Improving a struggling employee’s performance is a two-way street

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It’s easy to get frustrated when an employee is failing to produce the volume or quality of work you’re looking for. A business owner or department manager may even give in to the temptation to play the blame game, pointing a finger at the struggling worker and only exacerbating the situation.

In truth, performance improvement must be a two-way street. There’s no doubt that the individual in question must step up and do better. But, as an employer, you’ve got to provide information, tools and support to help his or her improvement efforts.

Map the route

To get started, before saying one word to the person, fully investigate the issue. This means first defining the nature and degree of the underperformance and then determining whether you’ve done the best job possible in helping the employee to be successful.

For example, when and how well was the employee trained? Someone hired years ago may have been taught to do a job differently than it now needs to be done. Also, is the employee aware that you consider his or her work subpar? Has anyone discussed the problem with the employee or put it in writing?

Staff members who aren’t sure whether they’re on the right track often wait for feedback, rather than proactively seeking guidance. That means you may need to act at the first sign an employee isn’t meeting expectations, rather than hoping the situation will remedy itself.

Embark on the journey

Once you’ve established what’s wrong, meet with the employee. Clearly and specifically state your performance concerns and let him or her know that your objective is to work together to find a solution.

After naming the specific performance issues, ask how you can help the employee turn around the situation, including some predetermined suggestions. There may be issues you aren’t aware of, such as tools that are in disrepair or missing, or poor lighting in the employee’s workspace. So be open to his or her input.

If the employee attributes the subpar performance to lack of clarity about expectations, the remedy might be as simple as weekly meetings with his or her manager to go over what needs to be accomplished. If the employee reports feeling overwhelmed and unable to prioritize tasks, you may need to provide additional training on organizational skills or better use of technology.

Work with the employee to create a performance improvement plan that includes specific goals and a timeline for achieving them. Then follow up regularly. If the goals and timeline are met, you’ll enjoy the benefits of having a more productive team member. If they aren’t met, then you need to consider what further action to take.

Take the trip

Employee retention isn’t about only strong compensation packages and companywide recognition. It’s also about making the effort to help struggling employees find success. When the person in question is, underneath it all, a good worker, it’s a trip well worth taking. Our firm can provide further information and ideas.

Do your employees a favor and remind them about their W-4s

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Employees don’t always fill out their W-4 forms accurately. For example, some may wrongly write “exempt” on the withholding portion of the form to ensure that no federal or state tax is withheld. Others may be inadvertently underwithholding because of recent tax law changes.

Although the employees themselves are liable for improperly completing their W-4s, you can do them a favor by reminding them of possible mistakes. After all, the IRS may eventually come calling on your organization if someone appears to be underwithholding.

Key questions

Here are some questions to ask when determining whether an employee can legitimately claim to be exempt from withholding:

Did the employee have a tax liability in the previous year? If the employee received a refund of all federal income tax paid (or had a right to a refund), he or she may be able to claim exempt status, depending on the answer to the next question.

Does the employee expect to have a tax liability this year? To legitimately claim to be exempt, the employee must be able to state that he or she had no tax liability last year and doesn’t expect to have a tax liability this year.

Also, an “exempt” W-4 is valid for only one year and expires in February of the following year. If your payroll includes employees who claim to be exempt, require them to fill out new W-4 forms annually.

TCJA impact

Because of the many changes wrought by the Tax Cuts and Jobs Act (TCJA), and as you’re likely aware, earlier this year the IRS issued new withholding tables — and withholding amounts have generally dropped. The new tables are intended to work with current W-4 forms. However, just because you’re correctly following the withholding tables for an employee doesn’t mean the employee isn’t having too little (or too much) tax withheld.

Remind all employees that they should use the new IRS calculator (available at irs.gov) to determine whether the appropriate amount is being withheld. If it isn’t, they should submit a new W-4 to you to adjust their withholding. Employees who may be at risk for underwithholding include those who itemize deductions, who hold multiple jobs, or who have dependents age 17 or older.

More changes ahead

IRS Form W-4 is currently in a bit of a state of flux. A new version of the form is expected for 2019 that more clearly reflects the TCJA’s provisions. Some of the applicable rules for filing the form could change along with it. Our firm can keep you apprised of the latest news affecting W-4s and help you gather and verify the right information.

Remind soon-to-be retirees about RMDs

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Do you have employees in their late 60s? If so, are they aware of the required minimum distribution (RMD) obligations beginning at age 70½ for their IRAs and possibly their 401(k) plans? It’s essential that they know what to expect when they reach that age so they can avoid a potentially whopping penalty. As their employer, you can stand to benefit from helping them out with a friendly reminder.

IRAs vs. 401(k)s

In most instances, IRA account holders must take RMDs on reaching age 70½. However, the first payment can be delayed until April 1 of the year following the year in which the individual turns 70½. (For inherited IRAs, RMDs are often required earlier.)

401(k) accounts are a different story. Account holders don’t have to begin taking distributions from their 401(k)s if they’re still working for the employer sponsoring the plan. Although the regulations don’t state how many hours employees need to work to postpone 401(k) RMDs, they must be doing legitimate work and receiving wages reported on a W-2 form.

There’s a notable exception, however: Workers who own at least 5% of the company must begin taking RMDs from the 401(k) starting at 70½, regardless of their work status.

If someone has multiple IRAs, it doesn’t matter which one he or she takes RMDs from so long as the total amount reflects their aggregate IRA assets. In contrast, RMDs based on 401(k) plan assets must be explicitly taken from the 401(k) plan account.

Other pertinent facts

Here are some additional RMD facts you can share with employees approaching retirement:

Calculation of RMD. The IRS determines how RMD amounts change as the account holder ages, using a formula and life expectancy tables. For example, at age 72, the IRS “distribution period” is 26.5, meaning that the IRS assumes that the individual will live another 26½ years. Thus, he or she must withdraw the percentage of the IRA or 401(k) account that is 1 divided by 26.5 (3.77%).

Beneficiary spouses. Account holders who have a beneficiary spouse at least ten years younger are subject to a different RMD formula that allows them to take out smaller amounts to preserve retirement assets for the younger spouse.

Tax penalty. The penalty for withdrawing less than the RMD amount is 50% of the portion that should have been withdrawn but wasn’t.

Form of distribution. RMDs can be in cash or be taken in stock shares whose value is the same as the RMD amount. Although this can be administratively burdensome for you as the employer, it allows your employees to defer incurring brokerage commissions on securities they don’t want to sell.

Informed employees

Remember, informed employees are happy employees. Educating your older employees about their RMD obligations can help maintain healthy morale among these employees and demonstrate to your entire workforce (and job candidates) that you care about retirement planning. Let us know how we can help with this critical effort.

IRS extends deadlines for ACA information reporting

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Under the Affordable Care Act (ACA), certain employers must report health care plan information to the IRS and employees. Specifically, Forms 1094/1095-B (B Forms) and Forms 1094/1095-C (C Forms) may need to be submitted for the 2017 tax year. The agency recently extended submission deadlines for these forms under some circumstances. Let’s delve into the details.

Background

The B Forms are filed by minimum essential coverage providers — mostly insurers and government-sponsored programs, but also some self-insuring employers and others. The C Forms are filed by applicable large employers (ALEs — generally, employers that employed 50 or more full-time employees or the equivalent during the previous year) to provide information the IRS needs to administer the ACA’s employer shared responsibility and premium tax credit provisions. ALEs with self-insured health plans also report coverage information on Form 1095-C. Forms 1095-B and 1095-C must also be furnished to employees.

General extension

The IRS recently issued Notice 2018-06 to announce limited relief for information reporting on Forms 1094 and 1095 for the 2017 tax year. The deadline for furnishing Forms 1095-B and 1095-C to employees has been extended by 30 days, from January 31 to March 2, 2018. Because of this automatic extension, the discretionary 30-day extension isn’t available, and no further extensions may be obtained.

The notice doesn’t, however, extend the due date for filing Forms 1094-B and 1094-C (and accompanying Forms 1095) with the IRS. Accordingly, the deadlines remain February 28, 2018, for paper filings and April 2, 2018, for electronic filings. (Electronic filing is mandatory for employers required to file 250 or more Forms 1095.) However, filers may obtain an automatic 30-day extension by filing Form 8809 on or before the regular due date.

Good faith relief

Also, the IRS will again provide penalty relief for employers that can show they have made good faith efforts at compliance. No penalties will be imposed on employers that report incorrect or incomplete information — either on statements furnished to employees or returns filed with the IRS — if they can show they made good faith efforts to comply with the reporting requirements.

The notice specifies that the relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other required information. Penalty relief isn’t available to employers that:

  • Fail to furnish statements or file returns,
  • Miss an applicable deadline, or
  • Otherwise don’t make good faith efforts to comply.

Evidence of good faith efforts may include gathering necessary data and transmitting it to a third party to prepare the required reports, testing the ability to transmit data to the IRS, and taking steps to ensure compliance for the 2018 tax year.

Total compliance

If your organization self-insures or is defined as an ALE for the 2017 tax year, make sure you’re in total compliance with the ACA’s information reporting requirements. Our firm can help you with the pertinent details.