September/October
2006: by Jim Nellis
It's all about the people...
If you own a business in Saskatchewan (or in
Canada for that matter) in almost any industry one of the biggest
challenges you are facing is finding and retaining good employees
and executives.
The competition for labor is as fierce today
as it has ever been, challenging employers to look for new ways
to attract and retain people.
Recently I attended a speaking event in Saskatoon
entitled "lessons I've learned" where I listened to
four prominent Saskatchewan business leaders in different career
stages and different industries.Without exception all of these
individuals made a point of stressing the critical importance
of the people who work with them to grow there business.
World Famous Entrepreneur Andrew Carnegie once
commented: "Take away my factories, my plants; take away
my railroads, my transportation; take away my money; strip me
of all these, but leave me my people and in two years I will have
them all again."
Business owners know the value of key people
in their organizations: executives who envision production at
unheard-of levels; technical wizards who streamline and invent;
top sales people who continually outperform their colleagues;
and office managers who transform staff into finely tuned administrative
units. These people have one thing in common; they make a significant
contribution to the profitability of their company. I am not a
human resource management expert but I do know keeping and motivating
key employees takes more than just a salary. A closer look at
supplemental compensation plans and benefit packages may provide
employers a new direction to consider. The following are different
strategies that we have helped implement for some of our clients.
Supplemental retirement pensions: Generally,
these programs provide significant tax deductions for the corporation
if the shareholder/employee's income has been in the $86,000 (plus)
range and age is 45 or older.An individual pension plan can be
established for the owner/employee(s) "promising" a
pension benefit based on salary and years of service to the company.
Once the pension amount is determined, the amount of deposits
necessary to provide the level of promised benefit is established.
The deposits will be made by the corporation to the pension plan
on a tax-deductible basis and will be larger than RRSP limits
each year.
Salary continuation plans: Said to be
the single benefit key employees are most reluctant to leave behind.
Basically this is an exchange of promises. The key employee(s)
promise to remain with the business until retiring at a specific
age. In return, the business promises to pay a benefit at retirement
and a death benefit to the employees' family if he or she dies
before all promised benefits are paid. It is ideal for high earning
employees and executives in high tax brackets, it defers income
from peak earning years to some future years when a highly paid
employee is in a lower tax bracket. Typically insurance is used
to fund the plan and it is possible to structure the plan so the
company recovers its costs.
Profit sharing plans: The Company contributes
a portion of its pre-tax profits to a pool that will be distributed
among eligible employees, done on a quarterly or annual basis.
The motivation for doing this would be to bring your employees
together to work toward the success of the company and to enhance
commitment to company goals. There are some potential negatives
associated with profit sharing plans. The pay for each employee
moves up or down together, and it does not give merit to individual
performance. For smaller companies, these plans may result in
drastic swings in earnings for employees' which they may find
difficult to manage.
Group benefits packages: The world of
employee benefits is changing and is offering new ways to look
at serving your employees.Among many new trends that are emerging,
employee assistance programs (EAP) are helping to improve the
psychological health of your company. An EAP is established to
help your employees develop coping skills and accept a greater
degree of responsibility. It will help the resolve individual,
marital, family and job performance problems.
Implementation of these strategies should be
done with careful consideration as every situation is unique.
It would be wise to consult your financial advisor, accountant
or lawyer when making strategic changes to your compensation and
benefit plans.
. . .
About the author
Jim Nellis, B.Comm, is a Financial Planning Advisor with Assante
Financial Management Ltd. He can be reached at 1-877-837-3377
or 306-665-3377, or Click
to email Jim Nellis.
Disclaimer
Please contact a professional advisor to discuss your particular
circumstances prior to acting on the information above. The opinions
expressed are those of the author and not necessarily those of
Assante Financial Management Ltd.
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