Whether as a result of a booming economy, tighter immigration laws or an educational system gone astray, finding qualified job applicants has become increasingly more difficult for those in the snow removal and ice management industry. Even more troubling for many smaller businesses is the question of how they can compete for badly-needed, qualified workers?
Fortunately, thanks to our unique tax laws, every snow removal contractor can afford to offer fringe benefits to their workers and may even be able to benefit themselves. That's right, our tax laws merely prevent employers from discriminating in favor of owners, key employees or other highly-compensated individuals when setting up any benefits plan that is to be tax deductible by the business and tax-free to the recipient.
Fringe benefits are often defined as property and/or services whose benefit to employees frequently outweighs the cost to the employer. With several notable exceptions, fringe benefits are generally included in an employee’s gross, taxable income where they are subject to income tax withholding and employment taxes.
However, while some fringe benefits are included in an employees’ taxable wages, other fringe benefits aren’t taxable wages and, yet, remain deductible by the employer. Among these exceptions are nontaxable fringe benefits, so-called “qualified” fringe benefits such as health insurance, medical expense reimbursements, dental insurance, education assistance and day-care assistance. Yes, tax qualified benefits are deductible by employers and totally free of federal and state income taxes as well as the employee’s Social Security and Medicare taxes.
These tax savings obviously make fringe benefits an attraction. However, thanks to last December’s Tax Cuts and Jobs Act, the array of tax-free fringe benefits that employers can provide employees is not quite as generous as it used to be.
Surprisingly, survey after survey shows that it is not money alone that attracts new workers and keeps existing employees on the job. It is the benefits. In fact, currently treasured by job seekers – and employees – are flexibility and the opportunity to balance work with other life responsibilities, interests and issues. But, obviously, no snow removal or ice management business can be an employer of choice without a good benefits package. Job training, educational assistance and employer-provided vehicles used for business are among the common working condition fringe benefits for many small businesses.
Training and educational assistance
On-the-job training provided by an employer is a tax-free hiring incentive as well as an invaluable “perk” for current employees. Educational assistance and tuition reimbursement are also welcome fringe benefits.
A formal, written educational assistance plan doesn’t require immediate employer funding, only provide reimbursement for an employee’s educational expenses – up to $5,250 per employee, per year and exempt from tax. Educational assistance doesn’t just include tuition assistance, but also payments for books, equipment and other expenses related to continuing education.
While pay often isn’t the primary goal of many job seekers, every snow removal business owner and manager should keep in mind that, in today’s job market, compensation remains an important factor. By surveying the local job market and the compensation offered by others in the snow removal industry, a contractor can pay better than average to attract the best candidates.
Benefits offered by a snow removal contractor or business should also be above industry standards and new fringe benefits added — when they are affordable. Existing employees should be educated about the cost of their benefits, so they appreciate that their needs are being addressed.
Job seekers and employees are increasingly looking for cafeteria-style benefit plans in which they can balance their choices with those of a working spouse or partner. Profit sharing plans and bonuses that pay employees for measurable achievements and contributions are invaluable.
BONUSES: Bonuses and awards must, as mentioned, be included in an employee's taxable income. Should the bonus or award be in the form of goods or services, employees must include the fair market value of those goods or services in their income. The same applies to holiday gifts. However, employees receiving turkeys, hams or similar items of nominal value from their employers at Christmas or other holidays may exclude the value of the gift from their income.
PROFIT-SHARING PLANS: A profit-sharing plan, often a “deferred profit-sharing plan (DPSP), gives employees a share in the profits of the snow removal business. Under this type of plan, an employee receives a percentage of the operation’s profits based on its quarterly or annual earnings. This is a great incentive to attract new workers and a way to give employees a sense of ownership in the business. Not too surprisingly, however, there are restrictions as to when and how a person can withdraw these funds without a penalty.
The contribution limit for a snow removal business sharing its profits with an employee is the lesser of 25 percent of the employee’s compensation or $55,000. To implement a profit-sharing plan, the snow removal professional must file a Form 5500-series return/report and disclose all participants of the plan. Early withdrawals, just as with other retirement plans, are subject to penalties.
ESOP: An Employee Stock Ownership Plan, or ESOP, is an employee-owner program that provides workers with an ownership interest in the snow removal or ice management business – tax-free. An ESOP is a qualified defined contribution employee benefit plan designed to invest primarily in the stock of the employer.
In general, employees are provided with ownership with no upfront cost. The shares provided can be held in trust for safety and growth until the employee retires or resigns. At that time, the shares do go back to the business for further redistribution or are completely voided.
Cheap and valuable
So-called "de minimis" benefits may be worth little or nothing in the eyes of our lawmakers but go a long way toward making employees and prospective employees — happy — without an accompanying tax bill. “De minimis” fringe benefits refer to any property or service that is so small in value that accounting for it is unreasonable or administratively impractical.
The bottom line
To attract talented individuals to work for the snow removal or ice management business, as well as to retain qualified employees, today’s employer must offer fringe benefits and other perks. Once it has been determined what benefits will best attract badly-needed workers in today’s job environment, which benefits employees would prefer and figured which benefits the business can afford, then and only then will it be possible to make an informed choice of which benefits will attract job applicants, benefit your snow removal business and your employees the most.
Knowledge is essential when deciding which benefits work in today’s job market — as are the services of a qualified professional. But, wouldn't it be ironic if those benefits turned out to be the ones which cost your operation the least?