As a small business owner or manager, it’s never easy to lay off employees. Unfortunately, economic and unforeseen conditions can make it necessary to make difficult business decisions that impact the livelihoods of your team members.
The pace of employment growth remains near zero for small businesses, with some sectors seeing declines in employment. For example, employment in the leisure and hospitality, professional and business services, and information industries fell month-over-month in June.
With this in mind, it’s important to know how to lay off employees with dignity and empathy. Not only will this help your employees through a difficult time, it will also help your business maintain morale. There’s no best or ideal way to let people go, but there are respectful and compassionate ways to go about it.
How to prepare for compassionate layoffs
Compassionate layoffs can minimize the negative impact on employees and treat them with respect and empathy throughout the process. Roughly half of employed Americans have anxiety about layoffs, according to Intoo.
Here are some tips for making the process less stressful for everyone:
1. Consider the needs of your business
While layoffs are never an easy decision, sometimes they’re necessary to ensure your company’s continued success and profitability. Here are some key factors to consider when evaluating the needs of your business:
- Economic conditions: If your company is struggling financially and is experiencing a decline in revenue, laying off employees may be a necessary step to cut costs and stay afloat.
- Performance issues: Terminating employees can help maintain productivity and efficiency if there are performance issues.
- Business decisions: Sometimes, layoffs may result from broader business decisions, such as reorganizations, mergers, or acquisitions, that require a reduction of workforce. Layoffs may be necessary to restructure your company and eliminate redundant positions.
You’ll want to carefully evaluate the company’s needs before making any decisions regarding layoffs. While it can be difficult, it’s crucial to approach this process with objectivity and a focus on the long-term success of your business.
2. Gather necessary information
Gathering necessary information is a critical step in laying off employees with the dignity they deserve. Before making any decisions, you should take the time to gather all the pertinent information related to the layoff process, such as:
- Employee records
- Performance reviews
- Job descriptions
- Roles and responsibilities for employees
- Company policies regarding layoffs.
You’ll also want to collect relevant information for employees ahead of time, such as severance details.
3. Ensure it’s fair
Business owners and managers should ensure that the layoff process is fair, objective, and transparent. It’s key to base your layoff decision solely on performance and business needs. Make sure the layoffs avoid discrimination or personal bias and adhere to payroll laws and regulations.
Other ways to ensure fairness include providing employees with a reasonable notice period, such as two weeks, and offering them a fair severance package based on experience and how long they’ve been with the company.
4. Select the right time
Laying off employees is emotional and stressful, so choose an appropriate time and place to deliver the news. Schedule a meeting with the affected employee in a quiet and private setting.
Midweek can be an ideal time, as it allows enough time for employees to handle any work-related items while also being able to start their job search.
Avoid delivering the news via email or phone, and be mindful of what the employee has going on in their personal life.
Best practices for laying off small business employees
Laying off employees is never an easy task, especially for small businesses that rely heavily on their team’s support and hard work. If a time comes when you have to lay off long-term employees, you’ll want to have a clear and well-defined process in place.
Create a layoff plan
The layoff process should include details such as who will be involved in the decision-making process, how to notify the affected employees, and what kind of support and resources to provide during the transition period.
Consider factors such as who will be conducting the notification meetings, where they will take place, and what information to share during the meetings.
Also ensure you plan for necessary messages or updates to other employees, clients, and stakeholders. You should outline your layoff plan in the company policy or employee handbook and communicate it to all necessary employees.
Note that if you are covered by the WARN Act (which most companies with 100 or more full-time employees are) you may have to meet certain notice requirements if you are doing a sizable layoff.
Provide transition initiatives
A transition plan will help affected employees and should outline the specifics of the process, including timelines and next steps. Providing a clear transition plan can help ease some of the uncertainty and anxiety employees may feel during this challenging time.
Items you should mention to help with the transition include:
- Whether there’s a severance package, which can include compensation or continuation of benefits for a set period.
- When and how to expect paid time off payout (aka compensation for unused paid time off).
- If you offer outplacement services like resume writing assistance, job search help, and career coaching or development services.
- If they’re eligible and how to apply for unemployment insurance.
By providing both practical and emotional support, businesses can help foster a positive transition for their employees and maintain a positive relationship with former and current employees despite economic hardships.
Build morale
While the focus may be on those who are being let go, it’s crucial for businesses to take steps to build the morale of their remaining workforce. Those employees may be experiencing a range of emotions like fear, uncertainty, and guilt.
One way to build morale is to communicate openly and honestly about the layoff process. Employees may feel more secure knowing that the business is transparent about what’s happening and why.
It’s also important to offer support and resources to help employees cope with any emotions they may be feeling due to the layoffs. This can include counseling services, support groups, or even an open-door policy for employees to discuss their concerns.
Communication tips for laying off employees with dignity
One of the most critical aspects of laying off employees with dignity and respect is communication. The way a business owner or manager communicates layoffs can have a profound impact on the emotional and mental well-being of all employees. Here are some tips to help business leaders communicate layoffs in a respectful and compassionate way:
Do it in person
When it comes to laying off employees, it can be tempting to inform them via email or phone calls. However, this can negatively impact employees and the company as a whole.
Making an effort to inform employees of layoffs in person (or via video if necessary) is a crucial step in maintaining dignity and respect throughout the process. While it may be difficult to have these conversations face-to-face, it demonstrates that the business values its employees and recognizes the gravity of the situation.
Notifying employees of layoffs in person can help prevent confusion or misunderstandings that may arise from electronic communication. It also allows for a controlled and respectful environment, as opposed to the potentially chaotic and emotional response that can come from an email or phone call.
Be transparent but empathetic
When delivering the news to employees, it’s important to be transparent and honest about why the layoff is necessary, such as cash flow problems or economic concerns. Start by expressing gratitude for the employee’s contributions to the company and acknowledging the challenging nature of the situation.
If the layoff is due to performance issues, be specific about what those issues were and how they led to the decision to lay off employees. Being transparent helps employees better understand why layoffs are happening and reduces feelings of confusion or mistrust.
At the same time, show empathy and extra care throughout the layoff process by acknowledging their emotional response to the news. Use statements such as, “I understand this is hard news to hear,” or “I know this is a difficult time for you.” Ensure that key players involved in the process, such as senior managers, also understand the need for empathy and extra care.
Don’t overpromise
The decision to lay off employees is never an easy one, and a company may want to do everything it can to soften the blow and ease the transition. However, it’s important to avoid overpromising during the layoff process.
Making promises that you can’t keep or providing false hope can have negative consequences for both the affected employees and the company as a whole. Additionally, employees may feel misled or betrayed, and your company’s reputation can suffer.
For example, promises about outplacement services, unemployment, and job search resources should be made with caution. While these resources can be valuable for laid-off employees, it’s important to be realistic about what you can offer.
Empower your business to move forward
Laying off employees is never an easy decision. However, by handling the process with dignity, empathy, and extra care, your business can help make the transition period as positive as possible for everyone involved.
Remember that how you handle layoffs will impact the affected employees and your business’s reputation in the broader business community.
This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
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Top 10 sales tax strategies for small businesses
Many of us dream of running our own business and when we act on that dream, the life of joy we envisioned can quickly turn to pain if we fail to adjust to ever-changing tax requirements. Some of the more recent tax changes apply to simple sales tax, which becomes not so simple for those with a sizeable number of online sales or high dollar amount of online sales in multiple states. If this is your business scenario, the following 10 strategies for dealing with sales and other business taxes will help you maintain or bring back the joy of running your own company.
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In the past, retailers typically needed to register, calculate, collect, and report sales tax in jurisdictions only where their business had a physical presence. This presence provided the minimum connection, or nexus, needed for a state or local to require tax registration, collection and reporting from retailers. The 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, 585 U.S. ___ (2018), however, broadened nexus to include economic presence and immediately triggered other states to enact or begin to enforce their own economic nexus laws. For a current list of economic nexus laws, by state, see the Supreme Court Tax Decision – Online Tax Laws by State. In reviewing the article, you may notice that many states base their new economic threshold on the:
- dollar amount of sales or number of transactions; or
- dollar amount of sales and number of transactions
To complicate the matter even more, the definition of “sale” is not uniform among the states, and can vary between gross, retail, or taxable sales.
Business license tax
New jurisdictional sales tax responsibilities may also trigger new Business License Tax liabilities, albeit often low dollar. Nonetheless, not understanding your tax requirements can create administrative headaches and detract you from focusing on your true passion, your business. When dealing with a tax agency directly to understand your sales and other business tax obligations it is often best practice to request the agent direct you to the written guidance on the revenue agency website to help avoid any misunderstanding or miss-guidance.
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In light of the Wayfair ruling, many states have enacted, or are in the process of enacting, new rules with regard to Marketplace Facilitators. Make sure your facilitator agreements stay compliant with these tax changes.
1099-K impact
Sales via a Marketplace Facilitator may result in the facilitator issuing you a Form 1099-K, reporting gross payments received from the facilitator on qualifying sales. If facilitators are responsible for reporting and paying sales tax on your sales via their online portals then make sure the 1099-K received is not overstating your income by the amount of this tax. If it is, then request an amended 1099-K. Otherwise, you could be stuck with the mess of having to reconcile your 1099-K reported income with a tax agency.
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Whether you are the business owner or only deal with the accounting and tax issues for the company, you should always understand what it is the business is selling in relation to the sales tax rules. Sometimes, what you think is exempt might actually be taxable, depending on the jurisdiction. If you provide a service along with the sale of goods, the service may be included in the tax base but may be exempt when provided alone. The key, know what you are selling and check your state(s) taxability rules to avoid any audit assessments down the road.
Sales tax calculator
Even if you sell standard taxable goods, for multi-state sellers it can be overwhelming to keep up with sales tax rate changes that are constantly happening throughout the US. To ease this burden, consider using a reputable sales tax calculator (including our sales tax calculator), which provides current sales tax rates for all of the more than 10,500 US state and local taxing jurisdictions.
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Not all sales that qualify for an exemption are exempt on their face. Often, exemptions apply based on the buyer (e.g. non-profit) or the intended use of the goods sold (e.g. resale). To support an exemption in these instances, a seller must obtain a properly completed exemption certificate from the buyer. Trouble arises when something about the certificate is wrong or the exemption period listed on the certificate has expired. If you have exempt sales based on receipt of a properly completed exemption certificate, you must create a process for storing the certificates and, prior to exempting any sales based on a certificate, make sure the certificate provided is one the applicable state will accept. Otherwise, you could be stuck paying for uncollected tax, plus any penalties and interest imposed by the state.
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Sometimes small businesses purchase goods for use in their business without paying any tax. If this is you, remember that there might be an obligation to self-assess use tax on the purchase. Continued failure to report use tax by small businesses may trigger an audit. The key to avoid mishap is to set-up a process to catch and report applicable use tax on purchases.
Personal property tax
Align the process for use tax accrual with any state/local Personal Property Tax compliance, if applicable, to help with tax abatement and filing deadlines.
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When a business registers to collect and report sales and use tax, the tax authority provides a notice to the business of the proper filing frequency and will issue notices per tax type if a jurisdiction treats tax types differently (IE: sales or use tax).
Filing frequency
The filing frequency defines when tax must be reported and paid to the tax authority. It is usually based on revenue and typically set to monthly, with tax due on or before the 20th of the month following the period reported. For example, an October monthly return may be due on or before November 20. 24 States have worked to unify their filing rules under the Streamlined Sales Tax (SST) and require monthly filing, but those filing rules only apply to certain sellers. The key here is to remember that every tax jurisdiction has its own filing frequency thresholds and your initially assigned frequency can change.
Tax type considerations
Many states, like Massachusetts, administer tax on sales the same way regardless of where the sale originated. Further, if a business needs to self-assess use tax on purchases, that tax is often also reported on the sales tax return. Some states, however, differentiate tax administration by tax types:
- Sales tax – intra-state sales; occurring within a state;
- Seller’s use or vendor’s use tax – inter-state sales; occurring between states;
- Consumer’s use tax – on purchases for which tax was not properly paid.
Jurisdictions with tax type distinctions typically require separate registration and reporting, per tax type. Even when businesses report different tax types on the same return, they must make sure to report each tax type on a separate line. Reporting for the correct tax types every month, in every state always helps small businesses minimize out-of-pocket tax expenses.
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More and more states are moving from paper to an electronic process for reporting and paying sales tax. Make sure to follow these e-requirements or states may assess penalties, even on zero-dollar returns.
Also, remember that states can make mistakes or have technical “glitches.” Save your online confirmations, as well as proofs of mailing and cancelled checks related to paper submissions, so that if there is a mistake, you can use that proof to eliminate penalty or interest assessed for late submissions.
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Many states offer a collection allowance or timely-file discount, regardless of whether filing returns electronically or by paper. When a discount is available, claim it. There is no point in leaving money on the table. When claiming discounts, however, be careful that your business is reporting under the correct tax type because not all jurisdictions allow a discount for every tax type.
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How can small businesses keep track of filing frequency and due dates in every jurisdiction where they are required to report, especially as that number grows? One way is to set calendar reminders, including special rules for payments. If filing by mail, it is important to note which jurisdictions treat the return and payment timely if postmarked on or before the due date or measure timeliness based on the receipt date, an issue common for Alaska locals, for example.
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Small businesses never want to miss a DOR notice or fail to timely act on a notice as required, especially an audit notice. If you have an online DOR sales/use tax account, make sure your business name, address, phone and email are current. If you authorize the DOR to send notices via the online account, set-up a process to also receive hard copies, by mail. Once you get a notice, read it and respond in accordance with the instructions and timelines contained in the notice.
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As your business grows in the e-commerce market, things can get very complicated and hard to keep track of for small businesses. Consider these 10 strategies for dealing with sales tax and a few other business taxes. It will help you retain or bring back the joy of running your own company. You can also consider the use of an automated sales tax solution such as QuickBooks Sales Tax to help manage the nuances of sales tax laws, reduce the risk of error, and minimize the likelihood of a sales tax audit.
This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
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