuses and sabbaticals.
Sales staff responsible for keeping current customers satisfied should receive consideration for company automobiles (if needed for their duties), credit cards, personal expense accounts, professional memberships and publications, sales commissions, spouse travel on company business and end-of-year bonuses.
All employees should receive consideration for EAPs, physical exercise facilities (if you have them), parking, tuition programs, dependent day care, holiday gifts, service awards, credit unions, matched donations to universities, colleges and/or charities, physical examinations or health screenings when offered and merchandise discounts.
Tip: Offer legal services and loans and mortgages on a case-by-case basis. Some perquisites, such as extra vacation, should be given only as a reward for extraordinary service to your company.
You may want to consider employer-employee cost sharing of such pre-requisites as physical exercise facilities, dependent day care, parking and, perhaps, some health screening services.
Before beginning any program of perquisites, check current tax law for treatment of each item:
Can you, as the employer, deduct it as a business expense?
Will it become taxable income for your employee?
Flexible Compensation or "Cafeteria" Plans
To accommodate today's many variations in family relationships, life-styles and values, flexible compensation or "cafeteria" benefit plans have emerged. In addition to helping meet employee needs, cafeteria plans also help employers control overall benefit costs.
The idea behind cafeteria plans is that amounts which would otherwise be taken as taxable salary are applied, usually tax-free, for needed services like health or child care.
Example: Employee John earning $60,000 allocates $4,000 of salary to cover health care costs through a cafeteria plan. John is taxed on $56,000; the $4,000 is tax-free. Had John taken the full $60,000 and paid $4,000 of health care costs directly, he would have paid tax on the full $60,000, probably with no offsetting medical expense deduction.
Besides saving employee income and social security taxes, salary diverted to cafeteria plan benefits isn't subject to social security tax on the employer. With a cafeteria plan, employees can choose from several levels of supplemental coverage or different benefit packages. These can be selected to help employees achieve personal goals or meet differing needs, such as health coverage (family, dental, vision), retirement income (401(k) plans) or specialized services (dependent care, adoption assistance, legal services (legal services amounts are taxable)).
Careful planning and communication are the keys to the success of flexible compensation. Employees must fully understand their options to make choices of greatest benefit to them and their families. Both employers and employees must fully understand the tax consequences of the various options.
Keeping Current on Benefit Plans
The government has certain requirements for qualified pension or profit-sharing plans, as well as for most health and welfare plans. It is essential for you to stay current on developments that may affect your plan. Even small changes in tax laws can have a significant impact on your plan's ability to help you and your employees achieve your goals. Information on these requirements is available from the IRS and from qualified accountants and financial advisors.
Communications
Once you've implemented a benefits program, you'll want to tell your employees about it. Good communication is important in enabling employees to use the plan effectively and to appreciate the role of benefits in their total compensation.
Benefits orientation should be part of the orientation of a new employee. You can use newsletters, staff memos or employee meetings with audiovisuals to announce plan changes or answer employees' questions.
Planning Pointers
Before you implement any benefit plan, you should ask yourself some questions:
How much are you willing to pay for this coverage?
What kinds of benefits interest your employees? Do you want employee input?
What do you think a benefits plan should accomplish? Do you think it is more important to protect your employees from economic hardship now or in the future?
Is a good medical plan more important than a retirement plan?
Do you want to administer the benefits plan, or do you want the administration done by an insurance carrier?
What is your employee group like today? Can you project what it might look like in the future?
You now have some basic benefits information as well as the basic questions that need answers before you go benefit shopping for your employees.
Tip: If you are serious about offering your employees a satisfactory benefit plan, the next step may be to contact an insurance broker or carrier, the local chamber of commerce or trade associations. There may be off the shelf products that will suit your needs. A benefit consultant or actuary can help you design a specialized benefit program.
An adequate benefit program has become essential to today's successful business, large or small. With careful planning you and your employees can enjoy good health and retirement protection at a cost your business can afford.
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