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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.

Choosing the best way to reimburse employee travel expenses

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If your employees incur work-related travel expenses, you can better attract and retain the best talent by reimbursing these expenses. But to secure tax-advantaged treatment for your business and your employees, it’s critical to comply with IRS rules.

Reasons to reimburse

While unreimbursed work-related travel expenses are deductible on a taxpayer’s individual tax return (subject to a 50% limit for meals and entertainment) as a miscellaneous itemized deduction, many employees won’t be able to benefit from the deduction. Why?

It’s likely that some of your employees don’t itemize. Even those who do may not have enough miscellaneous itemized expenses to exceed the 2% of adjusted gross income floor. And only expenses more than the floor can be deducted.

On the other hand, reimbursements can provide tax benefits to both your business and the employee. Your business can deduct the reimbursements (also subject to a 50% limit for meals and entertainment), and they’re excluded from the employee’s taxable income — provided that the expenses are legitimate business expenses and the reimbursements comply with IRS rules. Compliance can be accomplished by using either the per diem method or an accountable plan.

Per diem method

The per diem method is simple: Instead of tracking each’s actual expenses, you use IRS tables to determine reimbursements for lodging, meals and incidental expenses, or just for meals and incidental expenses. (If you don’t go with the per diem method for lodging, you’ll need receipts to substantiate those expenses.)

The IRS per diem tables list localities here and abroad. They reflect seasonal cost variations as well as the varying costs of the locales themselves — so London’s rates will be higher than Little Rock’s. An even simpler option is to apply the “high-low” per diem method within the continental United States to reimburse employees up to $282 a day for high-cost localities and $189 for other localities.

You must be extremely careful to pay employees no more than the appropriate per diem amount. The IRS imposes substantial penalties on businesses that routinely fail to do so.

Accountable plan

An accountable plan is a formal arrangement to advance, reimburse or provide allowances for business expenses. To qualify as “accountable,” your plan must meet the following criteria:

  • It must pay expenses that would otherwise be deductible by the employee.
  • Payments must be for “ordinary and necessary” business expenses.
  • Employees must substantiate these expenses — including amounts, times and places — ideally at least monthly.
  • Employees must return any advances or allowances they can’t substantiate within a reasonable time, typically 120 days.

If you fail to meet these conditions, the IRS will treat your plan as nonaccountable, transforming all reimbursements into wages taxable to the employee, subject to income taxes (employee) and employment taxes (employer and employee).

Whether you have questions about which reimbursement option is right for your business or the additional rules and limits that apply to each, contact us. We’d be pleased to help.