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  • No matter the size of your company, a 401(k) can play a pivotal part in a competitive benefits package. Only 48% of businesses offer some form of retirement savings plan for their employees, which makes starting a 401(k) plan all the more enticing for an enterprising business owner.

    Of course, it’s not always clear how to set up a 401(k) or profit sharing plan for your small business. Offering a retirement saving and investing plan takes a few steps, but the results can have a major impact on both your employees and your company. It’s time to break down what it takes to set up the right 401(k) for your company.

    Why Should My Small Business Offer a 401(k) Plan?

    Before you set up a 401(k) for your small business, it’s important to know why it makes sense for your company. There are several key reasons to offer this sought-after benefit.

    Attract and retain talent

    Arguably the most obvious benefit of offering a 401(k) plan is that it makes your business more competitive in the hiring market. Charles Schwab reports that 88% of job seekers named a 401(k) plan as a “must have” benefit when considering a position. That desire for a retirement plan not only makes your business more attractive as a landing spot, but also adds another way to keep your current employees satisfied.

    Improve your employees’ morale

    A 401(k) can stand as more than just a financial benefit. The act of giving your employees a retirement savings plan serves as a symbol that you value their future with your company—and beyond. 73% of Americans named their finances as the top cause of stress in their lives. By offering a 401(k), you can show employees that you care for their quality of life, which can help make them more productive and appreciative.

    Tax-deductible perks

    Another potential advantage of offering a 401(k) plan is that they can help out during tax season. First off, the IRS states that any “elective deferrals and investment gains are not currently taxed,” which means that you and your employees can enjoy tax deferral until those funds are distributed. Employers can also deduct any matching contributions up to the annual limit on their federal income tax return.

    The Four Steps for Setting up a 401(k) for a Small Business

    Once you’re ready to establish a 401(k) plan, there are some initial actions you’ll need to take for your business. This four-part process will help you go from identifying the right type of plan all the way through executing your new 401(k).

    Step One: Choose A Plan That’s Right For You

    Once you decide to offer a 401(k), it’s time to determine which type of plan is right for your business. There are many types of plan designs that offer different contribution features or advantages. This amount of flexibility allows you to determine how contributions work, create eligibility requirements and vesting schedules, and decide on whether or not to contribute to these plans. These plans include:

    • Traditional 401(k)
    • Safe harbor profit sharing 401(k)
    • Simple 401(k)
    • Roth 401(k)

    Traditional 401(k)

    The traditional 401(k) plans are arguably the most flexible option available. The plans give employers a lot of freedom in terms of profit sharing options, vesting schedules, and more. Through a traditional 401(k), employers can:

    • Contribute directly to all participants’ plans.
    • Match employees’ deferral amounts (or a portion of the deferrals).
    • Provide both contributions and matches.
    • Offer none of the above.

    Any contributions employers make can be subject to a vesting schedule, giving employers added flexibility. These schedules determine how long an employee must work for your company in order to keep part or all of your company’s contribution.

    Another key part of traditional 401(k) plans is that they are subject to non-discrimination tests with the IRS. These tests are designed to prevent businesses from favoring certain employees over others. Every year, the IRS will test traditional plans to see if the deferral percentage and actual contribution percentage don’t favor highly compensated employees key employees such as an owner. As such, you’ll need to meet these testing requirements to prevent your 401(k) from failing IRS guidelines.

    Safe harbor 401(k)

    Safe harbor plans are similar in nature to traditional plans, with the biggest difference being that safe harbor plans are not subject to the IRS annual contribution testing. In exchange for eliminating these non-discrimination tests, employers are required to make contributions to employees’ plans. In addition, many safe harbor 401(k) plans require these mandatory contributions to fully vest when they’re made.

    SIMPLE 401(k)

    If your business has fewer than 100 employees, you can also opt to offer what’s called a SIMPLE 401(k). This type of plan is also exempt from nondiscrimination testing, but does limit some of the flexibility of other plan types. For example, your business cannot offer any other types of plans and all contributions must be fully vested. SIMPLE plans also require employees to make one of the following types of contributions.

    • A matching contribution up to 3% of each employee’s pay.
    • A non-elective contribution of 2% of each eligible employee’s pay.

    Roth 401(k)

    Another option available to business owners when setting up a 401(k) is a Roth account. Roth accounts function much in the same way as a regular 401(k), except that all contributions are taxed before they’re deposited. The main advantage of this type of plan is that account owners don’t need to pay any taxes on withdrawals, including all of the investment earnings.

    Step Two: Find the right team for your 401(k) plan

    When learning how to set up 401(k) for a small business, an essential requirement is partnering with the right providers for your business. There are many different aspects of a 401(k) plan that makes it nearly impossible for business owners to do everything by themselves. That’s why these plans can involve a variety of partners, including:

    • Recordkeepers in charge of processing withdrawals and tracking contributions, earnings, losses, plan investments, expenses, and benefit distributions.
    • Advisors who help you select and maintain plan investments and potentially oversee the money management of the plan.
    • Plan administrators who handle document preparation, transaction approval, compliance filing, and other behind-the-scenes tasks.
    • Payroll providers who tie your payroll process to plan contributions and paycheck deductions.

    With the right team, business owners can successfully implement a 401(k) plan. However, that doesn’t necessarily mean that multiple providers for each role. Small businesses can choose to work with multiple vendors or find a partner like a Professional Employer Organization that can oversee and manage most, if not all, of the setup and administration for your plan.

    Step Three: Start Your New 401(k) Plan

    Now that you have the plan type and partnerships in place, it’s time to make your 401(k) official. The IRS requires businesses to take some basic actions to officially establish and run a 401(k) plan.

    Create a plan document

    Every 401(k) plan needs to start with a written document. According to the IRS, this document should serve as “the foundation for day-to-day plan operations.” In short, the document should lay out the various rights, benefits, and features of your plan. These details include:

    • When your employees are eligible for the plan.
    • A breakdown of profit sharing and employer matching (if applicable).
    • Guidelines on vesting schedules.
    • The process for handling distribution.
    • Relevant contact information for providers and internal company resources.

    Set up a trust

    The next basic action involves having any plan assets held in a trust. This step ensures that these assets only benefit the participants of the plan. Your business must assign at least one trustee to the plan. This individual or group is tasked with handling plan activities such as contributions, distributions, and plan investments.

    While this step may seem simple, it’s critical to have the right trustee in place. Trustees’ decisions will have a direct impact on your plan’s financial health, so you’ll want a person or people in place who you can trust with the financial integrity of the plan.

    Record maintenance

    Businesses are also required to set up an accurate recordkeeping system for their plans. This system should track and properly attribute several key details, including:

    • Contributions
    • Earnings and losses
    • Plan investments
    • Expenses
    • Benefit distributions

    Another reason recordkeeping systems are important is that they can help your business stay compliant with the Federal government. Every year, businesses must prepare and file an annual return/report for their 401(k) plans. The recordkeeping system makes it easier for you and your team to prepare these reports.

    Inform participants

    The final action for setting up your small business’ 401(k) plan is to notify eligible employees about your plan. This information should include key details about your plan’s benefits and requirements. These efforts should include providing employees with a summary plan description (SPD) that shares key information and discloses fees. You can also opt to provide additional information, such as education about the advantages of a 401(k) plan and employees can get the most value out of them.

    Step Four: Ongoing Maintenance

    Setting up a 401(k) for a small business is a big accomplishment, but it’s not the end of the process. An ongoing 401(k) plan requires additional work to keep it successful and compliant. These responsibilities include:

    • Regular plan maintenance
    • Ongoing nondiscrimination testing
    • Government filings
    • Employee assistance

    Find the Right Partner to Help You Set Up and Maintain Your Small Business’ 401(k)

    Let’s face it – setting up and maintaining a 401(k) plan can be an overwhelming, time-consuming process. That’s why GMS partners with small businesses to offer an attractive 401(k) or profit sharing retirement plan without the added time and hassle. GMS not only saves you time by managing your setup and ongoing maintenance, but also reduces plan costs by leveraging the group buying power as a PEO.

    Ready to set up a fully customizable retirement savings plan for your business? Contact GMS today to talk to our experts about how we can support the financial health of your employees through our large-scale 401(k) plan.

    Already a GMS client? Sign up for a 401(k) through GMS now through Aug. 31 and we’ll waive the admin fee for the rest of 2021-22! Reach out to your account manager or Tom Smith (TSmith@groupmgmt.com) to set up an appointment.

  • A healthy and efficient workforce is an important part of any successful business. In environments where workplace injuries are more common, it’s absolutely essential.

    According to the Bureau of Labor Statistics’ most recent occupational injuries and illnesses survey, the manufacturing industry accounted for “15% percent of all private industry nonfatal injuries and illnesses.” Manufacturing safety meetings are a great opportunity to educate your employees on key safety guidelines and practices. With the right information, your company can help protect people from injuries, stay compliant, and reduce workers’ compensation costs.

    8 Essential Safety Topics for Manufacturing Companies

    When it comes to safety topics for the manufacturing industry, there are a variety of subjects that you should discuss with your employees. Here are eight key topics that your company should highlight at the next manufacturing safety meeting.

    Slips, trips, and falls

    The potential for slips, trips, and falls is arguably the biggest threat for manufacturing employees. OSHA estimates that these falls account for more than a third of fatal workplace injuries, making it a major priority for any manufacturing company. There are a variety of reasons for slips, trips, and falls in the workplace, including:

    • Wet or uneven surfaces
    • Ladders that are defective or set up improperly
    • Dangerous weather conditions
    • Crowded workspaces
    • Poor lighting
    • Human error

    While you can’t prevent every slip, trip, and fall, you can use safety meetings to educate employees about proper safety precautions. Train every employee on how to identify potential hazards and use protective equipment and fall protection systems. That education will not only help employees stay aware, but also know what to do to protect themselves and your business.

    Fire hazards

    A single fire can put both lives and property at risk. Your next safety meeting should highlight how fires start and what employees can do to prevent them. Start by breaking down relevant OSHA codes designed to protect against fire hazards. Employees should also learn about how they can adhere to any state or local fire safety laws to stay compliant and limit the chances of a fire.

     

    You should also educate workers about what to do in case a fire ever breaks out at your facility. Have an evacuation plan for your employees so that they know how to get to safety. Make sure that your employees know the following details:

    • The locations for any fire extinguishers and other prevention equipment and instructions on how to use fire protection devices.
    • The locations of all exits at your facility.
    • Available evacuation routes.

    Hazardous materials

    The presence of hazardous materials can create a number of safety issues. Safety meetings are a tremendous opportunity to educate employees about the dangers of hazardous materials and proper procedures when dealing with these substances.

    To start, share guidelines on how employees should label, handle, and store hazardous materials. Let employees know where they can access safety data sheets for any onsite chemicals. You should also give employees a thorough rundown on proper waste management. This discussion should include details on the following subjects:

    • Relevant hazardous waste regulations
    • Waste determination
    • Accumulation limits
    • Waste pickup procedure

    Finally, employees need to know next steps in case a spill, leak, or other form of exposure occurs. Discuss what can happen in these events and how to act quickly in these emergencies. If you really want to give employees some experience, you can perform a simulated emergency to help workers practice how to respond to potential spills and leaks.

     

    Safety equipment and Personal Protective Equipment 

    Personal protective equipment (PPE) won’t help if your employees don’t know how to use it – and that’s if they use it at all. The first step of this process is to ensure that your employees and acknowledge that using or wearing safety equipment and PPE is mandatory. As long as you make this equipment available to employees at no cost of their own, they must use safety masks, reflective vests, and any other safety gear.

     

    Of course, having that equipment and knowing how to properly use it are two different issues. Use your safety meeting as an opportunity to educate employees about how to properly wear, use, and store equipment. Employees should also know how to identify and report any equipment issues issues and next steps for disposal and replacement.

     

    Machine guarding

    According to OSHA, unguarded and inadequately guarded machinery leads to “18,000 amputations, lacerations, crushing injuries, abrasions, and over 800 deaths per year.” It’s essential to put the proper safeguards in place and educate employees about the dangers that industrial equipment can pose. Make sure that employees are aware of the risks associated with improper machine guarding and take the following steps to limit the potential for user error:

    • Train employees on how to correctly use any industrial equipment and follow proper procedures.
    • Review the machine guarding controls in place at your facility, which can include barriers, two-hand trips, and other safety measures.
    • Conduct a full walkthrough of your facility or facilities to highlight controls and potential risks.

     

    Lockout/tagout procedures

    Certain industrial equipment can release hazardous energy sources whether they’re in use or not. Educating employees about proper lockout and tagout procedures will help ensure that workers know how to safely depower machinery and limit the potential for workplace injuries.

     

    Use your manufacturing safety meeting to stress just how important it is to control hazardous energy and follow proper maintenance and service protocol at all times. If you don’t already, make sure you have written lockout/tagout procedures for every machine and present them during the meeting. While the exact procedures can vary, the following steps represent a typical process for lockout/tagout:

    1. Notify any employees who are affected by lockout/tagout.
    2. Shut down equipment in accordance to proper procedure.
    3. Isolate the energy source.
    4. Attach the appropriate lockout device.
    5. Release or restrain any energy stored in the machine.
    6. Verify the lockout with the proper personnel.

     

    Electrical safety

    Anytime equipment generates electricity, there’s a chance that someone can get electrocuted. Electrical accidents can range from minor shocks to major fires and fatalities. Regardless of the danger level, you’ll want to talk with your employees about these hazards.

     

    It’s important that employees don’t underestimate potential electrical safety threats. While electrical machinery is a more obvious hazards, exposed wires or improperly used power strips are also an issue. The following topics can help ensure that employees know how to behave around electrical equipment and why safety is so important.

    • Electrical safety requirements and procedures in the workplace.
    • Why electrical safety-related work practices are critical.
    • How to identify potential hazards.
    • The different types of electrical injuries.

     

    Ergonomic work areas

    It’s easy to overlook the importance of workplace ergonomics, but this topic plays a direct role in limiting injuries and stress. Both laborers and office team members can directly benefit from adapting processes, environments, and instruments around their physical needs. There are a variety of ways that you can educate employees about safe workplace ergonomics, including the following subjects.

    • Correct lifting techniques and best practices to handle repetitive motion.
    • Stretches and exercises that can help minimize physical risks when bending, lifting, or twisting.
    • Ways to adjust computer monitors, equipment, and other items to improve posture and avoid neck and back pain.
    • Proper posture to prevent long-term issues.

     

    Protect Your Business Through Manufacturing Safety Meetings

    Proper safety training can go a long way toward making your workplace safer and more efficient. However, it’s not always easy for small business owners to conduct these meetings and stay ahead of safety and compliance risks alone.

     

    Group Management Services partners with businesses to reduce risk and create a safer, more efficient work environment. Our experts can assist you with onsite consulting, jobsite inspections, accident and injury investigations, training, and safety education. Along with learning how to run a manufacturing safety meeting, you can also sign up for one of our workplace safety courses. Contact GMS today to talk to our experts about how we can make your business simpler, safer, and stronger with manufacturing safety training.

  • You don’t need to run a big business to be a target for litigation. Small businesses across the country are targets for potential lawsuits, especially when it comes to wage and overtime compliance.

    Wage and hour litigation has grown into a major hazard for employers. Employees can pursue litigation if they feel that they weren’t paid for their work. These types of claims can stem from a variety of factors – an employee worked overtime that wasn’t approved, someone clocked in early when they weren’t supposed to, etc. These claims can wreak havoc on your business, so it’s essential to protect your business from these disputes.

    Why is Wage and Hour Litigation a Growing Trend?

    While wage and hour lawsuits have been around for decades, they’ve become more prominent in the past few decades. Fair Labor Standards Act (FLSA) lawsuits increased by a staggering 417% between 1997 and 2017, and the stakes have grown even higher in recent years due to complicated labor regulations and the impact of COVID-19.

    The Department of Labor’s Wage and Hour Division (WHD) has dedicated more time in recent years to achieve compliance with labor standards. The WHD conducted more outreach events in 2020 than any other year in history, capping off a three-year stretch of increased efforts. More employees also reached out to the WHD, as evidenced by the following numbers.

    • The WHD received more than 9,000 phone calls per day, an 350% increase from their previous average.
    • The WHD website received more than 45 million views since the passage of the Families First Coronavirus Response Act (FFCRA).
    • The WHD collected an average of $706,000 in back wages for workers per day in 2020.
    • WHD investigations in 2020 found that employees were owed an average of $1,120 in back wages.

    COVID-19 also created some new challenges for wage and hour compliance. More businesses were forced to have employees work from home, making it difficult for some employers to diligently track hours and account for overtime as they would have before.

    How to Protect Your Business from Wage and Hour Litigation

    Simply put, employers need to be increasingly careful about wage and hour violations. Even a small timekeeping error or miscommunication can turn into a lengthy, costly dispute. 

    Here are some ways that you can protect your business against these lawsuits.

    Keep accurate employee payroll records

    Clean, accurate payroll documentation is a critical aspect of running a compliant business. The (FLSA) requires businesses to keep accurate payroll records for non-exempt employees, many of which can help you make your case if you ever face a wage and hour lawsuit. Some of those records include:

    • Time and day of week when employee’s workweek begins
    • Hours worked each day
    • Total hours worked each workweek
    • Basis on which employee’s wages are paid (e.g., “$9 per hour,” “$440 a week,” “piecework”)
    • Regular hourly pay rate
    • Total daily or weekly straight-time earnings
    • Total overtime earnings for the workweek

    It’s also important to maintain these records for extended periods of time. Payroll data should generally be stored for at least three years in case of future litigation or if the Department of Labor (DOL) ever wants to review your business.

    Audit your timekeeping practices and adjust policies as necessary

    One of the simplest ways to protect your business is to review your timekeeping practices. Maintaining outdated or poorly defined practices can lead to unpleasant surprises when it comes to wage and hour law. As such, you’ll want to audit your practices and make the necessary changes to help your business avoid any issues.

    A good place to start is to review the Society for Human Resource Management’s (SHRM) checklist for various timekeeping practices. This checklist highlights a few different issues that can clean up your practices and establish more definitive methods for timekeeping. Of course, there are some notable risk areas that you’ll need to address as well.

    Establish a timekeeping policy and communicate it to employees

    It’s essential to set some ground rules to makes sure everyone is on the same page about your timekeeping policy. Employees should have a clear understanding of how your timekeeping policy works and what they should do when it comes to recording time. For example, you may want to highlight the following policies.

    • Require employees to record and verify all time worked.
    • Break down what counts as hours worked (such as training and travel time).
    • Put controls in place to prevent employees from clocking in early without prior approval.
    • Prohibit off-the-clock work.
    • Clearly state that overtime must be pre-approved by a supervisor.

    You’ll also want to have your employees review and sign documentation that they acknowledge your practices. This measure will not only educate employees on your policies, but also serve as a key compliance document to defend your business against some off-the-clock claims.

    Avoid rounding for timekeeping if possible

    It’s not uncommon for employers to round hours during payroll, but that doesn’t mean it’s the safest approach. According to the DOL, “employee time from 1 to 7 minutes may be rounded down, and thus not counted as hours worked.” The problem with this approach is that it can still open your business up to legal grey areas. SHRM found that “courts have ruled in favor of employees where the employer’s rounding policy worked only to the employer’s advantage or failed to average out over time.” Some states also have their own rules for rounding time, adding an extra dimension of complexity to the issue. 

    This grey area is why pay to the punch is the gold standard for timekeeping. This approach will not only help your company identify exactly how long your employees worked, but also avoid these potential complications that can lead to wage and hour lawsuits.

    Invest in payroll technology

    These days, a manual timekeeping system is just going to hold you and your company back. Whether you use paper records or some other form of offline time tracking, these methods are inconsistent and time consuming. That combination is only going to make matters worse if your company is ever hit with a dispute.

    Payroll technology is designed to simplify timekeeping and keep your business compliant with wage and hour regulations. Cloud-based timekeeping tools like GMS Connect offer a variety of key advantages for small business owners. 

    For example, timekeeping software makes it easier to track exactly when employees clock in and out for work and avoid issues with rounding. Technology also helps you streamline payroll management, giving you real-time calculations of employees’ pay and allowing both you and your employees to access schedules, hours, and other details from anywhere with a secure connection.

    Work with payroll experts

    It’s not easy to manage payroll for a small business. A simple timekeeping mistake can lead to a serious compliance issue that turns into a lawsuit. That need for payroll expertise is exactly why small businesses shouldn’t face these threats alone.

    GMS partners with small businesses to help them take control of their payroll administration. We can provide your company with a comprehensive web-based payroll solution to not only keep your business compliant, but also save you both time and money. You’ll also have access to a dedicated GMS payroll processor and other experts who can answer your questions and help you stay on top of new regulations, state laws, and timekeeping trends.

    As a Professional Employer Organization, GMS is here to make your business simpler, safer, and stronger. Contact GMS today about how we can help you with payroll administration and other critical HR functions.

  • Your small business’ benefits package takes on added importance as it gets harder and harder to attract and retain top talent. While group health insurance may dominate headlines in terms of what job seekers want in a new role, it’s not the only health care benefit employees want. 

    Ancillary insurance can play a pivotal role in making your workplace more enticing for both job candidates and current employees. However, some businesses may see supplemental benefits like dental and vision insurance as less important than other offerings. Let’s break down how ancillary insurance works and why your small business should offer these benefits.

    What are Ancillary Benefits?

    By definition, ancillary insurance is a secondary health care benefit that’s typically purchased in conjunction with major medical coverage. These supplemental benefits are meant to enhance your existing health coverage and give employees more support for their overall well-being. Employers can also offer ancillary insurance in a couple of different forms.

    • Voluntary benefits – Employees pay 100% of ancillary premiums, but have access to lower premiums by being part of a group plan as opposed to purchasing a policy as an individual.
    • Employer-contributory benefits – The employer pays at least half of the premiums.

    While dental, vision, and life insurance are the most well-known ancillary benefits, they’re not the only options for small businesses and their employees. Ancillary benefits can also include any of the following options to enhance your benefits package.

    • Long-term care
    • Cancer and critical illness
    • Hospital indemnity and intensive care
    • Accidental death policy
    • Long-term and short-term disability

    Why Small Businesses Should Offer Vision Insurance and Other Ancillary Benefits

    Simply put, employees care about ancillary insurance. One survey asked 2,000 people to choose between a higher-paying job and a position with more attractive benefits. A whopping 88% of those individuals said that they would consider taking a lower-paying job that had better health, dental, and vision insurance – and that doesn’t even take into account the other ancillary benefits that would make your benefits package even more enticing. 

    Adding ancillary insurance for your small business not only makes your benefits package more competitive, but also shows your employees that you care about them. A little peace of mind can go a long way, so giving your employees access to ancillary insurance can save them from worrying about getting contacts or scheduling their next dentist appointment. 

    That added emphasis on your employees’ well-being can also have a direct impact on the future of your business. Employees who feel valued and are happy at work are likely more willing and able to contribute to your company’s success. That increased employee engagement can lead to a plethora of benefits for your business, including:

    • Improved retention – Businesses with engaged employees reduced employee turnover by 90%, according to Gallup.
    • Increased productivity – That same Gallup report found that engaged employees were 17% more productive.
    • Reduced absenteeism – Gallup also learned that engaged employees missed work 37% percent less than unmotivated workers.
    • Greater profitability – According to Inc., a 10% increase in productivity can increase profits by $2,400 per employee per year.

    Another major advantage of offering ancillary benefits is that they can help your employees stay healthy. Vision insurance is a great example for this. Poor vision and eyestrain will not only negatively impact your employees health, they can have a direct impact on job performance as well. 

    According to the American Optometric Association, dry eye disease can reduce employee productivity by 20 to 25%. Offering vision insurance and other ancillary benefits can go a long way toward keeping your employees happy, healthy, and productive.

    Work with a PEO to Offer Competitive, Cost-Effective Ancillary Insurance

    Running a small business is no easy task. There are countless administrative burdens that rest on your shoulders, and managing your benefits offerings is one notable example. Fortunately, you don’t have to deal with employee benefits administration alone.

    Group Management Services works with small business owners to help them offer and manage quality benefits packages and save valuable time. As a Professional Employer Organization (PEO), our greater buying power allows you to offer competitively-priced group health plans and ancillary options on a mass level, even for at-risk employers or small groups.

    Partnering with GMS also means that you have a dedicated resource that’s here to help. We’re always looking for ways to improve your offerings, which is why we recently switched our vision provider to VSP to ensure that you and your employees have the perfect ancillary benefits for your business. In addition to our new vision provider, we continue to offer additional benefits to our clients, including Metlife Auto & Home coverage. We also have a team of experts on hand to answer your questions and guide your through any HR hurdles you may face in the future.

    Ready to make your business more competitive? Contact GMS today about how we can support you and your employees with ancillary insurance and other HR services. Already a GMS client? Contact your account manager to learn more about VSP and our vision plans.

  • As a small business owner, you’re in charge of making many critical decisions that impact your employees. Determining which benefits and employee perks you offer is one choice that plays a direct role in attracting top talent and retaining key members of your company.

    These days, health insurance is a major sticking point for new and current workers. The Society for Human Resource Management (SHRM) found that nearly half of employees ‘said health insurance was either the deciding factor or a positive influence in choosing their current job.’ That willingness to choose jobs based on health insurance makes a competitive benefits package even more important for a growing business.

    Of course, offering health insurance is also a notable expense for a small business trying to grow. Fortunately, the small business health care tax credit allows qualifying organizations to offset some of those costs and provide quality health insurance for their employees. Here’s what you need to know about this tax credit and whether it can help your business.

    Which Small Businesses Qualify for the Health Care Tax Credit

    While any business that offers health coverage would love to save money, the IRS does set some stipulations for which organizations will benefit from the tax credit. Your business will need to meet the following criteria to be eligible for the small business health care tax credit. 

    Your business must have fewer than 25 full-time equivalent employees

    Full-time equivalent (FTE) employees are typically counted as those who meet “an average of 30 hours of service per week for a calendar month or at least 130 hours of service in a month.” Any employee that performs services for your business would normally be counted, but the IRS requires employers to alter this calculation for the tax credit.

    Instead of counting 30 hours per week as one FTE employee, the health care tax reviews hours from an annual perspective. One FTE employee for the tax credits equals approximately 2,080 hours per year. Any part-time employees who combine to equal more than 2,080 hours would count as one FTE employee in these calculations.

    The IRS asks employers to not include the wages and hours worked by certain types of employees toward their 25 FTE employee limit. These individuals include:

    • The owner of a sole proprietorship
    • Any partner in a partnership
    • Shareholders of S Corporation owning more than 2%
    • Owners of more than 5% of the business or other businesses
    • Family members of the above
    • Seasonal employees who work 120 or fewer days per year

    Your business’s average wages must be lower than $56,000 per full-time equivalent

    In addition to meeting FTE requirements, your business must also meet certain wage thresholds. The IRS set the average annual wages at $50,000 back in 2014 and have adjusted the amount each year for inflation. As of the 2020 tax year, businesses must pay average wages of less than $56,000 to FTE employees to qualify for the tax credit. 

    Your business must offer a qualified health plan

    Any organization that wants to be eligible for the small business health care tax credit is required to offer a qualified health plan through a Small Business Health Options Program (SHOP) marketplace. There are also certain areas where a qualified health plan may not be available through SHOP. In those cases, an eligible business may still be able to claim the credit.

    Your business must pay health insurance premiums through a “qualified arrangement”

    According to the IRS, a qualified arrangement means that employers pay at least 50% of any premium costs for enrolled employee’s health insurance coverage. This arrangement only extends to costs incurred by those employees, meaning that any costs incurred by family or dependents do not affect the 50% threshold.

    How Much Can Organizations Receive from the Small Business Health Care Tax Credit?

    The exact amount of credit your organization receives depends on two main factors:

    • Whether your organization is tax-exempt or not
    • The size of your organization

    Eligible smaller businesses can receive a tax credit that covers up to 50% of the premiums paid for by the employers. Meanwhile, eligible employers who are tax-exempt can max out a 35% tax credit. This credit is available to both types of employers for two consecutive taxable years. Small business employers are able to carry that credit either forward or back as well.

    Of course, those numbers represent the maximum tax credit for your business. The exact amount your business can receive is based on a sliding scale where smaller employers will receive larger credits. According to the IRS, your maximum allowed credit will be reduced if you employ more than 10 FTE employees or have average wages of more than $25,000 (subject to change due to inflation).

    How to Claim the Tax Credit

    If your small business is eligible for the tax credit, you should fill out Form 8941 to calculate that credit. The IRS provides a detailed PDF with instructions on how to list your employees, their total hours, and how much you paid them. Meanwhile, tax-exempt organizations can file Form 990-T for their credits.

    How to Invest in the Right Benefits Package for Your Small Business

    Whether you qualify for a tax credit or not, it’s difficult to balance rising premiums and providing quality health care coverage that helps you attract and retain top talent. Fortunately, Professional Employer Organizations (PEO) like GMS make it possible for you to provide top-tier coverage at affordable prices.

    As a PEO, GMS is a natural fit for health insurance administration. We represent hundreds of businesses and can leverage our greater buying power to keep premiums down and give you access to quality plans at cost-effective prices. GMS also gives you and your employees access to experts who can help you stay on top of regulatory changes and educate group members about how to best use your plans.

    Let’s face it, benefits administration is confusing and time consuming. GMS helps you invest in quality, cost-effective coverage and allows you to reclaim your valuable time. Contact GMS today about group health insurance and ancillary benefits that makes sense for your small business.

  • Employee layoffs are never easy, but factoring in the unemployment claims process can add even more stress and confusion to the situation. Unemployment benefits are designed to protect employees from unexpectedly losing a source of income. As an employer, you have certain responsibilities regarding unemployment, from maintaining accurate employee records to paying unemployment taxes. 

    Because these benefits can impact your business’ tax rates, it’s essential to understand these responsibilities and how small business unemployment claims impact your business. Let’s break down how unemployment insurance works and what you can do to manage future unemployment claims.

    How Does Small Business Unemployment Insurance Work?

    Unemployment insurance, also known as unemployment benefits, is a short-term, state-provided benefit that provides money to eligible employees who have lost their job. The specific eligibility requirements for employees can vary by state or due to COVID-19 unemployment insurance relief measures. However, eligible employees typically need to meet the following requirements.

    • They must have been an employee.
    • They lost their job through no fault of their own (e.g. if an employee was fired because of poor performance, they would not be eligible).
    • They should be completely or partially unemployed (an employee is considered partially unemployed if they worked less than a full week at the time they lost their job).
    • They’ve worked enough hours and earned enough wages in their base period, which is the first four of the last five quarters. For example, employees in Ohio are eligible for unemployment benefits if they’ve worked for at least 20 weeks and earned an average weekly wage of $247 during the base period. However, these specific requirements can vary by state.

    When an employee is laid off, they can file a claim to receive unemployment benefits. If the claim is approved, the employee will receive weekly payouts. The amount they receive is based on the state’s budget and how much they earned at their previous employer. 

    What are Small Business Owners’ Responsibilities Regarding Unemployment?

    The best way to be fully prepared for an unemployment claim is to understand your responsibilities as an employer. There are three key responsibilities that you’ll have as an employer.

    • Paying Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) taxes
    • Properly classifying employees
    • Keeping accurate and detailed employee records.

    Unemployment taxes

    Although small business unemployment insurance is a benefit provided by the state, employers fund this benefit with their taxes – even when they don’t have any unemployment claims against them. As a small business owner, it is your responsibility to pay a variety of taxes, including FUTA and SUTA taxes. 

    Federal Unemployment Tax Act (FUTA)

    The FUTA tax rate is 6%, which is applied to the first $7,000 in each employee’s wages – up to $420 per employee. However, filing your Form 940, the form used to report your annual FUTA tax, may allow you to receive a credit of up to 5.4%. This credit could make your payment as low as $42 per employee.

    Employers are responsible for paying FUTA taxes quarterly based on how much they owe. If a business owes less than $500 in a quarter, it can carry this balance forward until its liability is more than $500. Once a business hits the $500 threshold, the employer can pay FUTA taxes via the Electronic Federal Tax Payment System. These payments are due by the last day of the month after the end of the quarter.

    Although employers might be required to pay their FUTA taxes throughout the year, they still need to file their Form 940 annually by Jan. 31. For employers who paid all FUTA taxes when they were due, the filing date is extended to Feb. 10.

    State Unemployment Tax Act (SUTA)

    Whereas all employers pay a flat rate for FUTA taxes, SUTA taxes – its state-based counterpart – vary based on several factors.

    • Your state’s SUTA tax rate range
    • How long your business has been around
    • Your industry

    To find their SUTA tax rate, employers must register the business with their state. After registering, the state will assign them a new employer rate. This rate can be updated as often as every year based on the employer’s “experience rating,” which looks at how much the employer has paid in taxes and how much they’ve been charged in benefits. If an employer has employees who work in a different state than the business, they are responsible for paying SUTA taxes in those respective states as well.

    These taxes are also typically due quarterly. Employers must report wages and employee information to their state to determine their tax liability.

    One important factor to keep in mind is that when employees make a successful unemployment insurance claim against an employer, that employer’s SUTA taxes can increase significantly for up to three years. This rate increase is part of why accurate employee classification and records are essential responsibilities for a small business.

    Proper employee classification

    Employees are classified into different groups based on several different factors, including the number of hours they’re expected to work and if their role is permanent. Misclassifying employees can have serious penalties, such as paying fines to multiple government offices, FICA taxes, interest on unpaid taxes, and possibly wage claims as far back as three years. As such, it’s important to accurately classify each team member. The types of employee classifications include:

    • Full time
    • Part time
    • Special classes, which include interns, freelancers, and independent contractors

    A common concern regarding classification is knowing the difference between an employee and an independent contractor. While an employer may classify someone as an independent contractor, the IRS may not agree and penalize your business for noncompliance. The IRS looks at the degree of control an employer has over the worker and the type of relationship they have. For example, the IRS uses the following criteria to identify proper employee classification.

    • Employers can give specific, detailed instructions to employees regarding their work, as well as provide training and evaluations for how the employee completed their task. Independent contractors generally have more freedom to complete their tasks. 
    • Employees are usually reimbursed for work expenses, have a regular payment schedule, and don’t need to personally invest in work-related equipment. Independent contractors are commissioned as needed and responsible for their own equipment, which can give them a higher profit or loss risk.
    • Employees generally receive benefits, are hired for a long-term permanent role, and provide work that is considered key to the business. Independent contractors may be hired for short-term projects and provide services that aren’t considered critical to the business.

    These classifications determine the types of benefits the employee can receive as well as the expenses the employer is responsible for paying. For example, an independent contractor is not eligible to receive unemployment benefits, which also means that the employer isn’t required to pay FUTA or SUTA taxes for that employee. Not every type of employee is eligible for unemployment benefits, so properly classifying each employee will help determine their eligibility if they make a claim.

    Accurate employee and HR records

    Maintaining accurate and up-to-date HR records could also factor into the claims process. For example, a former employee files for unemployment benefits, which inherently implies they lost their job through no fault of their own. However, their supervisor had several documented discussions with the employee about poor performance and misconduct, and HR records indicate this person was fired. 

    Having these records on hand will be helpful should the employer choose to contest the claim. Additional records that could be relevant in the unemployment claims process include:

    • Personnel records, such as I-9 forms, performance reviews, etc. These records should be kept for one year if the employee is terminated, according to the Equal Employment Opportunity Commission.
    • Payroll records, which should be kept for at least three years according to the Department of Labor (DOL).
    • Timecard records, which should be kept for at least two years according to the DOL.

    Although there are federal guidelines for how long to keep certain records, check with your state for additional recommendations. For example, the Ohio Department of Job and Family Services require that employers keep their employee records, including hours worked and wages paid, for at least five years.

    Reporting new hires to the state can also help prevent fraudulent unemployment claims. Each state has an online portal where employers can submit new hire information, which includes the employee’s name, home address, social security number, and hire date. The state compares this information against unemployment benefit claims to determine if any claims are illegal.

    How Does the Unemployment Claims Process Work for Employers?

    After an employee files for unemployment benefits, the employer is notified by your state’s unemployment office. This office could be known as the Department of Labor, Department of Jobs, and Family Services depending on your location. Once notified, you’ll be asked to verify details about the employee and the claim, including:

    • The employee’s classification
    • The reason for the employee leaving

    After reviewing the details of the claim, it’s up to the employer to accept the claim or contest it.

    Not contesting an unemployment benefits claim

    The simplest response is not to contest an employee’s unemployment claim. Even though there are tax consequences to unemployment benefits, an employee is entitled to unemployment if they have a legitimate claim. Be sure to review all the information on the claim to make sure it’s accurate and correct against your records. If so, it’s best to comply since fighting against a legitimate claim will only cost you more time and money.

    Contesting a claim

    While you shouldn’t take action against legitimate claims, there are several instances when it makes sense to contest a claim:

    • If an employee has submitted false information on their claim
    • If their classification doesn’t allow them to receive unemployment benefits
    • If they quit or were fired for performance or misconduct

    If any of these reasons apply, contest the claim quickly and within your state’s fact-finding timeframe – usually 10 days. The employer will need to provide accurate documents to support any information that opposes the details submitted with the claim, including the correct employee classification or proof that the employee was fired with cause. 

    After contesting the claim, all information will be reviewed and both parties will receive notification of whether the claim is allowed or denied. Keep in mind that in either case, both parties have a period of time to appeal the decision.

    Protect Your Business With Unemployment Claims Management

    Managing small business unemployment claims can be confusing and time consuming. Considering your responsibilities as an employer – such as paying FUTA and SUTA taxes, correctly classifying employees and maintaining accurate records, and monitoring and responding to unemployment claims – it’s possible that a small oversight can lead to significant consequences for your business.

    If you’re looking for an easier way to handle the unemployment insurance process, partnering with the right PEO can help you protect your business. Contact GMS today to talk to our experts about how we can take the stress out of managing unemployment claims and other critical HR functions.

  • As a small business owner, it’s essential to understand how different events affect your bottom line. Sometimes this process is as easy as checking an invoice, but other cases are not quite as clear. This is exactly the issue when it comes to employee separation costs.

    Losing an employee costs you more than just a member of your business. The departure of an employee can cost your business in a variety of ways. Let’s break down the reasons for employee separation, the true costs of employee turnover, and what you can do to prevent talented people from leaving your business.

    The Costs Associated with Employee Turnover

    When an employee leaves your company, it has a number of direct and indirect financial impacts on your business. Unfortunately, you won’t receive an itemized bill that helps you understand the cost and implications of turnover. Instead, you’ll need to recognize the different factors that will impact your business’ bottom line.

    Exact employee turnover costs vary depending on the employee and the nature of your company. However, the Society for Human Resource Management (SHRM) reports that it costs an average of half to three-quarters of an employee’s salary to replace that individual. For an employee who makes $50,000 a year, it could cost your business roughly $25,000 to $37,500 to find, hire, and train that person’s replacement.

    Those estimates can balloon even higher depending on the position. It can cost more than an entire year’s salary to replace technical or supervisor positions. Meanwhile, turnover for hourly employees can quickly add up as well, with an average turnover cost of $1,500 to replace each person.

    Of course, estimates are only one part of the employee turnover puzzle. It’s also important to understand exactly why those costs are as high as they are. Here are some of the factors that go into calculating the cost of employee turnover:

    • Recruiting and hiring costs
    • Onboarding expenses
    • Lost productivity
    • Reduced employee engagement
    • Increased risk of errors

    Recruiting and hiring costs

    Any time you must hire a new employee, it’s going to take some time and money to do so. To start, you’ll need advertise your open positions. Some jobs may even call for a recruiter to help you find the right person to fill the position. 

    Recruiting costs don’t stop with that initial search, either. Once you find some qualified candidates, your managers and supervisors will have to take time away from their jobs to interview and vet them. This is especially true for any job searches that last for months. As you may know, time is money, so any extra time spent will add to employee turnover costs.

    There are also a number of other expenses that can add up once you find the right fit for the role. For example, you could have additional fees for background checks, drug screenings, and other pre-employment assessments. These measures are important to ensure that your hire is the right person, but they do add to your overall hiring expenses.  

    Onboarding expenses

    Hiring an employee is just the first step – you will also need to spend time with onboarding and training. This process will incur a number of additional expenses to get your latest team member up to speed. 

    The exact onboarding costs can depend on your business, but employee training is a pretty common expense. The average company spends 31.5 hours training a new hire, which adds up to an average of $1,888 in training and development costs for businesses with fewer than 500 employees. You’ll also need to factor in how much it’ll take to provide that new employee with the tools to do their job, whether that means a computer, certain supplies, or other needs.

    Lost productivity

    The goal of hiring someone is to boost productivity and improve your business operations, but it will take some time to get them up to speed. The person will need to learn the processes that are unique to your business, as well as any new systems they will be required to use. 

    Someone will also need to help them get started and be available to answer their questions along the way. This will result in lost productivity for the rest of the team as well since they’ll need to take time away from their jobs to assist them. 

    Reduced employee engagement

    Anytime someone leaves your company, there can be ramifications for the employees left behind. Other individuals may start to question why that person left and what their future might look like at your firm. Depending on their outlook, they may start looking for another opportunity as well.

    A departing employee can impact your remaining workforce in other ways as well. You may see reduced engagement from any employees who end up having to cover for a temporarily vacant role. This process will not only force them to spread themselves thin, it can also leave them feeling burnt out from the extra hours and impromptu responsibilities. As a result, that transition period could spur further turnover down the road. 

    Increased risk of errors 

    When you lose an employee, you also lose important knowledge and experience.  Following, turnover can easily result in reporting errors or other costly mistakes. Even if you spend extra time to help ensure these errors don’t occur, that simply means you or someone else is spending extra time to address something that your departing employee handled regularly.

    How to Prevent Your Talented Employees from Leaving

    The best way to reduce the cost of employee turnover is to keep your talented employees from leaving in the first place. It’s important to assess the different reasons why high voluntary turnover occurs. 

    There are a variety of reasons why people leave a company. By identifying contributing factors for employee turnover, you can take appropriate measures to reduce avoidable turnover costs. Let’s evaluate a few ways that you can retain top talent, avoid wrong fits, and reduce your employee turnover costs.

    Offer a competitive benefits package

    Losing employees is an expensive process. Offering competitive pay and benefits can help limit the chances that employees try and leave for a small raise or certain work perks.

    It’s important to consider what perks employees truly find valuable in order to attract and retain top talent. It’s not uncommon for employees to value key benefits more highly than their pay, which makes an appealing benefits package a powerful retention tool. Some of the top benefits included:

    • Better health, dental, and vision insurance
    • More flexible hours
    • More vacation time
    • Work-from-home options
    • Paid parental leave

    Improve company culture

    Your company’s culture has a significant impact on employee satisfaction and can determine whether they stay or go. Creating a culture that fosters a positive work environment, encourages work-life balance, and recognizes employees will help you attract and retain top talent. 

    According to research conducted by LinkedIn, 47 percent of employees want to work for a company with a welcoming culture, while 51 percent of professionals seek employment at businesses that promote work-life balance and flexibility. Fortunately, benefits such as work-from-home options and flexible hours offer the dual perk of making your business more attractive and helping employees avoid burnout and other issues. That level of support can make your workplace a space where employees don’t want to leave.

    Recognize employees

    Establishing procedures to recognize employees is also essential to boost engagement and retention. Over 70 percent of companies report that employee recognition had the highest impact on engagement. As such, it’s important to make sure that employees know they’re appreciated.

    Consider implementing a formal recognition program that incorporates ideas like employee spotlights and peer recognition. Recognizing the individuals that work hard to contribute to the success of your business will improve morale and create additional incentives to perform well.

    Monetary prizes aren’t the only options either. Get creative with other ways to reward your employees, like an extra day off or an experience that they can enjoy. Even short conversations expressing your appreciation for an employee’s work can go a long way toward making them feel good about where they work. 

    Provide potential for growth

    One reason why employees leave is because they don’t think there’s a future with their current company. Giving employees the tools they need for career development can help them feel like they can continue to grow at your business.

    Growth can come in many forms – opportunities to advance in the company, stipends for development, etc. Regardless of the form the prospects take, nearly 95 percent of employees would stay with a company longer if they had access to learning opportunities. These efforts can play a key role in limiting employee turnover, so work with your employees to create employee development plans, provide training, and put measures in place to invest in your team.

    Welcome employee feedback

    One of the best ways to understand why people leave your company is to ask for feedback. If you’ve noticed that employee turnover has increased or want to address any issues before someone leaves, talk to your employees about what they value and encourage feedback regarding what you could do better.

    Collecting feedback is not enough though – you need to listen to them and implement their ideas to make them feel valued at your company. Making changes based on thoughtful, serious feedback shows your current workforce that you’re listening. That step along can make a major difference in morale and show your employees that they’re heard.

    When someone does choose to leave, conduct an exit interview to determine why. Use this interview as an opportunity to learn from your mistakes – they will be more likely to share candidly at this point since they are on their way out anyway. This feedback can help you narrow down potential weakness, strengths, and opportunities to improve your company and reduce employee turnover.

    Cut Out Turnover Costs With Employee Retention Strategies

    Losing a talented employee costs your business in a variety of ways. Fortunately, GMS can help you attract and retain top talent and keep your business strong. 

    Our experts can manage key functions like employee training and recruiting and benefits administration to help you find the right employees and keep them on your team. Meanwhile, you can spend that time to focus on growing the business instead of constantly dealing with the hiring process. Contact GMS today about how we can support you and your employees.

  • Whether you need to follow legal regulations or simply have some company rules, workplace compliance requirements are crucial for any small business. Unfortunately, it’s not always easy to get employees on the same page. 

    It’s important for small businesses to take some steps toward encouraging a compliant workplace. Encouraging this type of culture can help businesses save on workers’ compensation, create a safer workplace, and help everyone stay on the same page. Let’s break down what you can do to get your employees to buy in to your company’s rules. 

    How to Ensure Compliance in the Workplace

    There are a few different steps that employers can take to help cultivate compliance in the workplace. Here are six ways that you can make sure that your workforce complies with existing policies and procedures.

    Document any rules your employees need to follow

    The first step toward workplace compliance is to make sure everyone knows your policies and procedures. It’s important to document your company’s rules in your employee handbook. This way you can give each employee a handbook so that they can review the regulations you have in place. 

    This process will not only give everyone a document to review their rights and obligations, but also serves as a compliance tool in case there are any occasions where people violate company policies. You can have employees sign off on receiving and reviewing your handbook. You can also create checklists to ensure employees understand all the right steps for certain procedures.

    It’s also important to make sure your policies and procedures stay up to date with any new federal laws or business trends. You can update your handbook to add new policies or tweak existing rules, just make sure that every employee has a means to access these rule changes so that they can stay compliant. Finally, these documents should be easily accessible so that employees can review them at their own leisure.

    Consistently apply those policies and procedures

    Having policies and procedures in place is one thing, the way you apply them is another. Your compliance rules affect everyone at your company, from the top executive to the newest member of your team. 

    It’s important to make sure that you consistently apply those policies and procedures equally so that your whole organization sees that there isn’t any special treatment. If employees see that the rules aren’t applied equally, they’ll be much less likely to buy into them. That disenchantment can quickly lead to non-compliance.

    The best way to avoid this potential problem is to reinforce how important these policies and procedures are for everyone. Have regular handbook reviews where you go over key policies and company culture with your whole staff and reinforce that it takes buy-in from everyone. By setting an example and making sure everyone is accountable, you can instill a culture of compliance and avoid issues stemming from inconsistent treatment.

    Take a positive approach instead of just saying “no”

    If you want people to truly buy in to a culture of compliance, it’s best to focus on what they should do instead of telling them what not to do. Taking an “anti” approach with workplace policies is like telling someone “no” over and over – at some point, they may stop listening.

    This natural reaction to being told what not to do is why it’s better to focus on proper behaviors and educate employees on why that approach is best. If you have certain safety rules in place, create policies of what employees should do and why those behaviors are best. 

    For example, lay out guidelines on the safety equipment employees should use and how that equipment keeps them safe and healthy. That type of message will naturally hit home harder than simply saying “don’t work without a harness.” By providing positive instructions and providing the reason behind it, your workforce can at least understand why those rules are in place, even if they don’t like it.

    Invest in employee compliancetraining

    Once you have your policies in place, you’ll want to do more than just communicate them with employees. Training will help reinforce those compliance procedures and policies so that they’re less likely to make mistakes. These training sessions should cover the following topics.

    • Safety and health policies, goals, and procedures
    • Functions of the safety program
    • Proper contacts for any questions or concerns about the program
    • How to report hazards, injuries, illnesses, and close calls/near misses
    • What to do in an emergency

    Training should also be more than a one-time event. An ongoing training program can help your employees stay aware of company policies and procedures, especially if there are any changes to your compliance guidelines. 

    Use positive reinforcement for doing the right thing

    Let’s be honest, the average person doesn’t think of workplace compliance as a fun topic. That doesn’t mean the subject has to be a drag. Utilizing positive reinforcement to reinforce your policies and procedures can not only help prevent problems, but also encourage your employees to actively participate in workplace compliance measures.

    There are several different ways that you can go about this process. If you’re trying to get people into compliance training, the company could buy lunch for employees to get them more excited about the session. You can also incentivize employees by setting up a small rewards program for people who actively engage in compliant behaviors. If you make compliance a positive experience, employees will be much more likely to follow company policies and procedures.

    Keep employees engaged

    Positive reinforcement is one step in the right direction, but don’t forget that compliance is a two-way street. It’s critical to keep communication open for any employees who want to talk about workplace compliance. Those conversations will not only help your employees feel heard, but also uncover some potential opportunities for improvement.

    Sometimes these conversations aren’t exactly enjoyable. If someone breaks company rules about safety, harassment, or something else, it’s time to have a serious discussion about unacceptable behavior. It’s important to foster a compliant work environment, so these conversations are necessary to explain why an employee’s behavior went against company policy and how to move forward.

    It’s also important to keep an open dialogue with employees to see what’s going on around the workplace. If employees are experiencing difficulties with certain policies or have some feedback about how to create a safer work culture, let them know that management is there to listen. Allowing people to share what they’re experiencing can help foster a more engaged workforce and help identify potential opportunities to improve compliance. 

    Create a Culture of Compliance

    From safety regulations to parking policies, it’s important to make sure that everyone buys in to your company’s rules. Fortunately, you don’t have to go through this process alone.

    GMS works with businesses to develop a culture of workplace compliance and help them save time and money through expert HR outsourcing. Our team can help instill a culture of compliance through employee training, documentation, and other measures to help prevent future issues.

    Ready to make your company simpler, safer, and stronger? Contact GMS today about how we can support your business through comprehensive human resource services.

  • Hiring a new employee is an exciting occasion for a small business. However, it does call for a lot of paperwork.

    The onboarding process requires new employees to review and sign several documents. These papers range from government forms to records specific to your business. Regardless of their purpose, it’s important to make sure new hires address these documents shortly after they join your company. Let’s break down the various documents required for onboarding a new employee.

    The Different Types of New Hire Forms and Documents

    Onboarding documents have many different functions. Some are needed to collect important information from a new employee. Others are designed to properly inform new hires about certain practices and give them the ability to sign up for certain benefits. Essential onboarding documents are broken up into a few different groups.

    • Initial hiring documents
    • Employee eligibility forms
    • Tax forms
    • General business documents

    Regardless of their intent, it’s best to have employees review and sign these documents on their first day if possible. While the paperwork may not be all that exciting, it’s best to get these steps out of the way early and create a good foundation for new hires.

    Initial hiring documents

    The onboarding process starts with a job offer. There are a few documents that new hires will need to sign in order to get the job and help ensure that they’re the right fit for a company. As such, all prospective employees should fill out the following documents to get the onboarding process into motion.

    Job application form

    The job application form is the very first official document required to onboard new hires. While this form may seem obvious, it’s crucial to have it on file so that you have information such as work history, education, and personal data available in case any issues were to occur in the future. Some states have requirements for including specific statements in job application forms, so having this document can help you prove that you followed any legal obligations.

    New employees should sign this document to verify all the information and consent to a background check. It’s also important to note that this form should be included even if a job candidate already submitted a resume. You can then hold onto this document for a full year along with any notes or other details documented during the hiring process.

    Offer letter and/or employment contract

    The offer letter is another standard part of adding on a new employee. Still, it’s important to not only give employees an offer letter and employment contract, but also attach a copy to the employee’s file. This inclusion will just give businesses another document to reference in case any issues arise in the future regarding that contract or offer details.

    Drug testing records

    Whether a company wants to drug test a job candidate upfront or conduct tests throughout employment, you’ll need to provide employees with a copy of the company’s drug testing policy. You should also maintain records of any test results for at least one year, although some regulations may increase the minimum time frame for saving these records.

    Employment eligibility forms

    Once you’ve decided on the perfect candidate, the government requires them to confirm their eligibility to work in the United States. There’s only one document that falls under this section, but it’s a very important one: Form I-9.

    Form I-9 requires both the new employee and the employer to fill out parts of the document. New employees must fill out and sign the first section of Form I-9 on their first day of employment. Employers are then required to review the first section for completion.

    Employers also must also fill out the second section of Form I-9 within three business days of the date of hire. This step requires new employees to provide unexpired original documentation to prove their identity and employment authorization. This documentation can come in may forms such as passports, driver’s licenses, Social Security number cards, and more. U.S. Citizenship and Immigration Services provides a complete list of acceptable Form I-9 documents online.

    Once an employer has the required information, they can fill out the remainder of the form. Employers do not need to fill Form I-9, but they should keep it on file for at least three years after the employee’s first day or for a full year after an employee is terminated. This will allow employers to present the form if any authorized U.S. government officials visit the business for inspection.

    Tax forms

    Employment eligibility is just the first step toward completing government-mandated documents for new employees. Employees are also required to fill out Form W-4 so that you can properly manage payroll for their business.

    Form W-4 is used so that employees determine the federal income taxes that their employers should withhold from paychecks. As such, new hires should fill this form out right away so that employers can apply the information toward their first pay period. Some states also have their own version of Form W-4 for local income tax withholding, while others simply use the federal document.

    Employers aren’t required to regularly submit these forms, but they should keep them on file for reference and in case the IRS requests a copy to compare withholdings. Each W-4 should be kept on file for at least four years after these taxes are either paid.

    General business documents

    While some onboarding documents are required by law, many others are simply a means to provide new hires with all the information they’ll need at their new company. These papers can range from means to gather payroll and benefits information to simply giving individuals more detail about their roles and other company materials.

    Direct deposit form

    Direct deposit is a convenient arrangement for both employers and employees, but businesses need some details to set up this payment method. New employees that will receive direct deposit will need to fill out a bank account information form to ensure that their paychecks go to the right place. These forms should require the employees to include:

    • Their full name
    • Bank account number
    • The account type (checking or savings)
    • Name and routing number of the bank

     Benefits forms

    If a business offers a benefits package to its employees, that company should provide information about those benefits to new hires and have them opt in or out of programs. These programs can include:

    • Health insurance
    • Life insurance
    • Retirement plans
    • Disability insurance
    • Wellness programs

    Employers will need to hand out different benefits forms for each offering in their plan. These forms should have details about each offering and give employees the chance to opt in for them if they’re eligible. Even if they opt out, employers should retain those signed documents as evidence that they were informed of benefits options and chose not to enroll in them.

    Mission statement and strategic plan

    Some onboarding documents are simply to help new employees get more accustomed to a business. A company mission statement, strategic plans, or any other relevant documents will help new hires understand the company’s culture and goals. This type of information will help them understand how their role fits in with the organization’s vision and fit in from day one.

    Employee handbook

    As long as an organization has an employee handbook, it’s best to give a copy to new employees right away. A good handbook lays out all the important elements about a business – company policies, procedures, and other key details.

    Handing out a handbook to new employees allows them to consult this document about key questions they may have about an organization. A handbook also serves as a noteworthy compliance tool, acting as proof that employees had prior information about company policies. As such, you’ll also want employees to sign an employee handbook acknowledgment form to verifying they received and read through the handbook.

    Job description and performance plan

    Every employee should be given a clear direction of what their role should accomplish and how their success will be measured over time. Employers should provide new hires with a document that lays out responsibilities, expectations, and potential timelines of what should be accomplished during their first few months. Having employees sign off on this document will not only help them understand expectations, but also provide employers with written guidelines when it comes time to evaluate performance.

    Employee onboarding checklist

    There’s a whole lot that needs to happen in the first few weeks on the job. An onboarding checklist is a detailed action plan that documents all the training, tasks, and other key items that will happen at the beginning of someone’s tenure with the organization. A solid outline will help keep everyone on track and give new employees a sense of reassurance that their new employer has a plan and values their position.

    Security and parking signoffs

    If the job calls for special security or parking details, employers should lay out all that information and arrange for special clearances in time for a new hire’s first day. Employees should receive any forms they need to sign and key items or information related to parking, entrance, and more. These items can include parking passes, keys, and passcodes. Documentation for these items should also include details on next steps if an employee leaves the company or is terminated.

    Emergency contact information and plans

    Everyone hopes that they’ll avoid any emergencies, but it’s important to be prepared just in case. New employees should be given relevant contact information for managers and other individuals in case anything happens after hours. Employees should also provide the company with an emergency contact in case something happens to them on the job as well. Finally, provide new hires with any disaster readiness plans if the company has any created.

    Set Up Your New Employees for Success

    While new hires call for a lot of paperwork, a good onboarding process can make for an easier transition into your company. Of course, gathering all these documents is just the first step in a long process. It’s important to set the right tone for new employees so that they can help your company grow.

    Fortunately, GMS can help your business build an onboarding process that not only sets up new hires for success, but also takes the administrative work off your hands. Contact GMS today about employee onboarding management and other critical human resource functions.

  • Terminating an employee is an unfortunate, yet sometimes inevitable aspect of running a successful business. For a small business, where owners and employees often think of themselves as a “family,” terminating an employee can be an especially difficult decision. When the employee who is being terminated and the owner or manager have a long work history and possibly even a personal friendship, the situation can become even more charged. As a business owner, it’s important not to let personal feelings get in the way of making sound business decisions.

    terminated employee packing desk

    Signs It’s Time to Part Ways with a Long-Time Employee

    Many employees can thrive in their careers working decades for the same employer. Long-term employees who continue to provide value to your business have deep knowledge about your products, services, systems, and business structure and are certainly worth holding onto.

    Sometimes, though, even employees with long tenures at an organization can create difficulties that can be draining on a business. Although sometimes difficult to admit, if you’re honest with yourself, you may already have an idea of who these employees are. Long-term employees who have overstayed their welcome typically exhibit the following traits:

    Obsolete skills

    It often becomes clear that a long-term employee hasn’t taken responsibility for their career or training when they don’t actively seek out new information or express little if any curiosity about their industry or profession. A noticeably stale skill set is often one of the first signs it’s time to let a long-term employee go. These employees often have an outdated mindset and little, if any knowledge of current best practices. They only know what they’ve learned early in their career and have continued with those same processes for years, sometimes for decades.

    Resistance to change

    As industries and technology evolve, so should a business. A resistance to change could be holding your company back from operating at its full potential. You could be missing out on key opportunities to reach new markets or create innovative products or services. When an employee is perfectly content maintaining the status quo, it could be a sign that it’s time to move on.

    These types of employees tend to be champions of old systems and familiar processes. You may often hear them say things like, “This is how we’ve always done things.” When employees are constantly undermining change and new or progressive initiatives, it’s typically a clear indication that it’s time to let that employee go.

    Defensive attitude

    Long-term employees may be painfully aware of their dwindling value within a company. As a result, they may feel threatened over particular aspects of the job. These types of employees may become defensive when questioned or having to justify their processes. They might even undermine or sabotage new hires by hoarding information or dismissing a new hire’s ideas or skills.

    Slower productivity

    Long-term employees may no longer have the skills or capabilities to efficiently produce high-quality work or work quite as fast as their peers. As a result of not having the appropriate skills for their position, long-term employees may try to compensate by working long hours and weekends. These types of employees often claim they are overworked and may even be too busy to attend meetings. They’re critical of co-workers who have a life outside of work and don’t put in extra hours. They may even see themselves as company martyrs and call out co-workers who don’t spend as many hours working.

    Overcompensated

    Often, long-term employees have incurred higher salaries over their tenure that can weigh heavily on a company’s bottom line. Of course, long-term employees who continue to provide value and have experienced growth within your organization are likely deserving of a higher paycheck. However, it can be harder to justify when a long-term employee’s salary and title is grossly inflated to reward them for their tenure when it doesn’t correlate with the value and skills of other employees.

    How to Terminate a Long-Term Employee

    When it comes to terminating a long-term employee, much of your usual termination process will be the same. However, there are some special considerations to keep in mind when firing a long-time employee.

    Review past performance

    Termination can certainly come as a shock to an employee, especially one who may have felt secure in their tenure with a company. You’ll want to ensure due diligence by reviewing past performance reviews and feedback. If the employee has only ever received positive feedback, you may want to wait until you can provide some honest feedback and evidence of negative performance. An employee performance review is an optimal time to set goals and expectations for an employee, identify areas for improvement, and provide resources for training. You may notice signs like resistance to change or a defensive attitude during this time.

    Terminate long-term employees in person

    When it’s clear that a long-term employee can no longer provide value to your organization, it’s time for termination. When firing a long-time employee, be sure to give them the news in person if possible. Not only is face-to-face firing the right thing to do, it can also help keep your remaining workforce strong, especially when losing a long-time colleague.

    Be transparent with your remaining employees

    Speaking of your existing workforce, you’ll also want to take into consideration how you communicate the termination to the rest of your team. The “loss of a colleague can send shockwaves—and extra workload —across the company. By firing someone, you’re asking everyone around them to take the news and the extra work in stride,” says Piyush Patel, author of Lead Your Tribe, Love Your Work: An Entrepreneur’s Guide to Creating a Culture that Matters. While transparency is key, you’ll want to focus less on the negatives and more on the positives. Leverage this as an opportunity to bring your team back together, understanding that additional tasks may fall onto your employees as a result of the loss.

    Don’t fire employees by yourself

    It’s also a good idea to have another person, such as an HR representative, in the room to serve as a witness when terminating an employee. There’s always a chance that your former employee may try to accuse you of an unjust firing, such as age discrimination. Having an HR representative in the room can help you stay on track and avoid any potential legal issues.

    Severance pay

    While post-termination severance packages are most commonly associated with executives, they have now become more widely extended to long-term employees. According to a Manpower Group survey, 75 percent of companies have a formal severance policy in place because “severance is one of the keys to ensuring a difficult action has the best possible positive outcome while speeding the return to productivity, profitability, and employee engagement.” Offering severance pay can also help you show appreciation for a long-term employee’s loyalty to your company.

    Terminating a long-time employee may not be enjoyable, but it’s important that it’s done legally and gracefully. Need help creating a termination policy or managing employee performance? Contact GMS today to learn more about our employee performance management services.