Recruiting and retaining talent isn't always about paying premium salaries. Sometimes, intangibles address specific needs important to members of your staff.

by Mark E. Battersby [January 9, 2001]

How can any ISP owner hope to compete when the number of workers available in today's marketplace are ever-dwindling ? How can anyone afford the unprecedented compensation packages being offered today? Or, more importantly, how can your ISP operation retain essential workers that are are a big part of its success and still afford to recruit new talent to help your ISP continue to grow?

Surprisingly, survey after survey shows that it is not money alone that attracts new workers and keeps existing employees on the job—it's the benefits.

Sure bet benies
While stock options and big salaries may be needed to lure high-level executives, the average ISP owner can get good mileage out of some inexpensive perks. A few common benefits that consistently get high marks from employees are:

• Flex-time scheduling.
• Company discounts.
• Free food and free beverages.
• Casual dress Fridays—or full time.
• Education or personal development training—on or after company time.

Notice that among the perks most often chosen by employees only one program—education or personal development—actually costs the employer a dime. Even with educational benefits, our current tax rules step in to provide a helping hand.

Peripheral benefits
When education is offered as a fringe benefit by an ISP business, 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 each 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 ISP business 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 fund that program.

Benefit benedictions
While each employee has different needs, the recent trend points toward health insurance as the most important and highly valued benefit for employees.

Health insurance is tax-deductible to the employer and tax-free for the employee. What's more, an ISP business can frequently purchase it at a lower cost than the employee would ordinarily pay for an individual policy.

Some ISP operators have discovered that, especially if they employ a lot of part timers, health benefits may not be that important because the employee is getting health benefits from another source. Whether its from another full-time job, through a spouse's employer or through a parent's health insurance, insurance is not a factor in the employees decision to work for you.

When it comes to benefits for part-time help, a smart ISP operator should consider focusing on offering other, less expensive benefits, that would still be considered valuable by employees. Or, you may find that employees would prefer more cash compensation rather than any particular benefit package.

Keep in mind, however, that cash paid in lieu of fringe benefits remain a legitimate, tax deductible business expense for the ISP operation, the employee is going to have to include the amount in his or her income and pay taxes on it.

This illustrates the often-overlooked value of fringe benefits programs offered by employers. In addition to the ISP operation's tax deduction for the expense of providing fringe benefits, those benefits are usually tax free to the recipient.

Caution, cheap could cost you
Bonuses and awards must, as mentioned, 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 of the goods or services in their income. The same applies to holiday gifts.

However, 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.

On a similar note, so-called de minimis benefits may worth little or nothing in the eyes of our lawmakers, but can go a long way toward making an employee happy—without an accompanying bill.

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 of de minimis fringe benefits include:

• Occasional meal money or local transportation fare
• Occasional personal use of an employer's copy machine
• Coffee, doughnuts and soft drinks, or even local telephone calls

The bottom line
After you have decided which benefits you want for yourself and calculate in what your employees would prefer, figure out which benefits your ISP business can really afford. Wouldn't it be ironic in this day and age if the benefit package you build for you ISP turns out to be the ones that cost your operation the least?

— End    

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	[Nov. 15, 2000]	Tax-Saving Tax Strategies for ISPs