California Computer Exemption - 2012

If you currently apply the overtime exemption under the California Computer Professional definition, be prepared for a cost increase in 2012. This exemption, which essentially allows companies to pay certain computer professionals on a salary basis if various criteria are met, is scheduled to see a 2.5% increase in the minimum salary requirement on January 1, 2012. This means that, in addition to the other requirements, you will need to pay your computer professional at least $81,026.25 next year in order to qualify, an increase of almost $2,000 over the current minimum. Of course, the cost to you as an employer is higher once you factor in payroll taxes and workers comp premiums on the additional pay, so it may be worth taking another look at the need for the exemption before committing to the pay increase. If your computer professional is working regular hours already, then you may not be getting much value out of paying him or her on a salary basis.

Spreading The Word

In the endless sea of startups, one of the toughest challenges is finding a way to stand out from the crowd enough to get the magical "buzz" factor in gear. Without a strong network of contacts, finding a way to get people to try out your new site could get frustrating. Most often, we look to our friends and family to help us get to critical mass, but unless they can help you spread the message to the masses effectively, that's all you'll have in the end. I recently came across a really interesting concept that addresses this issue in a very clever way. Wahooly has established a base of highly influential users (bloggers, twitter fiends, industry pundits) that can help get out the word for your new startup. They're gathering applications from which they will select 200 companies to present to their users, who will generate buzz in exchange for a small piece of the action. For example, a company can offer 5% equity to be shared between 5,000 Wahooly users, who's influence could reach huge audiences and immediately draw mass attention to the site. This investment in the company motivates the Wahooly users to pull out all the stops when sharing the news with their networks because they don't get rewarded if it doesn't succeed. You can also use the Wahooly base as your initial beta users, giving you instant mass and valuable feedback. All in all, it's worth checking out as a means of accelerating the development of your business refinement of your site. Here's a link to learn more about Wahooly.

Evaluating HR Options - Speed, Cost & Quality (Part 3)

In our final part of this series, we'll consider the needs for quality in your human resources administration, then tie all of the factors together in a few typical solutions. When you're thinking of the quality of your HR, the main thing to remember is that there's no specific level or amount that's going to completely eliminate your risk as an employer. The true value of quality will reveal itself when things do go wrong and you find yourself prepared and organized to meet the challenge before you!

• Quality - How good does it have to be?
• Payroll:  Standard payroll processing is fairly straightforward, allowing some to do it themselves with the right software. When you have more complex needs though, like multiple worker classifications in different locations, then you'll want to consider more than just the mechanics of payroll and make sure it's paired with high caliber compliance experts as well. There are variations in the laws between states and sometimes even counties or cities, which can be overwhelming.
• Benefits: Traditionally, benefits are meant to help employers attract and retain top talent. These days, cost seems to have undermined this objective as companies strip down their plans to make them more affordable, which is beginning to frustrate their employees. One commonly overlooked area can help mitigate this effect though. 67% of employees that understood their benefits are more likely to be well received, particularly if the plan features have been diminished. The educational campaign needed to achieve this result comes from using benefits professionals that can do more than just explain what the copays and deductibles are.
• Compliance: The amount and complexity of the regulations you are governed by as an employer depends on your size, but you're on the hook even with your first employee. Working with templates may be oversimplifying things as they rarely cover the sheer mass of filings and forms that need to be maintained. Due to the constantly changing legal landscape, the language in your policies needs to be regularly monitored to make sure it's up to date. The more complex your employee structure is (independent contractors, exempt employees, multiple locations, etc.), the more experience you'll want someone to have in the area of compliance.

Whether your a new startup company or considering human resources for the first time, there are three main options for you: do it yourself, hire someone internally or hire a firm externally.

DIY - Using templates and help lines to manage your HR administration.

1. Speed - Since you'll be doing payroll and billing reconciliation for the benefits, it's going to take you more time to attend to the compliance duties you've taken on, so do as much prep work as you can in advance when you do have time.
2. Cost - All this option will cost you is maybe the access fee to the toolkit and a call center for HR help, so this will probably be the least expensive way to manage your human resources administration.
3. Quality - Unless if you happen to have some formal training in the field, you're putting your fate in the hands of the toolkit you're using, which may not be refreshed very often. At the very least, it will be up to you to constantly check to see if the updates are available, and that can get complicated if you're not sure which parts apply to you and your business.

Hire Staff - Obtaining one or more professionals that will serve as your HR department internally.

1. Speed - The average ratio of HR to staff is about 3 for the first 100 people, then about 1 per additional hundred. The high initial number is needed to make sure you have sufficient people to act as backups and provide areas of specialty. 3 people will work quickly enough to keep turnaround times low on most items because they can handle multiple tasks at once.
2. Cost - 3 entry level HR specialists will probably run you at least $100k/year in total compensation, so this will be the most expensive option on the table.
3. Quality - There's only so much expertise you can acquire working internally because you may not have experienced all of the things that could go wrong to know what to do. HR staff that come from a consulting background are more likely to have a well rounded experience, but be ready to pay top dollar to snag them for your own.

Outsource - Contract with an HR firm to provide you with human resources administration.

1. Speed - With their larger size and specialized staff, the firm is more likely to have efficiencies in place that get most tasks done quickly, especially when they require interaction with red tape factories like insurance companies and government agencies.
2. Cost - Because the outsourcing firm will serve as a cauldron of expertise and be able to take on many of the time consuming duties like payroll and benefits administration, you'll probably only need just one internal HR contact for them to work with. This would save you at least $60k/year and a good chunk of that will remain even after paying the firm for its services. You would also gain access to insurance programs commonly at lower rates because of their aggregated policies across their clients. However, if your company only has one location and your staff gets to more than 400 employees, you may find that the economies of scale no longer have the same value they did when you were smaller. In those cases, you can probably begin shifting to an internal HR structure.
3. Quality - Unless you hired HR commandos under option 2, you're probably not going to find a more seasoned team to keep you out of trouble than the outsourcing firm. You usually get specialists focused on the each of the separate HR disciplines who will be at the top of their game and have a constant pulse check on the latest developments.

As you can see, it all depends on what you need and what your means are. Sometimes rolling up your sleeves is all you can afford to do, other times you may be so big that an internal HR department is justified, but when you're looking to focus only on your business and grow, the outsourcing option is a good bet!

Evaluating HR Options - Speed, Cost & Quality (Part 2)

Now that we have evaluated our need for speed, we can begin considering the costs of human resource administration. Determining a budget for these aspects of business operations largely depends on what your expectations and needs are. However, as we'll see below, you don't necessarily get what you paid for in HR. Sometimes (sadly not always) a less expensive option can also be more efficient!

• Cost - How much should I spend on it?
• Payroll: Depending on your needs, you might either do this in-house or outsource it. Contrary to what you might think, it's usually more expensive to have someone process your payroll internally. Even a single entry level payroll administrator could cost you around  $35k/year! However, most companies will roll these duties into another position to save money. The real question is whether you can afford to have this responsibility fall on someone who will probably look at payroll as something they need to "get out of the way" from time to time. The penalties for mistakes can add up quickly because they will probably be repeated on several payrolls before they are identified and resolved. Outsourcing most likely gets you a specialist in payroll for a small fee in the neighborhood of $7-10k/year for a company of about 10 employees.
• Benefits: The main area of benefits costs employers are aware of are the premiums they're billed from the insurance carrier. However, there's also a substantial cost in conducting staff meetings and administering the billing and enrollment relationship with the carriers, especially when offering many choices to your employees. If you employ staff that are in high demand positions, like executives or engineers, the least expensive insurance plan may not be attractive enough for you to bring in top talent for your business.
• Compliance: Just being an employer places you at risk for labor issues, particularly in more complex states like California. Typically, the more experienced, diverse and specialized your compliance team is, the more it will cost you. The amount you allocate to this area will largely depend on your comfort level with risk. Most startup companies face a domino effect of consequences due to litigation because of the effect it has on their funding sources and in the press, so making sure you have as much expertise as you can afford goes a long way towards having peace of mind enough to focus all your attention on your product.