Hiring & Incentivizing Employees & Consultants

Hiring & Incentivizing Employees & Consultants

Emerging Companies Roundtable Takeaways

At the December 2013 Emerging Company Roundtable session, Gianna Arnold and Phil Bogart of Saul Ewing moderated a discussion on Hiring & Incentivizing Employees & Consultants. Thought leader Nick Miller of Parking Panda, along with Saul Ewing attorneys Harriet Cooperman and Heather Pruger, provided valuable information.

Key takeaway points:

  1. You cannot communicate too much when it comes to hiring and retaining employees. Try to have team meetings every few months to discuss where the company is now and where it’s headed over the next six months to a year. These discussions will keep everyone on track and motivated to continue working toward a common goal.
  2. Define the culture of your company and make sure it is conveyed when searching for new employees – this will enable you to attract those who share your vision. While incentives might entice people to join your team, the culture is what will keep them around for the long haul. A candidate’s experience and skill set might be what you’re looking for, but if the candidate does not fit in with your culture, don’t ignore it. Be selective. An employee is more likely to stick around when s/he believes in the culture and the vision of the company.
  3. As a small company or startup, you’re most likely facing challenges with employee compensation. To avoid spending all of the money your company has on salaries, consider hiring independent contractors to complete certain projects, or take on part-time workers or interns at lower salaries. When looking at these options, make sure you classify each member of your workforce correctly. Follow applicable wage and hour laws to avoid state and federal ramifications. For a webinar series presented by our labor attorneys on employee classification and misclassification, please click here.
  4. There are different ways to structure employee incentivizing programs. Each option, such as bonuses or stock plans, comes with various tax issues. Know what they are. Vesting schedules and employment termination also need to be taken into consideration.

For a “Drive-By-Advice” video recorded by Umar Hameed of Productivity Cubed following our discussion, please clickhere.

Roundtable Q&A

Q: What percentage of equity ownership interest does an employee need to be exempt from the minimum salary requirements of the federal wage and hour law?

A: If the employee owns at least a bona fide 20-percent equity interest in the business in which s/he is employed, regardless of the type of business organization, and is actively engaged in management of the business, the employee is considered a bona fide exempt executive and does not have to meet the minimum salary level ($455/week) requirement. Generally, “management” includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures. This is a special rule for business owners. It is critical that the employee meet both parts of the rule: (1) have a bona fide 20% equity interest and (2) be actively engaged in management of the business. If the employee does not meet both parts, then s/he must be paid the minimum salary basis if s/he is otherwise an exempt employee (executive, professional or administrative).