How can any nursery hope to compete for the dwindling number of workers available in today’s marketplace? Most importantly, how can any grower keep the workers that are so essential to their success and afford to compete for new workers to help their business grow?
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. The value of many fringe benefits can be excluded from an employee’s income. And, so long as our tax laws are followed closely, every smart nursery owner can afford to offer fringe benefits to their workers. Of course, although perks or benefits play an important role in the lives of employees as well as their families, no employer should ignore cash.
Cash is king
Determining the appropriate level of cash compensation needed to attract and retain workers means employers should get a sense of what their competition is doing to bring in high-quality employees. Also keep in mind that people like being paid — and not just cash salaries but also those all-important “bonuses.”
Bonuses are a great way to reward the kind of performance an employer is looking for. The classic saying that you get what you pay for is very true when it comes to compensation.
Should the bonus or award be in the form of goods or services, employees must include the fair market value in their income. The same applies to holiday gifts. Employees who receive turkeys, hams or other similar items of nominal value from their employers at Christmas or other holidays, may exclude the value of the gift from their income.
Fortunately, so-called “fringe benefits” are considered a form of pay that often may be specifically excluded from the worker’s taxable income. Fringe benefits are rewards given to employees for thier service and play a crucial role in employee retention and recruiting. And now, thanks to our unique tax laws, nursery owners can afford to offer fringe benefits to their workers, and they may even be able to benefit themselves.
Tax deductible education
Training and education are vitally important to ensure the success and continued profitability of the nursery. Those training and educational expenses, whether paid for by the employer, by a supplier or equipment distributor, or subsidized or sponsored by an industry group or association, can be considered fringe benefits because they are, for the most part, tax-free to the recipient.
When education is offered as a fringe benefit by a nursery, the payments received by an employee for tuition, fees, books, supplies, etc. under the employer’s educational assistance program may be excluded from the employee’s income up to $5,250 per year.
Although the courses covered by the plan need not be job-related, courses involving sports, games or hobbies may be covered only if they involve the employee’s business or are required as part of a degree program. And, best of all, the nursery may claim a full tax deduction for the amounts paid.
Drawbacks include the necessity of a formal tuition reimbursement plan and, obviously, sufficient cash flow to pay the education bills as they become due.
Benefiting from benefits
No matter which specific benefits employees may be clamoring for, or which benefits the competition is offering, every owner or manager needs to assess how those benefits will impact the business. With popular benefits such as generous time-off policies, the operation is going to be able to attract and keep more and better employees. But will those benefits be worth their cost?
Although many growers offer mandatory benefits such as worker's compensation and social security taxes, employers are not required to provide fringe benefits such as paid time off, severance pay, retirement plans or holiday pay. However, while employers can often change or eliminate their paid time off (PTO) policies, they cannot take away PTO hours if they have been accrued. Employees will be entitled to their PTO leave, or the employer will be required to pay workers for the unused time. Similar rules may or may not apply to unused sick leave.
A nursery needing to change any fringe benefits, wages, or hours, should research their state's employment laws to ensure they are in compliance. Also, remember to apply benefit packages consistently to employees in order to prevent discrimination claims.
On the cheap
So-called “de minimis” benefits may be worth little or nothing in the eyes of our lawmakers, but they go a long way toward making an employee happy and without an accompanying tax bill. Under the rules, employees may exclude from their gross income the value of fringe benefits that qualify as de minimis.
De minimis fringe benefits mean any property or service that is so small in value that accounting for it is unreasonable or administratively impractical. Examples include: occasional meal money or local transportation fare; occasional personal use of an employer’s copy machine; occasional cocktail parties, group meals or picnics for employees and their guests; inexpensive birthday or holiday gifts (except cash); coffee, doughnuts and soft drinks; flowers, fruit, books or other similar items given to employees for special occasions or under special circumstances.
The cheapest may be the most expensive
Recognizing the effort made by a worker or their contribution to the profitability of the nursery should be included on any list of economical “benefits” offered by employers. They’re not always inexpensive to the recipient, however.
Unlike many fringe benefits, bonuses and awards must 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 in their income. The same applies to holiday gifts.
The right benefits package can help a small business attract or hold on to top-notch talent.
Small businesses should, according to many experts, consider a bigger menu of benefits to attract and retain older workers. In many cases, the standard benefits could include health insurance (still reqired for larger employers) and an employer-sponsored retirement plan such as a 401(k). Beyond that, the nursery might consider adding non-qualified stock options or a “cafeteria” plan, which allows employees to pay certain qualified expenses such as health insurance premiums, adoption assistance, dependent-care assistance, group-term life insurance coverage, as well as contribute to health savings accounts on a pretax basis, thereby reducing their total taxable income and increasing their spendable/take-home income.
The bottom line
Many small businesses mistakenly believe they cannot afford to offer benefits. However, while going without benefits may boost the growing operation’s bottom line in the short run, a “penny-wise” philosophy could strangle the business's chances for long-term prosperity.
Unfortunately, complications often arise as soon as a nursery begins offering benefits. That's because key benefits such as health insurance and retirement plans fall under government scrutiny, and it is very easy to make mistakes in setting up a benefits plan. And don't think nobody will notice. The IRS can discover in an audit what the nursery is doing doesn't comply with regulations. So can the U.S. Department of Labor, which has recently been beefing up its audit activities. Either way, a mistake can be very expensive, resulting in the loss of tax benefits, retroactively, and penalties can also be imposed.
One of the biggest mistakes is leaving employees out of the plan. Examples range from exclusions of part-timers to failing to extend benefits to clerical and custodial staff. A rule of thumb is that if one employee gets a tax-advantaged benefit — meaning one paid for with pretax dollars — the same benefit must be extended to everyone. Of course, there are loopholes that allow the exclusion of some workers, but no one should even think about trying this without expert advice.
It is ironic that in this market of escalating costs and increased competition for good, qualified employees, many of the benefits that most reward both the employees and the owners are often the ones which cost the least.