Risk Management Bulletin

Hiring employees is a big step for your small business. Because you’re not a large corporation, you may think you can skip the employment application. Actually, there are seven important reasons to have an application for your business.
Create an Unbiased Hiring Process
Every job applicant will answer the same questions on the employment application. Its uniform format reduces bias during the hiring process and allows you to compare candidates impartially.

Rule Out Wrong Candidates
Instead of interviewing every candidate who applies, use the employment application to filter out the obvious wrong candidates. They may be the ones without the proper training or experience for the position or ones who were fired for insubordination or have a criminal record.

Eliminate Untruthful Candidates
It’s easy for job applicants to lie on a resume but not as easy to lie on an employment application. It requires applicants to sign an agreement stating that all information in the application is true and that if they fail to tell the truth or omit relevant information, they could be immediately dismissed.

Get Permission to Verify Information
Your employment application should have a space where applicants sign their name and allow you to verify the accuracy of all information, including employment history and education. Candidates should also be required to agree to background and criminal checks as well as credit and driving checks if those are requirements for the position.

Streamline the Hiring Process
Interviewing every single applicant requires hours of time and wastes valuable resources. Read employment applications and scan for specific keywords, degrees and other specifics that help you identify qualified candidates. Your streamlined hiring process saves time and money. Plus, its efficiency reduces stress and frees you from unnecessary administrative duties.

Remain Legally Compliant
You don’t want to break legal rules and ask questions on the application or in the interview that are not allowed. Set the tone with your employment application. It should not include invasive questions or ask about protected statuses such as age, race or religious view.

Prepare for Interviews
When you conduct interviews, you need to know a little bit about the applicants. This way, you are prepared during interviews to ask relevant questions. The employment application gives you clues about a candidate’s work history, career goals and personal values and helps you prepare for interviews.

Whether you provide a printed or online employment application, it’s an important part of your small business’s hiring process. After you create an application, ask your attorney to review it. You’re then ready to hire the right employees for your small business.

You’ve started a small business, and everything’s going great. In fact, it’s time to hire help. Use this checklist to ensure you follow federal and state regulations as you hire your first employee.

Obtain an Employer Identification Number (EIN)

Apply online or call the Internal Revenue Service (IRS) for an employment identification number (EIN). It’s also known as an Employer Tax ID or Form SS-4, and you’ll use it when you file taxes and other documents with the IRS and when you report employee information to state agencies.

Prepare a Recordkeeping System for Tax Withholding

As an employer, you are required to withhold taxes from your employee’s paychecks. The IRS also requires employers to maintain employment tax records for four years, and you can use the records to prepare financial statements, track expenses and prepare your tax returns. Plan to withhold tax in three specific categories.

• Federal Income Tax Withholding – Employees must sign a withholding exemption certificate (Form W-4) that you must submit to the IRS.
• Federal Wage and Tax Statement – File an annual Form W-2 that details the wages you paid employees and the tax you withheld. It’s required for every employee to whom you pay salary, wages or other compensation.
• State Taxes – If your state requires you to withhold state income tax, follow the guidelines for reporting this income tax.

Verify Employee Eligibility

According to federal laws, you have the responsibility to verify that a potential employee is eligible to work in the United States. Be sure your employee fills out Form I-9 within three days of hire, and keep the form on file.

Register with Your State’s New Hire Reporting Program

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 requires you to report your new employee to your state’s directory. Complete this step within 20 days of hiring someone.

Purchase Workers’ Compensation Insurance

When you were the only employee of your small business, you didn’t’ need Workers’ Compensation insurance. You will have to purchase a policy for your new employee, though. Purchase it from a commercial carrier or through their state’s Workers’ Compensation Insurance program.

Post Any Required Notices

Because of labor laws, you must post certain posters in the workplace. They detail employee rights, responsibilities and safety details.

File Your Taxes

In general, employers with employees who are subject to income tax withholding must file quarterly federal tax returns. Discuss the details with your accountant to ensure you follow the law.

Your customers and clients rely on you to keep their data secure. If you don’t, their identities, credit cards and other information could be stolen, and you could be sued. Achieve data security in your small business when you take 10 steps.

1. Perform a Security Audit

   The type and amount of data you store and the equipment that data is stored on affects the security system you implement. Evaluate your needs before you implement a security system.

2. Know Your Industry’s Regulations

   All data needs to be protected, but different industries have different regulations. Research the guidelines so you can follow the law.

3. Store Only Essential Data

   When possible, err on the side of keeping less data. It’s better to delete information and have to ask for it later than to store it and risk a breach.

4. Store Customer Data Separately

   Keep your customer data and business information stored on separate networks. For safety, restrict access to the sensitive customer information.

5. Improve Your Security

   Strong passwords, two-step authentication when accessing systems, pass codes on your firewalls and encryption are four ways to improve your security.

6. Clean Your Computers

   Update and run antivirus and anti-malware software regularly, properly patch software, turn on system logs and archive them monthly, immediately deactivate former employees’ access, allow remote access only through secure VPN and don’t use Wi-Fi. You should also follow a written policy that outlines how and when to clean or destroy hard drives, USB memory sticks, CDs and DVDs as you keep your computers clean.

7. Use a Shredder

   Instead of tossing sensitive documents in the trash, shred them. Use a cross cut shredder for best results.

8. Turn Off Machines

   You probably log out of your computers at night, but remember to turn off copiers and printers, too. If they’re connected to the internet, the sensitive data stored on their internal hard drives could be compromised.

9. Train Employees

   All of your employees should know how to guard data and how to protect their equipment, including mobile phones and portable storage devices. They should never store credit card information, open suspicious emails or store important anywhere except the company’s cloud-based storage system.

10. Create and Enforce a Data Protection Policy

    Educate your entire staff on proper procedure. An official policy gives them something to reference and is easy to update as your security improves.

If there’s a college campus near you, consider hiring the students. They often need a job, and they may even be looking for a career. Take advantage of that market when you use these tips.

Set Up a Booth at a Career Fair

Call the college and find out when the next career fair is being held. Set up a booth, prepare a raffle item and share your business opportunity.

Build Relationships With College Officials and Professors

The college’s development officials and professors know the students better than you do. Cultivate relationships and get to know them. When you’re ready to hire someone, ask your contacts for quality referrals.

Teach a Class

Use your professional skills to teach a class. One of your students could be your next employee.

Sponsor Campus Events

Sporting, social and civic events are important aspects of college life. When you sponsor one of these events, you increase your business’s visibility and support the college.

Use Social Media

College students are active on social media, and your chances of recruiting new employees increases if you jump online, too. Post regularly on Twitter, Instagram, Snapchat and Facebook. As a bonus, use social media to research potential hires, too.

Create a Video Series

Today’s students are visual, so create and post videos that are valuable to college students. Possible topics include how to save money on clothes, storage hacks for dorm rooms, ways to get involved in the community and tips for acing a job interview.

Do a Giveaway

Everyone likes free stuff, especially college students on a budget. Host an online or in-person contest where entries are given in exchange for a student’s contact information. The prize can be a tech gadget, cash, free food or something else.

Offer a College Discount

Depending on your company’s product or service, offer a discount to students. You’ll build your contacts list and relationships as the students shop at your store.

Hold an Open House

Invite local college students to an open house at your business. Provide free food and door prizes as you give tours or demos of your products and services. Every student who attends should fill out a contact form, and you can contact those students when you’re ready to hire.

Offer Shares in Your Company

If you can’t afford to offer an attractive salary or benefits package, offer shares of your business instead. College students value the opportunity to have a voice in the decision-making and future of their company.

Franchises allow you to own and operate your own business. They’re available in different industries and require varied investments. Before you buy a franchise, understand how to choose the right one for you.

Know Yourself

Honestly evaluate you and your needs before you invest in a franchise. Ask several key questions that help you choose the franchise that’s a good fit for you.

1. What do you hope to gain from a franchise?

   Will it replace your full-time income, provide extra money you can invest or be the first store in your franchise empire?

2. What are your strengths?

   Your strengths and skills, including the ability to cold call, interact with customers and train employees, affect your ability to operate a franchise successfully.

3. How involved can you be?

   Be realistic about how much time you can invest in the business, particularly if you plan to keep your full-time job, so that you don’t overextend yourself or your resources.

4. How much money do you plan to invest?

   The total investment includes franchise fees, inventory, equipment, working capital and other costs and ranges from $10,000 to more than $200,000. Also, remember that you need enough money to live off of while your new business grows and becomes profitable.

5. What’s your exit strategy?

   It seems strange to think about ending your franchise before you’ve even chosen one, but many franchises include stipulations that make selling difficult, so you need to know if you plan to pass your business onto your kids or sell it in five.

Narrow Down Your Options

After you know yourself, narrow down your franchise options. Decide if you want a retail, non-retail, industrial or home-based franchise. Then choose an industry. When creating your short list of options, use logic rather than emotion. For example, you may enjoy working as a mobile dog groomer or tax professional, but does that franchise match your goals and skill set?

Do Your Due Diligence

You’re now ready to finalize your franchise purchase. Be sure to do all your homework so that you’re not surprised by fees or other challenges.

Your first step is to review the Franchise Disclosure Document (FDD). It’s a 100-150 page document that answers questions about the franchise costs, rules and restrictions, franchisor’s litigation history, financial performance representation and type of training and support offered.

You should also meet with your franchisor. Make sure you’re on the same page regarding business philosophies and management style.

Talk to other franchisees, too. Get real world answers to your questions as you make sure this business is right for you.

Employee retention boosts your business’s revenue, productivity and morale. One way you can retain employees is by offering a tuition reimbursement program that allows your team members to finish their degrees or learn new skills. Discover more about tuition reimbursement programs as you decide whether or not to include this valuable addition in your employee benefit package.

What Types of Tuition Reimbursement Programs are Available?

There are multiple tuition reimbursement programs, but they all fall into two basic types: prepaid and traditional.

The prepaid method requires you to pay the school for courses your employees take. Because payment is due before the class is finished, you could potentially lose money if your employee quits or fails the class.

The traditional method allows you to create guidelines your enrolled employees must follow. Those guidelines may require employees to earn passing grades and complete courses within a certain time frame. Employees pay for the classes out of their pocket and sign a written agreement stating that they will comply with the requirements before you reimburse them for the classes they take.

How to Establish a Tuition Reimbursement Program

Before you announce your intentions to start a tuition reimbursement program, outline the rules so your employees can understand the program and their obligations.

• Determine any employee qualifications for the program

• Indicate how long a person must be employed before they become eligible for tuition reimbursement

• Specify the amount of time an employee must remain with your company after they earn a degree

• Decide if employees can attend online or campus-based schools and whether they can go full-time or part-time

• Set a yearly cap

• Outline expected grade requirements

• Note the documentation required to show program requirement completion

• Create a monitoring system that verifies that employees meet program requirements

The Benefits of Tuition Reimbursement Programs

If you decide to offer tuition reimbursement, make sure it’s beneficial for you and employees. Ideally, you should gain more knowledgeable and skilled employees, and the employees should receive a free education that enables them to be more productive and earn more money.

The Tax Advantages of Tuition Reimbursement

Tuition reimbursement programs can provide you with a tax break. To be eligible, meet one of two IRS methods.

1. Submit a formal plan in writing. It defines employee eligibility, includes a financial cap on your participation (normally $5,250) and is free from all forms of discrimination.

1. Implement a working condition fringe benefit. No written plan is required, you don’t have to cap benefits and you can pick and choose employees to participate in the program.

A tuition reimbursement program can help you attract and retain quality employees. Consider implementing one for your company. For more details, talk with your accountant or financial advisor.

As a small business owner, you always look for ways to improve your company’s bottom line. Sometimes, you may be so focused on helping the business succeed that you forget your own needs. Be prepared for unexpected financial challenges, give your family peace of mind and reduce stress when you save an emergency fund. It’s an important part of your financial portfolio.

What is an Emergency Fund?

• Your biggest client sells the company and stops placing orders.

• Your husband discovers termites in the basement.

• Your son needs oral surgery that’s not covered by insurance.

These emergencies are a few examples of unexpected expenses that affect your finances. You could withdraw from your 401(k) or IRA, take out a loan or borrow from your business, but those steps cause severe penalties both now and in the future. With an emergency fund, you can weather these challenges with little ill effects.

How Much Should you Save in an Emergency Fund?

Everyone’s needs are different. Use these guidelines as a starting point for deciding how much money your emergency fund should have.

1. At minimum, save three months of living expenses. These expenses include your mortgage, utilities, insurance, food, entertainment, debt repayment, school tuition, clothing and other daily living expenses. As an example, you should save $9,000 if your monthly living expenses total $3,000.

1. If you have dependents, including a spouse, children or aging parents, save six months of living expenses. This figure protects your loved ones and accommodates the higher cost of living you may incur.

1. If you’re a high wage earner or concerned even a little bit about your business’s financial future, save 12 months of living expenses. This figure is significant, but it gives you peace of mind in case something goes wrong.

Where Should you Invest Your Emergency Fund?

Because you need your emergency funds accessible, don’t invest them in an account that will penalize you for withdrawing from it. Instead, consider a short-term certificate of deposit or a regular savings account at an online bank. Shop around to find the best interest rate.

How Can you Boost Emergency Fund Savings?

It can be intimidating to save thousands of dollars in an emergency fund, but you can do it one dollar at a time. Start saving money automatically from every paycheck. You can also give up a coffee or two each week and look for other ways to cut expenses. Consider selling unused items as you build your emergency fund, too.

Saving an emergency fund gives you a cushion in case something happens to your business or at home. For more details about how much you should save, talk to your financial advisor or accountant.

Every small business needs to be equipped with functioning fire extinguishers. Local and city codes and your insurance company mandate specific requirements, and here a few of the guidelines you’ll need to know as you practice fire extinguish safety.

Ensure Extinguisher Accessibility

During a fire, you don’t want to have to search for the fire extinguisher behind a pile of boxes or in a closet. Mount it somewhere that’s easily accessible but does not hinder anyone from exiting the building. Also, if the fire extinguisher weighs less than 40 pounds, mount it on a permanent structure that’s three to five feet off the floor.

Use the Correct Size and Type

The fire load of your business determines how many fire extinguishers you need and what size they are. As an example, a retail space with less than 3,000 square feet of space may need only one 5-pound extinguisher, but if candles or pool chemicals are sold in that space, two extinguishers located at opposite ends of the building may be required.

Test Extinguishers Regularly

Like most things in your office, fire extinguishers do wear out even if they’re not used. Follow this testing schedule to ensure your extinguishers are ready to go when you need them.

Six years after your dry chemical fire extinguisher is manufactured, it must undergo routine maintenance. The handle, stem, internal parts and chemicals are removed and the cylinder is pressure tested and inspected for wear, tear, damage and defects. The extinguisher is then reassembled, charged and tested to ensure it doesn’t leak. A new inspection tag is attached if the extinguisher passes all these tests.

Twelve years after the manufacturer’s date, perform a hydrostatic test on your extinguisher. It receives a hydrostatic test sticker or stamp if it is serviceable.

You’ll also want to perform monthly checks on your extinguisher. Be sure the extinguisher hasn’t been tampered with, vandalized or damaged and check for missing parts and improper pressure. The supervisor or designated employee who does these monthly checks should initial the inspection tag to verify that the extinguisher is ready for use.

Provide Proof of Inspection

The fire extinguishers in your business much be inspected annually by a licensed technician. During the inspection, the technician will verify that the extinguisher is undamaged and not discharged, is the correct pressure, has a debris-free hose and is properly mounted. Each extinguisher that passes inspection receives a tag that’s punched with the inspection month and year.

The fire extinguishers in your building could save lives. Follow these safety tips to ensure your extinguishers are ready for action. You can also ask your insurance agent or building inspector for additional safety tips.

Is your small business prepared if a natural disaster, equipment malfunction or other unforeseen event disrupts daily operation? A Continuity of Operation Plan or COOP analyzes your business, identifies critical resources, personnel and weaknesses, and outlines a contingency plan. You need a COOP to protect your business’s future, and these tips help you create one today.

Do a Business Impact Analysis

When creating a COOP, start by doing a Business Impact Analysis (BIA). It removes all the layers in your business until you only have the absolute necessities required for your company to continue operating. Consider your personnel, finances, operations, ordering and distribution as you do the BIA.

Assess the Risks

After you identify your company’s BIA, make a list of risks, threats and hazards your business faces. Those risks will be unique to your area and could include natural disasters like tornadoes, hurricanes or floods, equipment malfunctions, data breaches or illnesses of key employees.

With your list of risks, you can create contingency plans that account for the worst-case scenarios and ensure your business can remain operational. As an example, let’s say you rely on two key pieces of heavy equipment that sit outside. Plan to store those machines in an alternative location nearby during hurricane season so that they’re protected and available to you if bad weather strikes.

Plan for Resiliency

The most successful businesses are resilient in the face of adversity. Your business can be, too, as you prepare for potential risks, threats and disasters, but resilience requires planning. Depending on your BIA, you may need to take these steps as you prepare for anything.

• Cross-train employees to cover necessary duties if your key people are unable to come to work.

• Decentralize operations of key tasks to ensure at least parts of your business are up and running when disaster strikes.

• Have another location on-call in case you can’t access your building.

• Back up critical data at least once a day to prevent loss.

• Store records online or in a separate location to decrease the risk of a data breach.

• Know how to reach key employees and customers any time day or night.

• Protect your equipment or prepare back-up equipment if yours is damaged or inaccessible.

• Open a financial account with emergency money to cover operations in the event you cannot access your regular accounts.

Your Continuity of Operations Plan can keep your business operational in the face of disasters and emergencies. When preparing your COOP, talk to your insurance agent. He or she can help you write a comprehensive list of threats and risks, assist you in creating a plan that addresses those issues and increase your business’s likelihood of surviving adversity.

As a small business owner, you have a huge responsibility when it comes to making your business a success. Your heavy workload can lead to burnout, though. Improve your ability to stay in business and boost your creativity, productivity and focus when you take breaks.

Schedule Breaks

Your daily schedule is filled with meetings, trainings, projects and networking. These tasks are essential, but where are your breaks?

Starting today, include meal times, regular exercise and family nights into your daily schedule. Mark out vacation, too. Writing breaks on your schedule shows that you prioritize them and ensures you have time to eat, play and relax. Adding breaks to your schedule models a good work life balance to your staff, too, which helps them stay focused and energized at work.

Stick to Your Schedule

Now that you added breaks to your schedule, take them! Don’t make excuses or promise to take a longer break tomorrow. Tomorrow will be busy, too.

Set alarms on your phone that remind you to stick to your break schedule. You can also plan a fun activity, like chatting with a friend, walking your dog or eating your favorite sushi to enjoy on your break. By keeping your schedule, your creativity, productivity and work life balance will thank you.

Take Advantage of Natural Stopping Points

You’re all set to take breaks, but the big projects you have scheduled don’t take breaks. Use natural stopping points to stay on track and get away.

Divide the project into milestones, calculate how long each milestone will take to complete and schedule your breaks to occur then. This technique gives you something to work toward and look forward to, and after your break, your brain will be fresh and ready to tackle the next thing on your to-do list.

Make the Appropriate Arrangements

Don’t let your work keep you from taking the breaks you need. Whether you get away for a few hours or a few weeks, a little planning and a few arrangements allow your business to keep moving forward even when you’re not present.

To put your plan in action, assign staff to do your duties. Then communicate with your clients. Work out a schedule that allows you to get away and finish any projects, even if that means putting in a few extra hours before you leave or postponing some work. The planning effort is challenging, but your mind and body need to get away from work once in awhile.

Breaks allow you to regroup, recharge, prevent burnout and stay focused. They’re essential for your business’s success. What will you do during your next break?