Good morning, Ladies and Gentlemen. Welcome to the people processes podcast where we dive deep into the tools, laws, and yes processes that you need to scale and grow your people processes. I’m your host, Rhamy Alejeal, and I’m the CEO of People Processes. My company helps organizations all across the United States streamline, optimize, implement, and revolutionize their HR operations. We’ve helped hundreds of companies and thousands of HR leaders across the world get their people processes right. Today, we’re going to be answering some questions that have been submitted either by our clients or through our social media. Please check us out over at Facebook, Twitter, Instagram, LinkedIn. You can find the links at peopleprocesses.com where you can ask any questions like these that are going to come up in our Q&A today. Specifically, we’re gonna be talking about FMLA and workers’ compensation. We’re going to be talking about required religious holidays and a few more topics. Before we dive too deep, though, I want to ask you, please subscribe to our podcast. You can find us on iTunes, Google podcasts, Stitcher, Spotify, pretty much any pod catcher of your choice. You can also subscribe at peopleprocesses.com which will give you exclusive subscriber only content.
Now let’s dive in. Okay. First question.
Are employers required to grant employees time off from work for religious holidays?
That’s a good question. Title VII of the Civil Rights Act. It says that covered employers must make a reasonable accommodations for employees religious observances. So if you fall under title 7, which generally applies to employers with 15 or more employees, though many state laws create similar obligations for smaller employers. But at a federal level, 15 or more, you fall under the title 7 of the CRA. The act clearly States that, an accommodation for an employee’s religion must be made. The only way you’re out of that is, if the employer can demonstrate that they are unable to reasonably accommodate the religious observance without undue hardship. So that means upon request, you would open a file, you would look at it, you would say, this is the request, this is the burden on the company. We cannot support that burden. That burden is undue.
According to the EEOC, an accommodation may cause undue hardship if it is costly compromises workplace safety, decreases workplace efficiency, infringes on the rights of other employees or requires other employees to do more than their fair share of more than their share, no fair of potentially hazardous or burdensome work. So the way I would do it if you’re a smaller company and you’re worried about this. Request, wants religious holiday, employee name, date of request, who was requested to a manager name or whatever. And then the HR or a small company business owner stick this definition right there at the top. EEOC says this and then determination. This would or would not cause undue burden. And then resolution granted leave. One thing to know. Federal law does not require employers to compensate employees at all for time taken off in observance of a religious holiday practice or belief. So if you don’t have a PTO policy or something like that, you can let them off unpaid.
However, an employer must offer the same options for religious holiday requests as it does for other time off requests. So you have to let them use their PTO if they’re going to use that, whether it’s vacation or personal leave, those sorts of things. Hope that answers your question. Again, start a file. Do your EOC check on undue burden. Make your determination. You do have to check it though.
Okay. Next question.
Can an employer require its employees to use their accrued PTO during an employer-required lay-off or time-off or furlough? And If salaried exempt employees worked during the furlough, how is pay calculated for these employees?
Okay, those are good questions. An employer can require employees to use PTO accrued, if that’s vacation or personal, whatever it is during a furlough, during a layoff. If an employer has no accrued time off, the employer can even put the employee into a negative pay leave balance if you would like. So you could continue paying them, let it go negative, require that be paid back upon resumption of work. Even while furloughed, however, FLSA applies to employees. So the fair labor standard act mandates compliance with the salary basis requirement for salaried exempt personnel. So if an employee performs any work during that week period, for a salary basis employee FLSA exempt, the employer may not dock the employees pay for the absence. When a furlough is for one week or more a full week, something like that. Federal law generally does not require payment to the employee. So if you’re going to lay someone off or you’re gonna have to do a temporary shutdown for a low, you’ve got to look at whether they’re salaried or hourly. If you’re going to do salary, you got to pay him for the whole week period if they work any hour of that week. One thing to also keep in mind that I didn’t ask about this, but during a furlough for the legal term of that, you are required to continue occurring vacation days, sick days, personal days, and to continue to receive other benefits such as health insurance. So hope that helps you out there.
Does workers’ compensation leave count against an employee’s FMLA leave entitlement. And how do temporary disability plans fit within the Family Medical Leave Act?
Okay. Let me clear something up. FMLA leave a family medical leave act. It protects the employees job and benefits during the leave for up to 12 weeks in a 12 month period. There are some exceptions to this. The spousal exemption is actually my favorite, most common, where you share these things in a lot of ways with a employed spouse at the same organization. But the key is FMLA leave is unpaid. It’s a job protection and benefits. It is not related to pay. Workers’ comp provides for treatment for a work related injury or illness and partial wage replacement. So it’s a disability policy. It would run concurrently at the same time with leave under the FMLA at leaves you, what you should do is designate the leave is FMLA.
As soon as FMLA leave starts, as soon as that eligible workers’ compensation illness or injury starts and it requires that the employee be out of work, it starts then. That’s their 12 weeks of protection. But the pay is related to the worker’s comp. If your company, if your employee qualifies for any sort of partial disability plan, whether that’s workers’ comp or some other disability plan, it’s going to run concurrently with FMLA leave disability plans, workers’ comp, they provide for wage payment. FMLA provides for job and benefits protection, but not pay. Hope that clears up for you. In the process of our last question of the day. Hope this has been interesting to you so far.
In the process of auditing I-9s, we found some I-9 forms containing incomplete or inaccurate information. What should we do?
Okay. You do not want to get new ones. Let’s start with that. If information on an employee’s I-9 is incorrect or incomplete, you can make corrections near the incorrect or incomplete space in the employee’s I-9 that had the errors. The employer and the employee have to work together on it. What you want to do is draw a line through the inaccurate information, write the correction on the form using a different colored pen. If you did this digitally, you need to print the copy, do this on paper, scan it back in. Okay. So anyway, I’m sorry. I printed it off, draw a line through the inaccurate information, right? The correct information on the form. Use a different color pen and then initial and date the correction, both the employer and the employee. Missing information should be provided initial dated and a written explanation. I’d put it on the front as to the reason for the change attached, not on the same form, like an extra one.
I would make a note that the file was a self-audit that was completed on that date. So if you have like five or six changes or 50 or 60 changes to make, I do your I-9, I’d put up, you know, internal memo in a self-audit was completed on December 31 2019. The following twenty I-9s had corrections brought with the employee, make those pieces, make sure the signature relates to the attestation. So remember that there’s a signature line of the I-9. It says, “I attest under penalty of perjury…” So you want to put that, you want to make sure you’re signing near there. If you have a cover letter, you want them to sign on top of it. I wouldn’t do that. I would just have them initial and date the corrections and sign at the bottom
If your company is audited, the examiners will want to have proof that you exhibited good faith effort to audit your records and correct the deficiency. So it’s a good thing to do. You’re not going to get me in worse off shape. Having audited founded errors and corrected them. You just want to make sure that it’s obvious that you’re not covering it up. You used a different color pen. You got it straight, cleared up, made a note, signed at the bottom. It’ll take care of you.
Okay, ladies and gentlemen, that’s it for today. I hope that was helpful to you. I hope you learned a little something. Please check us out on our social media pages and subscribe at peopleprocesses.com or on the pod catcher of your choice. We’re going to be coming out with episodes every week. We’ve got a lot of interviews coming up for 2020. I’m very excited to get to know some of our new guests and share their wisdom with you. Thank you so much for tuning in. My name is Rhamy Alejeal. Now it’s time for you to go out there, have a great day, and get your work done.
Good morning, Ladies and Gentlemen. Welcome to the People Processes podcast where we dive deep into the tools, laws and yes policies and processes that you need to scale and grow your people processes. I’m your host, Rhamy Alejeal and I’m the CEO of People Processes. My company helps organizations all across the USA streamline, optimize, implement, and revolutionize their HR operations. We’ve helped hundreds of companies and thousands of HR leaders across the world get their people processes right.
Today, we’re going to take a look at a new study that’s come out. A survey that says, the pervasive use of short term incentives among private employers is now at 99%. We are talking about what that is, why it’s important and why if you are one of the smaller private companies, you need to be taking a look at it too. Before we go deep, I want to ask you to please subscribe to our podcast. You can find us on iTunes, Google podcast, Spotify, Stitcher, pretty much any podcast or of your choice. You can also subscribe at peopleprocesses.com which will give you exclusive subscriber only content. Okay. Let’s dive right in.
Short term incentives is this, the use of it across almost every larger size private employer shows the desire to reward employee performance and compete for talent in a tight labor market. Even nonprofits and government organizations, 68% of them make use of short-term incentives. These are the two of the primary findings caption. The 2019 incentive pay practices, privately held companies and 2019 incentive pay practices, nonprofit government organizations which were conducted by worldwide work in partnership with compensation advisory partners. These surveys go all the way back to 2007 and have now run every year. Some of the key findings in this report is that spending on STI reflect 6.5% of all operating profit at median up from 6% or down from 6% in 2017 and up from 5% in prior years.
So 6.5% of operating profit at medium, up from 6% in 2017 and 5% in prior years. Got my columns off wrong. Companies are allocating more to reward, attract and retain talent. Let’s talk for a second about what an STI is. A short term incentive. That’s basically a bonus tied very tightly to a specific project, a KPI, a weekly, monthly, quarterly project. It’s not an annual bonus or it may be an annual bonus but it’s not something based on like long-term company profitability like equity. Like large companies a lot of times offer stock options. Those are example of a long-term incentive. Short term incentives are, Hey look, we’ve been this year or this quarter or this month you’ve got this project done, this job, we’re going to do a bonus. And if you look across larger privately held organizations, now 99% some method of that short term incentive and end the nonprofits 68% and small government are using it is blowing me away. Annual incentive plans are the most common type of STI. Those are at 86% compared to spot awards. Project bonuses as firms seem to be consolidating their STI spending unstructure. Structured annual incentive plans that can incorporate company-wide financial metrics and other objectives rather than it being that more project-based. There is an uptake in long-term incentive plan, 62% versus 54% in 2017 which means that they are as a lot more people who are offering equity or profit sharing match over the long-term, those kinds of things.
One of the most compelling takeaways of the 2019 survey is the increased use of LTI plans by private companies said Sue Holloway, CCP CCP director of an executive compensation strategy world at work. She went on to say private companies realize they need this total rewards component to up their game to compete with public companies for top management talent. Regarding the nonprofit sector, three out of four, 76% nonprofits use STIs in some way or another. For these organizations, STI spending is around 2% of operating budget at meeting median. So take all of your operations budget, which a nonprofit is like most of it. 2% of that is going to some sort of a short term incentive. On average, the most common type of STIs are still those AIPs, the annual incentive plans. But, spot award programs are much more common or more prevalent in nonprofits compared to AIPs, in at least compared to private industries with discretionary bonuses, project bonuses, team, small group incentives and profit sharing plans.
Also in the mix, STI plans are being simplified as nonprofits getting used to having these plans as reward tools. The prevalence of organizations using 10 or more performance measurements in their annual incentive plans decreased in 2019 and more. Organizations now report using four to six performance measures. Long-term incentive plans are used by a small minority with only 22% reporting and LTI plan in 2019. A lot of those LTIs are probably for HighQ,. High end executives, right year over year over year growth in your nonprofit, perhaps the, executive director or some of your executives may have some long-term incentives. One of the most interesting trends this year is the decrease in the number of performance measures used by nonprofits, said Bonnie SJ, Lender, principal at CAAP. Four to six performance measurements are now prevalent reflecting a move towards more holistic but manageable incentive management frameworks.
Discretion also continues to play a role in incentive decisions given the difficulty in measuring performance objectively without a true profitability metric. So this survey is very interesting and I just want to kind of hit on a couple of big ideas. If you are a smaller nonprofit or a private company and you’re doing a flat Christmas bonus, everyone gets $50, nothing wrong with that. But short term incentive plans, annual improvement, annual incentive plans are huge and everywhere. They’re a great way to control to incentivize good behavior. In order to do any good performance management, you have to take a holistic approach. You have to know what the objectives key results are you’re trying to accomplish in a year. You have to know what KPIs measurements you can use that are objective to measure the performance of your employees. It’s a big process.
At Academy.peopleprocesses.com we have a week-long deep dive into performance management where we dive in deep on how to structure all of that and bring ideas. Even have templates and that kind of stuff you can use to distribute to your organization. But for those of you who already have one, just keep in mind that the good numbers are 2% of operating budget for nonprofits and 6% of operating profit is going to STIs. So if you take your profit last year, take 6% of that, set it aside. That’s about your short term incentive budget. A 6.5%, actually now in 2020, 19 up from 6% in 2017 and 5% in prior years. So take a look. If you’re looking at your profit and you go, Hey, you know what? I don’t know how much to allocate to bonuses to, to this kind of stuff.
That’s what you want to do, but you don’t want to just do a blanket. Let’s say you had $1 million in profit last year. You want to say, all right, my budget is 65,000, but you don’t want to just spread it out among your employees, not evenly based on their salary. You want to have a plan in place. If you’re thinking about jumping into this, put your plan in place in January or February, run the whole year and do it at the end of your next year or however your fiscal year runs. Nonprofits, like I said, around 2% of operating budget is the most common. Let me know what you think. Speak in the comments message as you can always email us at service,at people processes or find us on Facebook, Twitter, LinkedIn, Instagram, and message me on there. I’d love to hear your thoughts about, does your PR, does your budget reflect a 2% for nonprofits into short term incentives like bonuses. What about your company profit? Are you doing around 6%? Are you doing a lot less? I’d love to see how this applies down into some of our local companies.
In the meantime, take a look at what you’re going to do for 2020. If you’re thinking about pay raises or budgeting for bonuses, lean towards bonuses, this is going to be a great opportunity to truly control. To provide the right incentives for the behavior you want. And this as a manager or an executive going to be one of the biggest bang for your buck in terms of both spend and time spend that you take to put this together. All right. That’s it for today. Ladies and gentlemen, I hope this is helpful. On our website peopleprocesses.com we have all these numbers laid out. Hey, listen this on the podcast. If you want to check us out there, I’d sure appreciate it. Subscribe on there for some special subscriber only content. Follow us on LinkedIn, Twitter, Instagram, Facebook. Love to hear from you on there. Now it’s time for you to go out there, have a great day, and get your work done. Thanks for listening.
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Rhamy Alejeal: Ladies and gentlemen, welcome to the people processes podcast. I’m your host, Rhamy Alejeal and I am excited today to bring you Dr. Angela Lauria.
Dr. Angela is the founder of the author incubator and creator of different processes for writing a book that matters. In 2018, The Author Incubator was ranked #275 on the Inc. 500 fastest growing companies and #87 on Entrepreneur Magazine’s Entrepreneur 360.
Angela is an expert when it comes to building teams and scaling businesses and we are ecstatic to have her on the show. Welcome Angela.
Dr. Lauria: Thanks. I’m so excited to be here.
Rhamy Alejeal: Great. Well you got to start telling me how you got into what you do now. It’s a very cool niche and I know you’ve got a great story on how you got there.
Dr. Lauria: It is super cool. And I actually was recruited when I was in college to start working for an espionage author. He was a New York times bestselling author and wrote spy stories. I’m in Washington DC so I got my career tracking spies around Northern Virginia and helping journalists write books about them. And I know I was really lucky. And from there, I had an accidental freelance business. I spent 19 years as a ghost writer, proofreader, editor, blurb writer, publicist, anything in the book industry. I was doing it and my family would always ask me, when are you going to get a real job? And I sort of wondered that myself.
So I was like, maybe I’ll go to law school, maybe I’ll get an MBA. And all of a sudden a couple of decades had passed and I still hadn’t figured out what I was going to do when I grew up. And all the work that I did with books I was generating. I’m often for businesses upwards of 2000, leads a month from books that I’d done with them. And they were generating millions of dollars in revenue. But I sort of thought of it like pet sitting or babysitting dog walking. It didn’t feel like a real job cause I got it in college and I just charged hourly. And I didn’t even have a website. I didn’t have a company name. I was just like a girl who helped people with books. And suddenly I was a mom with a two year old who helped people with books. And I was like, I gotta figure out who I want to be when I grow up. And I found this book called finding your own North star. What I searched for on Amazon was books, like what color is your parachute? And I want to take a quiz that said like, you should be a personal injury attorney. And then I would like go do that. And what this book said was, you should do what you lose track of time doing.
And for me that was reading personal development books and reading and writing and editing the personal development business, books, nonfiction, like that was always my sweet spot. And I ended up hiring this woman as a life coach to help me figure out what I could make, how can I make money doing this? Cause all the books I had done were in a completely different genre and helped me. She actually trained me as a life coach. Her name is Martha Beck and I got trained as a life coach and she’s like, you can work with life coaches on their books. And I didn’t, I couldn’t see the money. I couldn’t see the revenue. I couldn’t see myself as a business owner. I sort of saw myself as a freelancer and I read about probably seven years, not quite seven years, six years really working on myself.
And then in 2013, I started the author incubator and we help life coaches write books just like that one Martha Beck wrote and I hired her. So I read her book, I hired her, I went to a three day workshop that was like $3,000 and then I spent another 7,000 7,500 doing life coach training with her. So within about a year of finding her book, I spent $10,000 with her and now I help other life coaches generate clients that are worth about $10,000 each. Generally our authors write books that generate between 25 and 50 clients in a year from their book. And they make somewhere between a quarter of a million and a half million dollars doing the very thing that saved my life and changed my life for other people. So their wellness books, nutrition books, business books, find a career you love, save your marriage, get healthy, all those different topics. And we’ve now just published our thousandth book. We we’re at about, 20 million in revenue. We’ll do about 20 million this year in revenue. We have 45 employees. We have two locations in the Washington D C area. I’m currently at the author training Academy in Georgetown. Then we also have the author castle on the Potomac river in Northern Virginia. And it’s pretty exciting what we’ve built in about six years.
Rhamy Alejeal: That’s outstanding. And I know that journey, there’s been tons of amazing successes and right now things are looking awesome. But I like to start our interviews after we kind of know a person we’re talking with a little bit and how cool they are. Now, I like to go back to the hardest parts because I think a lot of our listeners, and I know myself, we learn more from the mistakes from the big rough times and how we got through them than we do from the successes.
So Dr. Angela, could you go back on your last six years in this entrepreneurial journey of building out this company to such a success? And tell me about the worst entrepreneurial moment you’ve had, the one that took nearly took you out and, and take us to that time.
Dr. Lauria: Yeah. Well God knows there’s a lot of those. It really is hard to pick. There’s two that come to mind and I’m going to share about both of them though. The one that really took me out that was like, I guess this is just the end, was when I formed a partnership and I think a lot of people in business do this. Early on, very early on for me. I formed a partnership with one of our authors, her book had done so well. Her business. She had been in business for like I think five years maybe, and had made no money. And within three months of her book coming out, we did over $100,000. She was one of my very first authors. I was just learning the different process. She was one of my Guinea pigs and it was super exciting.
And one of my coaches said to me, what you should do is partner with her. You should be taking a percentage from all of your authors instead of just having them pay you and you bring so much value you should get, you should get more value than just being paid back money for value. Right, right, exactly. Which sounded really good to me. So we partnered and I decided instead of having lots of clients, I would just have a few, like maybe three or four, but I would own like 40% of their business and I would do all the marketing and they would provide the content cause I’m super good at marketing and they’re good at whatever they’re good at. In this case, it was a woman who taught self care to new moms. And so she could do her program and I would do all the marketing and then I’d get 40% of the value and it worked.
We partnered, we made tons of money. I was like, this is a great strategy. I’ll do this with four more people and that’ll be my whole business. Cause if I get four people to a million, then you know, that’s all the money that I’ll need. Like I’ll be done. It’ll be great. And super simple. And then about six months in she was like, Oh, I don’t want to do this anymore. Now I want to do this thing and I don’t like the marketing copy or writing and I don’t want you to have my passwords for social media and everything you write, I want to approve and I’m not going to give you the password to my email. All the emails are coming out under my name. And all of a sudden I was like an employee and she wasn’t very good at marketing. That’s why she hadn’t made any money in six years.
So I was in a position where I had invested so much in this partnership. Like I put all my eggs in this one basket and without full control of the marketing, I knew I couldn’t make us any money and I didn’t want to just be an employee. That was like why I was starting a business. So we terminated that partnership. She went on to go back to not making money and did the marketing her way, which is what really felt good to her. And I made a promise to myself that I wouldn’t do partnerships anymore and that I wanted to always have full control of my own destiny.
Rhamy Alejeal: Before we move on to your other story, I think that’s really interesting and I hear that we actually just finished up an interview last week with an older gentleman who’s been in business for 20 years. And his story was the same as first business didn’t go well, and it was because of a partnership that he didn’t control. Right. He didn’t feel like that wasn’t his issue.
But from your story, what do you think if you know, our listeners should take away from?
Dr. Lauria: Don’t do partnerships. That’s the line. It’s hard liner on this. I very rarely hear positive, not never, but I very rarely hear a positive story about a partnership. And if you think you’re that exception, you would not be asking the question, should I do a partnership? So anyone who’s asking the question, should I do a partnership? The answer is no.
Rhamy Alejeal: Yeah, I think that’s fair and reasonable. I think that’s very reasonable. Some people are, you know, I’m kind of with you. I think probably in the last 30 interviews I’ve done a bad partner in the beginning has been the number one problem or moment of near destruction.
Dr. Lauria: It seems like it’ll make things easier. It makes them exponentially harder. And I don’t even, I’ve totally made amends with this person, but I don’t even, it wasn’t her fault. She was like, I don’t want something going on. You’re like, good, then do your own marketing. But then all of a sudden I had nothing to sell. And this happens in so many ways with partnerships that yeah, if you’re asking the question, it’s a no.
Rhamy Alejeal: Right. And it’s one of those where you know either if you’re investing and you’re getting out sized returns because of your value, then the other person or the majority owner will feel that they’re paying you hundreds of thousands of dollars a month for something they could hire a great marketing company for five minutes. And so there’s a structural view that leads to resentment a lot of times, unless there’s a much more complicated structure for like a publicly traded or, you know, venture capital kind of setup. But, for the vast majority of our small business listeners, I completely agree with you. A partnership just as you’re asking for pain, you’re asking for, well, you said you to tell us another story though.
Dr. Lauria: Well, I did because that’s the story that’s really gotten me here. This is the one that I think is an even better lesson. So, when I started my business I thought as I got busy, there would be tasks that I could hire people to do those tasks. And so it was a very transactional idea I had about hiring people. And the idea was I have a task, I give you money, you do the task. I love this idea, I daydream about it. Sometimes I just stare off into the sunset. This idea is not reality. Anyone anywhere, anytime. And it’s very hard to believe that cause your brain, at least my brain wanted to be like maybe if we pay them more, maybe if we find a different person, maybe if we make the task smaller, but no, the actual problem with this mistake is thinking you can get people to be transactional.
Dr. Lauria: They, in my experience are not, and it is so much more rewarding to actually build something with someone. I know it doesn’t sound that way. When you’re on the other side of it, you’re like, would you just shut up and do what I’m asking and do it my way. My dad was an entrepreneur and he used to say this thing that I never understood. But now it makes so much sense. He would say to his employees, I don’t pay you to think, I pay you to act. I don’t pay you to think it did not work. But I now know why he said that he had it written all over his office. There were plaques everywhere that said, I don’t pay you to think Mickey Lauria, to remind his employees all day long to just do what they were told. And, I think the reason why my dad, my dad has super successful business, he’s in the hot rod hall of fame and got his business to $5 million. But I think the reason he capped out at $5 million is that’s about how far you could get if you don’t pay people to think. If you want to get beyond six figures or beyond seven figures, at least you’re going to have to pay people to think. And that was my biggest lesson.
Rhamy Alejeal: Well, I think that’s very reasonable. And that’s a lot of course. What all our listeners are familiar with in people processes and that kind of thing to build out those structures to develop people. I’m really interested. I know we’re going to cover that a little bit later. We want to hear about how you actually implemented that.
But tell me about the realization point for you. Like why, how did you come to that decision?
Dr. Lauria: Yeah, it was, it was a lot of misery. What happened for me was, I wanted to hire people and have them document what they were doing and it seemed like every time I would hire them and try and get them to document it, they had all these suggestions and changes and then other people in the organization, it would mess them up. And it was just a disaster after it was like I was constantly fighting fires and I just decided there was one morning I was in Tuscany and it was the last day of an event that I was running in Tuscany and I just refused to get out of bed. I’ve never had burnout. I hear people talk about it and it sounds dumb to me, but that day was the only day lasted about 45 minutes where I was like, I am just not going to get out of bed.
There’s no one can make me, you are going to have to like drag me out of here because I just couldn’t handle another crisis. I knew the second my feet hit the floor that the crisis is we’re going to start there was, I was staying with my team in this Tuscan village and at the bottom of the steps I was staying in the master bedroom in this villain. At the bottom of the steps was the kitchen and I knew once I got to the kitchen there would be a question and it would be something like real quick, what do we do when a customer does this, but it wouldn’t be real quick and it was going to be from 7:00 AM until midnight that I was going to be badgered with fires and it felt like Puranas were just literally picking my body to pieces every day and I didn’t know how to do it.
One more day. Like I just could not go on one more day. And somehow I dragged myself out of bed that day and then the next day was a day off. And that was when I decided to build a real company and to stop hiring people and to start really to start over from scratch with the idea of having relationships and partnerships with my employees and really understand fundamentally what they were getting out of the job and what they wanted because trying to get them to do it my way just wasn’t working. So I had to start learning more and caring more about them as whole people. And I really made that decision in Tuscany, in 2016 and rebuilt my business. I came back from Tuscany and completely rebuilt my business with a lot more employees, but they’re more empowered. So I was really trying to do the whole thing backwards.
Rhamy Alejeal: Wait for dive. I’m looking forward to diving into that. It reminds me, and it’s so funny that it was 2016 because, it was right around, it was the end of 2015, early 2016, my wife and I had gone on a trip to Barcelona with family. I had almost the exact same thing. We’d doubled in size a few years in a row. We were making money, things were going great. And I just remember two or three first time events, you know, where the standard operating procedures just wouldn’t cut it, popping up every day of a five day vacation. And I remember sitting there, you know, time zones were different for US. So we would check in, you know, my things would start blowing up around like 4:00 PM in Barcelona. And I remember my Liz and I who started the company together, at least started the company with me years ago.
We were up at midnight in Barcelona while everyone else was asleep in our beautiful middle of nowhere Wine, country Villa. And we’re sitting there pissed cause we have bad internet trying to figure out how to deal with these problems. And that moment of, there’s gotta be a step beyond, you know, you read the emails, you build a company, you think there are technicians, then there’s this, this layer and you just have to build standard operating procedures for all the processes and then it’ll all work. But at scale that doesn’t work. That is not the end. There’s another step past that you got.
Dr. Lauria: And I was in the e-myth club and still love it. Like was totally in that club. But then yeah, just didn’t quite.
Rhamy Alejeal: I think it’s neat. I mean some people need a kick in the pants to get out of making the bread or writing the book itself.
You know, they need to get pass technician role, but there’s a step beyond making nice procedures for everyone to follow on a task based transactional nature. Absolutely. So I think I want to give you a chance to kind of show where you’re at and how you got there. I want you to have a chance to tell us about what’s coming up in the next six months and then we’re going to switch back to some of the insights you’ve gained. Because I think that’s gonna help round us out.
But in the next six months, what have you got coming up, coming out that’s got you just excited and rolling out of bed? No more burnout. Really, really excited to get what’s coming up for you? Yeah.
Dr. Lauria: Externally, tons of great stuff. We actually just had our grand opening on June 11th of 2019 for the author training Academy. That’s our Georgetown location. So 17,000 square feet, the largest collection of giant on the East coast. So Christina loves are stones. Yes.
Rhamy Alejeal: Okay. Ours for adults.
Dr. Lauria: Well, crystals filling our building. We’ve moved all of our team and our events over here which frees up the castle for what I’m doing now which is, adding a higher level. A lot of my authors have hit seven figures now and they really need help with scaling. We’ve done some really interesting and unique things here, which I write about in my new book, make ’em beg to work for you. And so I’m helping people plan a really successful team retreats and hiring strategies. So I am using the castle for our higher level authors, and then our new authors are working here at the Academy. So that’s one of the cool things that’s happening in the next six months. We’ve just added this second location. There’s also a film that a filmmaker in Hollywood made about me.
It’s called the weight of success and that is coming out in Netflix in the fall. And I also have a partnership with Jay Shetty, who is an inspirational storyteller. We are making a series of webisodes together. So we’re filming that and it’ll be coming out in the fall, which is super exciting. We have a new website coming out with the new author training Academy and all of our employees featured. So it’s that much focus on our editors and our team. So really transitioning away from the celebrity brand for the core business and the people who want to work with me directly. We’ll still have a way to do that in our other location.
Rhamy Alejeal: Nice. When you were coming, you said you had a new book coming out, make them beg to work for you. When do you have a release day on that?
Dr. Lauria: Yes, August 15th
Rhamy Alejeal: Well I think we discussed this earlier but we are going to schedule this podcast release right on that day as well. So if we have to,
Dr. Lauria: It will be free on that day. So those snappy listeners and you’re listening right away, if you go to Amazon and you search for my name, you will see that book, I’m going to try and make all my books free on Amazon on August 15th but certainly make them beg to work for you will be free.
Rhamy Alejeal: Do me a favor and we’ll follow up after this, but make sure to send me the links to those in the show notes. We’ll have a link down there straight to your Amazon page. That’s awesome. The release. That is excellent. And we we’re excited to get a free book. That’s awesome. So this is a couple of kind of rapid fire questions and just to get an insight into how you learn and what resources you use.
If you could recommend one book to go alongside, make them beg to work for you and your other makeup Beck series along with, of course people processes. What book would you recommend to aspiring business owners?
Dr. Lauria: Oh God, that’s like torture. I mean it depends on where you are. The big leap by Gay Hendricks. That’s always a top suggestion. Then anything by Brooke Castillo, she runs the life coach school podcast. I like her book self coaching one on one. That’s a good one.
Rhamy Alejeal: Not one yet. I’ll have to go put that on the notes. That’s awesome. Yeah.
Well, if you could go back to your first day in business back there in 2013 and write a letter to yourself or send yourself an email, what would you tell yourself back then?
Dr. Lauria: No, this, nobody’s going to your website. Just relax with the website. I spent six months working on my website. It was supposed to be released January 1st, 2013 I hired this poor guy named Mike in Honolulu and he was late, which I’m sure it was because I changed the goal post a thousand times. He was late and it ended up being done on February 7th and I remember thinking, God, this guy has cost me so much money. It’s like five weeks that my website hasn’t been up, and I guess I thought the website would go up. Millions of people would go there. You would read the website, you know, starting with the first page. After reading everything and contemplating it, they would call me. They would tell me what product to sell them and then suggest a price to me and offer me their credit card. I really didn’t realize the website wasn’t going to do anything. So when I hear people starting with a website, like for the love of God, do not start with a website. Start with clients.
Rhamy Alejeal: There’s your website. Exactly. There’s an old, there’s a web comic called XKCD that I’ve loved since I was in college. It’s a nerdy web comic about math and science and those things. One of the web comics was an image of like regular people when they hear the FBI’s website got hacked. You know. Then there’s like fire everywhere and Oh my God, the FBI has been hacked. And then like computer people, when they hear the FBI’s website got hacked. It’s a picture of like a movie poster where someone had just spray painted like Inn sauna. It’s just like a poster. It’s just a tiny part of your plan. It’s not your business. It’s a poster.
Dr. Lauria: Is this, it’s a coder. I have no idea. And I was so mean to that guy. That’s the other thing. Like I was so mean. I’m like, how can you be late? Like this is you’re killing me. I had my last day at my corporate job in December 31st like I need this website to go up January 1st or I’m going to be broke. I was broke.
Rhamy Alejeal: In the meanwhile, for five weeks you were just staring at your email going, where there is nothing else.
Dr. Lauria: Yelling at him? And probably coming up with new ideas to add this. But I would do that all over again. Totally. Differently. And it’s amazing. I tell this story and people do not listen to me here. I overhear them beating up their web guy about a website no one’s going to, and it just kills me.
Rhamy Alejeal: You know, we’ve been in business 10 years and I think at this point we finally broke about 1500 people a month going to our website.
Dr. Lauria: That’s amazing.
Rhamy Alejeal: We’re a content generation here in 10 years and generating all that content, that’s how many people go there.
Right, exactly. Yes. So that kind of traffic, you know, it’s a lot. It makes a big difference. It really grows your company. But it’s just one tiny piece. I think of all of the money we’ve generated being online and just known, it’s probably a 10th of what really has billed through relationships and being in person and trade shows and referrals and all that.
Dr. Lauria: 10 years of investing in creating content and a lot of that content was about other things you were doing. Like going to conferences and going to events and then meeting people at those events and they’re the ones who go on the website. Not to mention your employees, your competitors and your clients are a lot of who that tribe and people looking for jobs. It’s like what you think a website is going to do even 10 years in. I mean even with as much traffic as you have is so much less than I was imagining. I certainly didn’t think it’ll take me 10 years to get 1500 page views, a hundred visitors or whatever, like I was just like start the site and we’ll be at a million and they’ll give you my like target prospects.
Rhamy Alejeal: Of course it won’t be, it won’t just be some random person scanning your website.
Dr. Lauria: Right.
Rhamy Alejeal: That’s 600 times a month. Right?
Dr. Lauria: So that would be my biggest piece of advice to a new entrepreneur. I mean, here’s how you get business. Go talk to people and make offers. There it is. It’s so important. You know, that’s what you have to do. Both of those things. You have to do both of them, people that have the problem you solve and then ask them for money in exchange for solving it all, all every word in there is needed. Right.
Rhamy Alejeal: Well, okay, so we’re getting towards the end of this. So let me try to wrap it up a little bit. We’re an HR podcast and of course your new book is focused very much on the HR world of recruiting and training.
What do you think in your organization is the number one policy procedure training that’s had the biggest effect on your company?
Dr. Lauria: Okay, so I’m going to blow your mind here, but this is what we do and this has changed everything. Most of the interview is not about the position, or whether the person can do the job. So we do that in a test before they come. So before they can interview with us, they have to actually do the job for about an hour, the length of an interview. They have to do a task and deliver it. Once I know they can do the job.
Then most of the interview is about them. It’s really life coaching. It’s what we call doing their career path. We actually start with, when are you going to leave the author incubator? If you get this job and it’s the best job you ever had, how will you leave when and why? What will your title be? What will your salary be? Why will you leave? And for some people they say, Hey, I want to work there for two years. I want to learn everything I can and then I’m going to leave to start my own business. There’s no change to my salary, no change to my title, but I’m going to sop up all the information I can and then I’m going to start my business. I have other people who are like, I’m going to be there for 30 years. I’m going to retire from the author incubator.
I’m going to go from being an accounts receivable clerk to being your chief financial officer. My last 10 years I’ll be a CFO and I’ll be making 200,000 a year and it is amazing what people will tell you if you ask them how are you going to leave the company and then in the offer letter, instead of just doing an offer letter that says we’ll do annual reviews. We actually say, based on when they project, they want to leave, we’ll say what their raise will be and what their title will be. So we give them their whole career path when they sign up. Now don’t worry.
Of course things change and we make it very clear, but we say, here’s our plan. We’re going into this partnership together and next year you’re going to get a 10% raise and your title is going to change the year after your title will say the same and you’ll get a 3% raise. The year after that you’re going to get a 7% raise and a title change and we walk them through what their career could look like with the actual dates. They’ll get the raises and the actual amount of the raise and this has changed everything.
Rhamy Alejeal: I think that’s an awesome process. The number one thing I try to get people to understand in their annual reviews, this is where we talk about it in hours is actually exactly what you said, which is goal alignment. You need to figure out if they did the job well, you know that’s not the reason. Instead, you need to have a process annually and I love the idea of incorporating that in your recruiting. I think that’s an awesome idea, but you need to have a process annually where you’re looking at what are their goals, clarifying what it is they’re trying to do, and then making sure you have a similar vision and that those align and if they don’t, that’s the job of the annual review to either move their goals or move your goals.
Dr. Lauria: Exactly. That’s totally it. We start that with the recruiting where like this is what you’re thinking. Now we’re going to check in 90 days because we always do a 90 day check in. And then after that we’re going to check in once a year and we’re going to say, do we want to update this document? Are these still the next jobs you want this year that sometimes I find out, this is the year I’m going to leave. So one of my employees said, I really want to move to the Pacific Northwest. And it was a job that had to be done locally. I know I want to move in a year, so let’s make this year about me phasing out. And she still ended up getting a raise, but she didn’t get a promotion that we had planned and a lot of her job duties turned into recruiting and we had to hire two people to replace her. So recruiting and training those two people over there. I don’t like surprises. We had another, this is actually a super fun story. We had an employee who, at our annual review said, we start with what’s your big goal for this year? Personally, they have to come up with a personal goal. So he said his personal goal was to find a relationship and he’d been looking for some time and we actually made share this with the team. They can edit it a little bit, but a lot of it gets shared.
So he had shared that he felt like he had exhausted D C and a lot of his friends lived in Colorado and he was gonna move to Colorado and hopefully that was where this special person in his life would be. And so we changed his job, specifically so that it would be a remote job. So we moved him to managing our online classes. And I’m like, that way if you move, keep doing the job. Now, he was still coming into the office every day, but his job was an operations job, so he was moving lights and cameras and plugging things in. And so we were building up his skills in another area so he could take the job with him. And then about six months and he fell in love with one of our other employees and we’ve realigned his job again. You know, found the girl, he’s super happy, she’s super happy and that really changes his career path. So it doesn’t mean that nothing’s gonna change, but at least I wasn’t surprised we would have been prepared. He wouldn’t have just shown up one day and said, I’m leaving for Colorado. We were totally prepared and now we can adjust again. And nothing’s like, we’re all in this together. I want it to work for him. I want it to work for us. Like there doesn’t have to be any big surprises or sneaky anything.
Rhamy Alejeal: That’s awesome. Dr. Angela. We’re going to have to talk offline about, because you are doing exactly what needs to be done in these worlds. It’s amazing you’ve hit it directly on the head for your clients. Well, we got to talk about how do you process and automate as much of that as possible. I’m wondering about what tools you have for that and what tools maybe we could help you with as well. So I’ve got to talk about that because I think it’s such a perfect.
Dr. Lauria: I’m going to tell you one more thing we do. This is our only like automated thing, but it’s a super game changer and I would totally recommend it to people. So we use a system, I don’t know if you’ve heard of called lattice.
Rhamy Alejeal: I’m not, I’m not familiar with it.
Dr. Lauria: So it’s for team reviews, but they want you to do those horrible reviews where you say everything you were going to do and then you say what you did and then you have to like make up stories about the fact that you didn’t do them because your boss changed the goals without throwing your boss under the bus. And I always hated doing those annual reviews. So what we do is we do a full company 360. Everyone in the company rates everyone else and they rate them. On a scale of one to 10 with only one question, if a friend of yours was hiring someone to do this role, on a scale of 1 to 10 how likely would you be to recommend your coworker for that same job with another company?
Rhamy Alejeal: Ooh, I like that. Trade up net promoters. Let’s say it’s net promoter for employees,
Dr. Lauria: Net promoter score for employees. Yes. So that’s one of my other little hacks. I’m full of them.
Rhamy Alejeal: I love it. Well, Dr. Angela, you have dropped so much awesome information on here. Thank you so much. I’m sure our listeners are just scribbling notes and bookmarking and so awesome. You gotta tell us, how can our listeners contact you? Where should they find out more about you and what should be the trigger for them reaching out to you?
Dr. Lauria: Yeah. So if you go to the authorincubator.com, that is where you can learn about how we help people get their books written, published and promoted out in the world. Making a difference on there. There’s an area where all of our books are all that. We published about a thousand books and they’re all up there. At the top of that page you’ll see all of my books. We offer them for free. That’s a way to get a free book for me and also to get on my mailing list. And if you are interested in any of our leadership training retreats that we are now doing the best way would be getting the email list and just hitting reply. So grab one of my books for free and then right. Then one of the amazing people on my team will get back to you. We can figure out how to work together and if you want to get your book done, the authorincubator.com has lots of great resources for that.
Rhamy Alejeal: Awesome. Thank you so much Dr. Angela. I sure appreciate it.
Dr. Lauria: Thank you so much. This has been a lot of fun. I love kicking out on HR stuff. And the fact that you’re automating a lot of this makes such a difference because I think most people just don’t have time to do recruiting. Right? And before we could get, it’s like an afterthought, but it’s really the most important thing as a leader or an executive, I think that we do
Rhamy Alejeal: Well. My recommend is always this, just like in product delivery or service delivery, processes are the only thing you can deliver consistently and most importantly improve consistently. So systems like yours and the advice you give and the structures you build are outstanding. But if you don’t put them in place in such a way that they happen every time, the same way consistently, you can’t measure their impact and you can’t improve on them over time, which is the real secret sauce in a business. So I think I love having guests like you on and I can’t wait for some of my clients to reach out and learn more and for me to learn more as well. And let’s see how we can work together in the future.
Dr. Lauria: Love it. Thank you so much for having me on.
Rhamy Alejeal: Have a great one.
Dr. Lauria: You too!
Rhamy Alejeal: Ladies and gentlemen, that’s it for today. Thank you so much for tuning in. Check us out on LinkedIn, Facebook, Twitter at Poplar financial. Go to people, processes.com and subscribe and get some of our subscriber only content. Thank you for tuning in. Now it’s time for you to go out there, have a great day, and get your work done.
Find Angela Lauria Here:
Good morning, Ladies and Gentlemen.
Welcome to the people processes podcast where we dive deep into the tools, laws and processes that you need to scale and grow your people processes. I’m your host, Rhamy Alejeal and I’m the CEO of people processes. My company helps organizations all across the United States streamline, optimize, implement, and revolutionize their HR operations. We’ve helped hundreds of companies, thousands of HR leaders across the world get their people processes right. Today, I’m excited to dive in a little bit into a new Trump department of labor health and human services regulation that talks about insurance regulation, how fun, how sexy, how crazy, but this insurance regulations a little different. It says that insurance companies are going to have to disclose how much you will pay for a service before you get it. Whoa. Before we dive too deep, I just want to ask you to please subscribe to our podcast. You can find us on iTunes, Google podcasts, Spotify, Stitcher, pretty much any pod catcher you like. We’re there. You can also subscribe to peopleprocesses.com which is what I love because we give you exclusive subscriber only content in there, like our new on-boarding checklist for 2020 with updated information about the four pretty cool setup. Check it out at peopleprocesses.com.
All right, let’s dive right into this thing. So what is Trump doing? Okay. On November 27th, 2019 the U S department of labor, health and human services and the treasury jointly issued a proposed rule. That rule is actually linked on the peopleprocesses.com website if you want to read it in depth yourself. That rule is going to require group health plans and health insurance issuers in the individual and group markets to disclose price and call sharing information upon request to participants, beneficiaries and enrollees or their authorized representatives.
So that means your actual plan participants, your employees, their spouses and their kids, if they ask the proposal would give consumers real time personalized access to call sharing information including an estimate of their call sharing liability for all covered healthcare items and services through an online tool that most group health plans and health insurance issuers would be required to make available to all of their members and even in paper form at the consumer’s request. Good Lord, I can’t even imagine. Maybe that’d be a two week process to get a letter in the mail or something. This is going to help consumers compare costs between specific providers before receiving care. So imagine you know you need a knee surgery rather than knowing your deductible and your out-of-pocket and assuming, all right, well this is gonna max it out or maybe it will be less or Hey, my doc said it’d probably be around three grand and then trying to figure out what that would mean.
You could use the online tool, look up specific pre-negotiated rates with specific carriers or with your insurance carrier, with specific providers and get an actual estimate of what you would pay given your deductible spend so far, your max deductible, your max out of pocket, your co-insurance rate and their negotiated rate with that provider. It would allow you to shop providers. This could be huge. Together the agencies concluded that the additional price transparency efforts are necessary to empower a more price conscious and responsible healthcare consumer, promote competition in the healthcare industry and lower the overall rate of growth in healthcare spending. Look, I don’t care what your politics are. Healthcare spending has gone crazy for a long time. Really since the mid 2000’s before Obamacare. Though Obamacare really added some costs in there too. It’s been a roughing and one of the reasons is that employees and just consumers in general can’t shop you.
It’s like you went to best buy and you had to just trust the best. And he’s like, I want a TV. And then he goes and picks it for you. And you can’t go compare that to Amazon and you don’t get any pre-estimates. It’s just price transparency is going to be if this is able to be implemented, which no guarantees. But if this rule is able to implement it, it is the first true movement to lowering the cost, the true cost of healthcare in this country. Not what people pay individually, not what companies pay. And I would ensure his pay but just the overall cost. So everybody benefits that. I’ve seen at least since I started in this business about 10 years ago. The proposed rule includes two approaches to make healthcare price information accessible to consumers, allowing for easy comparison shopping.
So these are the two things they’re going to do. First, each non grandfathered group health plan or health insurance issuer offering non grandfathered health insurance coverage in the individual and group markets. So basically everybody who’s not unlike an old plan pre 2013 would be required to make available to participants, beneficiaries and enrollees personalized out of pocket cost information for all covered healthcare items and services. Through an internet based self service tool and in paper form upon request. For the first time, most consumers would be able to get estimates of their call sharing liability for healthcare for different providers, allowing them to both understand how costs for covered healthcare items and services are determined by their plan and shop and compare costs for healthcare before receiving care. Second, each non grandfathered group health plan or health insurance offering non-grant grandfathered individual coverage would be required to make available to the public, including stakeholders such as consumers, researchers, employers and third party developers.
The end network negotiated rates with their network providers and historical payments have allowed amounts to out of network providers through standardized regularly updated machine readable files, I. E. big giant databases that I can turn into proposals. This would provide opportunities for innovation to dive, to drive price comparison, consumerism in the healthcare market. That would be huge. Knowing what the usual and customary out-of-pocket spend is something that’s nearly opaque right now. Even for someone like me who’s in the industry quoting hundreds of companies, working with hundreds of companies every year, being able to see the actual, like you would get a proposal and be like, this is your deductible, your out of pocket maximum and here’s a sampling of negotiated rates for providers in your area. That makes a huge difference. In conjunction with the proposed rule, the DOL posted three appendices to its website.
The model notice proposed data elements for the negotiated rate machine readable file and proposed data elements for the allowed amount. That’s the out-of-pocket or the out of network stuff in machine-readable files, so they actually said, not only do we want you to do it, here’s the notice we want you to put out and here’s how we want your data to look so that everybody can read it. Those came out. That’s the big news for you as a consumer of healthcare. Now there’s a couple of other little things. They changed up how the MLR works. The medical loss ratio basically saying if you can provide information that lets people save money, the insurance company doesn’t have to necessarily rebate that as an MLR. They can split it with the consumer. So basically it frees up a little bit like right now, most MLRs are 80%.
So whatever dollars come into the insurance company, 80% has to go to spend on actual medical payments. This is saying, look, if you can actually lower the cost of health insurance and people are using these tools, we’ll let you go a little bit above 80%. This gives an insurer the incentive to make the system good instead of some just, you know, crappy website that no one ever uses because no one can ever find it. When they do, it doesn’t work. We don’t want that. So it also provides an incentive knowing that a lot of this cost of publishing this information is going to disrupt insurance services and presidents and other, it says if you do it well and it saves people money, you can make a little bit more too.
Now, when would the start? All components of the role would be applicable for plan years beginning on or after one year after the finalization of the rule. So the rule is not final yet. A commons are due on or before January 14th, 2020. So if you really think about this and you want to comment on it, we’ll have a link to our website. We can actually go online and comment to the federal government, department of labor, the joint task force on this and tell them what you think. Those comments are going to be up. You can do them up to January 14th, 2020 and then after that there’s normally a 90 day review period and then the law would go into effect unless they revise it. If that’s the case, then by 2021, we could have this kind of transparency. It would be a game changer, an absolute game changer.
So, you know, wherever your politics are, I gotta say I’m super excited about this. I think it would give us so much more information going in. So keep an eye out. If next fall you renew if you’re a January 1 renewal, so not 2020 that we’re already done with, but 2021 keep an eye on this because your 2021 proposal may be completely different and if your broker isn’t necessarily providing that information to you, you want to shop around, take a look around because this could be the biggest deal in terms of selecting health plans in a long time. My name is Rhamy Alejeal, I’m the CEO of peopleprocesses. We help companies all over the U S with things like on-boarding, payroll, timekeeping, and of course employee benefits. We can help you find and select the best plans for your organization, communicate them, enroll them, handle all the paperwork and talk to each and every one of your eligible employees with one of our licensed benefits counselors whose only job is to help employees understand this stuff. If you’re interested, drop us a line at surfaceatpeopleprocesses.com or at peopleprocesses.com you can book an appointment directly. We’d love to help you out there. In the meantime, it is time for you to go out there, have a great day, and get your work done. Thanks for listening.
Appendices. In conjunction with the proposed rule, the DOL posted the following three appendices to its website:
- Proposed Transparency in Coverage Model Notice
- Proposed Data Elements for Negotiated Rate Machine-Readable File
- Proposed Data Elements for Allowed Amount Machine-Readable File.
5Proposed Rule: Transparency in Coverage, 26 CFR Part 54, 29 CFR Part 2590, and 45 CFR Parts 147 and 158; 84 FR 65464, November 27, 2019; https://www.govinfo.gov/content/pkg/FR-2019-11-27/pdf/2019-25011.pdf.
Good morning, ladies and gentlemen. Welcome to the people processes podcast where we dive deep into the tools, your laws and processes that you need to scale and grow your people processes. I’m your host, Rhamy Alejeal and I’m the CEO of people processes. My company helps organizations all across the USA streamline, optimize, implement, and revolutionize their HR operations. We’ve helped hundreds of companies and thousands of HR leaders across the world get their people processes right. Today, we are going to look into the new form W4 for 2020. We’re going to talk about when it’s used, how it’s used, a little bit of the history of it, and we’re going to actually open it up and walk through it together, but before we go that deep, I want to ask you to please subscribe to our podcast. You can find us on iTunes, Google podcasts, Spotify, Stitcher, pretty much any podcatcher of your choice. You can also subscribe at peopleprocesses.com which will give you exclusive subscriber only content and I’d love to see you there.
Now let’s dive right in. A little bit of history. In May 2019, not too long ago, the IRS issued a first draft of the 2020 form W4 employees withholding allowance certificate. This new form will help employees improve withholding accuracy and fully reflect the changes including in the TCG JA the tax cut and jobs act of 2017 which contained major revisions affecting taxpayer withholding. Since then, we’ve had to use the old form still and it doesn’t provide as much information as is needed, and some irrelevant information based on the new law. The redesigned W4 no longer uses the concept of withholding allowances, which was previously tied to the amount of the personal exemption due to changes in the law.
Personal exemptions are currently not a central feature of the tax code. The primary goals of the new design are to provide simplicity, accuracy, and privacy for employees while minimizing the burden for employers and payroll processors like us, at least according to the IRS. So what happened in August, 2019, the IRS released a second draft of the form. The title of the W4 was changed to employee’s withholding certificate. Removing the word allowance from an entirely the computation of withholding did not change from the first draft at all. Employees who have submitted a form W4 in any year before 2020 will not be required to submit a new form merely because of the redesign. They made that clear in the instructions in the second draft, employers can continue to re compete withholding based on the information from the employees. Most recently submitted W4.
So when do you start using this? You start using this on new hires starting in 2020. Also, if someone wants to make a change to their withholding in 2020, you use the new W4, not the old one, but you don’t need to worry about blasting this out to all of your employees and getting new documents all for January. Just recently, December 4, 12 days before this recording, the IRS issued the final form W4 for 2020 changes since the last draft include basically minor edits to the verbiage. Also on page two under your privacy, more language was added to help the taxpayer understand exactly what went, what checking the box in step 2 may do to withholding. We’ll talk about that in a second. Basically they gave a little bit more information. The IRS encourages all tax professionals to become familiar with the new forms so that they can help tax payers with proper withholding in 2020 so let’s get into that form A.
All right, so if you look at the W4, by the way, the link to the new W4 along with publication 15-T which is the third draft, it’s not the final version, but it’s the instructions for the form and it’s in its third draft along with an FAQ provided by the IRS are all available and peopleprocesses.com. So if you’re listening to this on iTunes or somewhere else, go on over there, subscribe while you’re at it and get our newsletter and you can get direct links to all these different pieces. In the actual form itself, it looks pretty similar. It say W4 on the top left. First section, super easy. First name, last name, social security number, address, city, state, and zip code. Great. Then it asks single or married filing separately, married filing jointly or qualifying widower and head of household, which means check only if you’re unmarried and pay more than half the costs of upkeep of keeping up a home for yourself and a qualifying individual. So those are your three options. Great. Click one that’s straightforward.
Technically, that can be the end of the form, but we’re going to add a couple more. So complete steps 2 to 4 only if they apply to you. Now, how do we know that they apply to you? Alright, complete this step if you hold more than one job at a time or are married filing jointly and your spouse also works the correct amount of withholding depends on income earned from all of these jobs. So the W4 is now going to get information on whether you need information about your spouse’s income as well. So this is pretty cool. So it says, do one of the following, only one of the following. If you have more than one job or you have a spouse who works in your filing jointly, you want to use the email@example.com/w4app, which is actually not too bad.
Use the multiple jobs worksheet on page 3 and enter the result in step 4. See below. Or if there are only two jobs total, you may simply check this box. Do the same on the W4 for the other job. This option is accurate for jobs with similar pay, otherwise more tax than necessary may be withheld. All you gotta do is check the box. So if you have two working or you have two jobs that pay a similar amount, you simply check that box and you move on. If you’re married filing jointly, then over in a step to be the multiple jobs worksheet. Basically it says, if you have two jobs or you’re married filing jointly and you use a higher spot and you and your spouse each have one job, find the amount from a table on page 4, which is basically, a go to the higher paying job and look at your annual salary.
And then that’s what it shows on the left. So it says like zero to 10,000, 10,000 to 20,000 on the left in a column. And then across the top it says a lower paying job, annual taxable wage and salary. And it makes a little chart. So let’s say you make 80,000 and your spouse makes 30,000. It takes you over to the chart and it gives you a number 3440 and it asks you to then put that on the multi wage worksheet. So you can do it that way. Again, if you’re paid a similar amount, you can simply check the box under step two. Finally, you go onto step 3 and it says, complete this for only one of the jobs. And so whichever one is the highest paying job of your spousal income or your two jobs that you’ve told yourself you would complete step 3 on.
If you don’t have more than one job, you don’t need to complete step 3. You don’t need to do step 2 either. If you are married and you know, and not filing jointly, you don’t need to do step 2 or 3. But if you are, you go in here and it says, Hey, step 3 claim defendants. This is for those of you who would only do it on one of the jobs, right? Just one. Don’t do it on the extras. If your income will be less than 200,000 or less than 400,000. If married filing jointly, multiply the number of qualifying children under age 17 by 2000, multiply the number of other dependents by 500. And then combine the totals to fill out your final number. So you got one kid, you got one spouse, maybe one who’s not working. You put 2,500 in step 3. That’s simple. If you were the lower income spouse, you would put nothing in 3.
Finally, there’s the step 4 other optional adjustments, which you can say, Hey, I make extra money here, from riddle properties or something like that. Or driving an Uber. You can put in other income. You can also put in other deductions other than the standardized worksheet if you want. The vast majority of people will not use that. You can also put in your extra withholding, which again is an option that was on the prior SA W4. Again, very rarely used for most, but that’s foresee. So for A, B and C, completely optional, but some people will use them. Then you sign and date and then the employers numbers go on the bottom, first name and address, first date of employment and the EIM. And that’s it. That’s the W4. Now there’s a little bit more complexity to it because it’s kind of asking about total combined household income as opposed to just wanting to ask you the number of withholding. But that’s going to lead to such more accurate withholding that I’m quite pleased about it, but I understand it’s going to be a bit of a booger. So how do you fill it out? We just went over it. When do you start using it in 2024 new hires only or people who want to make updates in 2020.
Going forward go to peopleprocesses.com download a new one. Now, normally I just want to drop a little plug in here to let you know. Of course, in our HR systems, these are all part of your on-boarding systems and our HR base base HRS platform, they connect directly to payroll. They handle all the calculations on the back end. They’re easy for employees to access an update. Pretty cool little tool. If you’re not on it yet, let us know. We’d love to show you around, but many software out there are going to have, it doesn’t just have to be ours. Just need to get that W4 filled out for your new hires starting in 2020. I hope this was helpful for you. Hope you’ll learn something, go to the website, download the form, and look it over yourself. The lot of this episode will make a lot more sense that way. Thank you for taking the time. My name is Rhamy Alejeal, and I’m so excited you joined me to here today. Now it’s time for you to go out there, have a great day, and get your work done.