Businesses do not deliberately throw away money – yet that is effectively what 90% of businesses do, when they ignore examining economic rationality in structuring wage packages
Startup: The First 8 People You Should Hire
some of the most commonly suggested first hires for your business.
It’s smart to hire from the top,
Human resources and payroll specialists
Small businesses may be impeded by HR-related challenges more than larger businesses due to limited resources, including staff and money.
the U.S. Department of Labor’s online Employment Law Guide for the latest developments in federal employment law. An additional resource is your state’s department of labor website, where you can learn about changes that may impact your business. Consult an attorney with your specific questions and/or to assess your business’s level of compliance with applicable employment laws, particularly state and local ones.
2. Finding the right employees
Employee recruitment requires time and money, two things that small businesses frequently don’t have. It takes the average U.S. employer 52 days to hire the right candidate and costs $4,000. Replacing an employee costs more, about 33% of the predecessor’s annual salary.
3. Retaining talent
Keeping talented employees can be as difficult as finding the right employees in the first place.
Solution: Offering a competitive salary,along with an attractive benefits package, is a good start.
8. Employee compensation
Small businesses typically lack the deep “pockets” of large businesses, putting them at a competitive disadvantage with retaining employees. The cost of benefits, taxes, training, and the like – totaling as much as three times the employee’s salary – makes matters worse.
Solution: Benefits like a 401(k) plan can help compensate for a lower salary.
9. Developing a competitive benefits package
A good benefits package ranks among job candidates’ top criteria when deciding whether or not to accept a job offer. According to a study by Justworks, the quality and options of health benefits weigh heavily for 88% of job candidates considering whether or not to accept a job offer. Research from Accenture reveals that 68% of individuals consider pension and retirement benefits a “decisive factor” in whether or not they take a job. For small businesses, the cost of benefits can be difficult to bear.
Solution: Businesses with 50 or fewer employees may qualify for the Small Business Health Options Program (SHOP). Some associations offer group health plans that allow companies to obtain price breaks on employee health insurance by teaming up with other businesses as if they were to obtain health insurance as if they were one employer. And consider this: Retirement benefits, such as 401(k) plans, yield tax breaks that may offset the expense of introducing them.
14. Managing HR without a dedicated HR staff
“Most often, small business owners cannot afford to hire an HR professional and will then either do it themselves or appoint someone else – such as their spouse or the office manager – to handle these types of matters,” said Ivelices Linares Thomas, founder and CEO of The HR Hotline. This may work for a little while, but not for the long term. [Read related article: When Is It Time to Hire a Full Time Human Resources Employee?]
Solution: Professional HR outsourcing firms offer access to HR support on a subscription basis. External HR consulting firms can assist your company with updating its employee handbook; complying with federal, state, and/or local requirements; or preparing payroll, said Marina Galatro, executive HR consultant, HR services at ABD Insurance and Financial Services.
ways to further compensate employees when , companies can’t afford to raise salaries.
401(k) matching contributions
Access to a 401(k) plan has become a standard expectation for job seekers. Beyond providing access to a plan, companies can match a certain percentage of their employees’ 401(k) contributions. If a business can’t afford to offer a matching component, it could provide employee stock options or higher compensation instead, Balian said.
Now After the Storm – can you see clearly what has previously escaped you?
As an example consider a well-paid worker whose nominal income is $100,000 a year.
In States such as Florida where there is no state income tax the worker would receive $76,104 after tax.
However in New York where State Income Tax is at its highest in the US the worker would only receive $66,912 net on his total wage of $100,000
It is not only State Income Tax that should be a concern
There is the absolute level of Federal Income Tax and also Payroll Tax. Such that the Total Federal Tax Liability in a No-Tax State for 2019 on $100,000 would be $30,546.50.
Although down from $33,122.50 after the Tax Cuts and Jobs Act – that still is quite a savage impost on a worker’s earnings.
Payroll Tax (FICA) and Medicare combine to slice off 7.65% of earned income – with the biggest slice being the Federal Income Tax Take.
The Icing on the Cake is the Employer paying the worker a wage of $100,000 must on top of that also pay FICA at the same rate as their employee – which means it costs a New York Employer $107,650 to give a worker $66,912 after tax.
As a thinking Human Animal/ Business Owner/ Manager – have you ever digested the numbers which eat in to a worker’s wage, the costs of labor and impact of taxes your business currently bears?
How would you feel about cutting the wage bill by $10,000 per employee while helping them improve their take home money and annual retirement contributions by close to $20,000 a year?
Some Elementary Tax Planning utilizing 401k can produce some tax savings – although the level of sophistication of most Retirement Plans hardly makes a dent in the Tax Burden felt by most workers in the USA.
While employers contributions to a worker’s 401k is exempt from FICA – what is disgraceful is the requirement for Workers’ own 401k contributions to be levied with FICA!
The above outline is how the standard wage packages work out with tax when employers lack the instinct needed to improve wage cost economics for both themselves and employees.
With a little initiative it is not difficult to give workers more take home money, a bigger retirement nest egg and cash reserve for cases such as the Covid-19 Economic Impact – AND in the process significantly lower wage costs for employers.
If you seriously want to improve profits, lower wages costs and substantially improve worker’s financial position with better wage packages …
How to Create a Desirable Compensation Plan
Executive Compensation Data Trusted by Professionals