Start Your Own Business (63 page)

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Savings Incentive Match Plan For Employees (SIMPLE)
 
SIMPLE plans are one of the most attractive options available for small-business owners. With these plans, you can choose to use a 401(k) or an IRA as your retirement plan.
A SIMPLE plan is just that—simple to administer. This type of retirement plan doesn’t come with a lot of paperwork and reporting requirements.
MANUAL LABOR
 
S
ooner or later, every entrepreneur needs to write a manual. Employee policy manuals, procedures manuals and safety manuals are just a few of the more important ones.
 
 
Even if you only have one employee, it’s not too soon to start putting policies in writing. Doing so now—before your staff grows—can prevent bickering, confusion and lawsuits later when Steve finds out you gave Joe five sick days and he only got four.
 
How to start? As with everything, begin by planning. Write a detailed outline of what you want to include.
 
As you write, focus on making sure the manual is easy to read and understand. Think of the simplest, shortest way to convey information. Use bullet points and numbered lists, where possible, for easier reading.
 
A lawyer or a human resources consultant can be invaluable throughout the process. At the very least, you’ll want your attorney to review the finished product for loopholes.
 
Finally, ensure all new employees receive a copy of the manual and read it. Include a page that employees must sign, date and return to you stating they have read and understood all the information in the manual and agree to abide by your company’s policies. Maintain this in their personnel file.
You can set up a SIMPLE IRA only if you have 100 or fewer employees who have received $5,000 or more in compensation from you in the preceding year. Generally, the employer must make contributions to the plan by either matching each participating employee’s contribution, dollar for dollar, up to 3 percent of each employee’s pay, or by making an across-the-board 2 percent contribution for all employees, even if they don’t participate in the plan, which can be expensive.
“When you get into a tight place and everything goes against you, till it seems as though you could not hang on a minute longer, never give up then, for that is just the place and time the tide will turn.”
—HARRIET BEECHER STOWE
 
 
The maximum amount each employee can contribute to the plan is $10,000 for 2006. After that, the amount will be indexed for inflation. Participants in a SIMPLE IRA who are age 50 or over at the end of the calendar year can also make a catch-up contribution of an additional $2,500 in 2006.
Simplified Employee Pension (SEP) Plan
 
As its name implies, this is the simplest type of retirement plan available. Essentially, a SEP is a glorified IRA that allows you to contribute a set percentage up to a maximum amount each year. Paperwork is minimal, and you don’t have to contribute every year. And regardless of the name, you don’t need employees to set one up.
If you do have employees—well, that’s the catch. Employees do not make any contributions to SEPs. Employers must pay the full cost of the plan, and whatever percentage you contribute for yourself must be applied to all eligible employees. Generally, the maximum contribution is 25 percent of an employee’s annual salary (up to $245,000) or $49,000, whichever is less.
As your company grows, you may want to consider other types of retirement plans, such as Keogh or 401(k) plans.
Where to Go
 
With so many choices available, it’s a good idea to talk to your accountant about which type of plan is best for you. Once you know what you want, where do you go to set up a retirement plan?
Banks, investment companies, full-service or discount brokers, and independent financial advisors can all help you set up a plan that meets your needs. Many of these institutions also offer self-managed brokerage accounts that let you combine investments in mutual funds, stocks, bonds and certificates of deposit (CDs).
Low-Cost Benefits
 
In addition to the standard benefits discussed above, there are plenty of benefits that cost your company little or nothing but reap huge rewards in terms of employee satisfaction and loyalty. Consider these ideas:
•
Negotiate discounts with local merchants for your employees.
Hotels, restaurants and amusement parks may offer discounts on their various attractions, including lodging and food, through corporate customer programs. Warehouse stores, such as Sam’s Club, allow discounted membership to employees of their corporate members. Movie theaters provide reduced-rate tickets for companies’ employees. Don’t forget to offer employees free or discounted prices on your own company products and services.
•
Ask a local dry cleaner for free pickup and delivery of your employees’ clothes.
Or ask a garage for free transportation to and from work for employees having their cars serviced there. Many businesses are willing to provide this service to capture—and keep—new customers.
•
Offer free lunchtime seminars to employees.
Health-care workers, financial planners, safety experts, attorneys and other professionals will often offer their speaking services at no charge. Education is beneficial for both your employees and your business.
•
Offer supplemental insurance plans that are administered through payroll but are paid for by the employee.
Carriers of health, life, auto and accident insurance typically offer these plans at a lower rate to employers, so everybody benefits.
•
Offer a prepaid legal services plan administered through payroll but paid for by the employee.
Like insurance, the purpose of the prepaid legal service is to provide protection against the emotional and financial stress of an employee’s legal problems. Such services include phone consultations regarding personal or business-related legal matters, contract and document review, preparation of wills, legal representation in cases involving motor vehicle violations, trial defense services, and IRS audit legal services.
The employer deducts the monthly service fee from the paychecks of those employees who want to take advantage of the service. Typical fees range from $9 to $12 per month per employee and cover most routine and preventive legal services at no additional cost. More extensive legal services are provided at a lower rate when offered in this manner, saving employees money.
 
TIP
 
Taking time to thank your employees pays off in performance. Some ways to show appreciation: Send birthday cards to workers’ homes. Write congratulatory notes for a job well done. Use food to boost morale—Popsicles on a hot day or hot chocolate in the winter. Small things make a big difference in making employees feel valued.
•
How about an interest-free computer loan program?
Making it easier for employees to purchase computers for their personal use increases the technical productivity of employees on the job. The employee chooses the computer and peripherals based on the employer’s parameters. (For example, the computer must be a Macintosh, and the entire package may not exceed $3,000.) The company purchases the system, allows the employee to take it home, and deducts the payments from his or her paycheck. Although there’s some initial capital outlay, it is recouped quickly. Any computer experience an employee can gain at home will most likely enhance his or her proficiency in the workplace.
•
Let employees purchase excess inventory from your business at a significant discount via sample sales or employee auctions.
Arrange these purchases in conjunction with regularly scheduled companywide “yard sales” for employees to buy and sell their personal belongings.
One of the most appreciated but most overlooked benefits is membership in a credit union. There are some 6,000 well-established, state-chartered credit unions throughout the United States and Canada that accept startup businesses as members—at no charge.
The benefits to your employees are threefold: Most likely they’ll increase their savings rates (especially if you offer automatic payroll deduction), they’ll have access to lower loan rates, and they’ll pay lower fees—if any—for services. Services credit unions frequently offer include:
• Automatic payroll deductions
• Individual retirement accounts
• Savings certificates
• Personal and auto loans
• Lines of credit
• Checking accounts
• Christmas club accounts
Only state-chartered credit unions are allowed to add new companies to their membership rosters. To find a credit union that will accept your company, call your state’s league of credit unions. You can also write to the National Credit Union Administration, 1775 Duke St., Alexandria, VA 22314-3428, or call (703) 518-6300 for more information, or visit their website at
ncua.gov
for a list of consumer resources.
 
TIP
 
1001 Ways to Reward Employees
(Workman) by Bob Nelson is an encyclopedic survey of employee rewards. With more than 1,000 innovative ideas for rewarding employees, this book should give you plenty of inspiration on ways to offer rewards in any situation.
When comparing credit unions, get references and check them. Find out how communicative and flexible the credit union is. Examine the accessibility. Are there ATMs? Is there a location near your business? Consider the end users—your employees.
Once your company is approved, designate one person to be the primary liaison with the credit union. That person will maintain information about memberships as well as enrollment forms and loan applications. Kick things off by asking a credit union representative to conduct onsite enrollment and perhaps return periodically for follow-up or new sign-ups.
Employee Policies
 
Now that you have employees, you’ll need to set policies on everything from pay rates to safety procedures. Many of these policies are regulated by federal and state laws. Here’s what you need to know.
Paying Employees
 
There are many state and federal laws that regulate the paying of employees, including the calculation of overtime, minimum wage, frequency of payment, and rules for payment upon termination. Because your business may be subject to both state and federal laws (the primary federal law being the Fair Labor Standards Act, or FLSA), which are often quite different and conflicting, you should check with the applicable government agencies, your local chamber of commerce, and appropriate financial and legal experts to determine which laws apply and how to correctly apply them.

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