But according to Richard Medve partner in the tax department of CBIZ, if you want to take advantage of the changes in the law the key is planning.
"There were changes but they are mostly back-end loaded," explains Medve.
What EGTRRA has done is create a tax-free savings options that need to be taken advantage before April 15. Medve explains that education and retirement are the areas most people can see the most savings. "It entails more planning, more than just number crunching, it is about how to minimize taxes not just compliance," he says.
One of the most significant areas of change in EGTRRA is retirement.
Traditional and Roth IRA contribution limits moved up to $3,000 and there will be more increases in the following years. "Before it was $2,000 and has been since the beginning of time," says Medve.
Qualified retirement contributions, like a 401(k), also increased $1,000 this year and will continue to increase at the same rate until they cap off at $5,000 in 2008. Also, vesting schedules will be shorter and pensions will be more portable. Being more aware of the law won't make much of a difference in April, the benefits from these changes entail some long-term planning and increased saving schedules.
"The biggest thing that affects the most people are the changes in education," says Medve. In addition to raising the education tax credit from $500 to $2,000 the ability to save for education has been expanded both on the federal and the state level. "These are totally tax free, not a deductions and there are no capital gains or appreciation and the money can be used for college or other education, public schools or parochial."
One of the most interesting new features of the Section 529 plans are the rules surrounding who can save and who can benefit. Both parents, guardians and grandparents can set aside money and now the beneficiary can be changed from child to child, generation to generation. "It is like a trust without the taxable features," he says. "It is transferable and it can never be depleted."
Do not ask what the government can do for you. Ask what you can keep from the government. In the case of the new tax law, it's not so much what you can get back but what you don't have to put in.
The bad news? All of these much-touted provisions expire in 2010.
Last year's Economic Growth and Tax Relief Reconciliation Act of 2001 (HR 1836), or EGTRRA, contains 85 major provisions and more than 400 changes to the tax code.
Ken Haffey, managing partner of CBIZ, says the recent changes have received a lot of press and awareness among consumers.
"It has made everyone more aware of taxes, even my 70-year-old mother," he says. Much of that arrived in the form of a rebate check. "People are more aware because they received a check or because they didn’t receive one."
While the changes are significant, there are some simple truths. Both ends of the tax bracket spectrum will see incremental cuts. The 15 percent tax bracket, currently the lowest, dips down to 10 percent. By 2006, the 39.6 percent bracket slowly slides down to 36 percent.
If you're engaged to be married and have cold feet, just tell your intended that you want to wait until 2005 when the "marriage penalty" is lessened.
"The standard deduction for married couples will increase beginning in 2005, doubling the amount for singles," explains Haffey. In addition, the 15 percent bracket also expands for married couples, surpassing the bracket for single taxpayers.
It won't exactly be profitable to have children, but tax credits will double to $1,000 a head by 2010. The income ceiling is being raised from $75,000 to $150,000, and the dependent car credit will rise to 35 percent. The law also allows for childcare deductions for those taxpayers affected by the Alternative Minimum Tax (ATM).
The changes aren't exactly Earth shattering, but they will affect many people.
"A lot of dialogue has been given to this and you might expect more of a change but it is a step in the right direction," says Haffey.
How to reach: CBIZ Business Solutions of Cleveland Inc., (216) 525-1099.
According to one new law, complex trusts will now have to pay State income tax, even if those funds are not distributed to the beneficiary.
“The Ohio law, prior to passage of this Bill, did not apply the personal income tax to the undistributed income of a trust,” explains Andrew Press, CPA and tax partner with Bick Fredman & Co.
Before, as long as the income was not distributed tax did not need to be paid. This only applies to trusts that “reside” in Ohio. “There are three case in which a trust or part of a trust is considered an Ohio resident,” explains Press.
The tax applies when assets are transferred under a will of a person who lived in Ohio; when the trust is irrevocable and the assets are transferred by a person who lives in Ohio; and if even one of the beneficiaries is an Ohio resident during the taxable year.
The amount owed on the trusts is figured the same way as the federal tax. “The tax is computed by multiplying the allocated and apportioned income of the trust by the personal income tax rates,” says Press.
In the end, the state won’t actually raise more money, the new legislation just the receipt of the tax. Press suggests that the State is looking to raise a little revenue this year. “This is the one thing the state is doing to get the money quicker,” he says.
The first of these quarterly estimates was due Sept. 15, 2002. “Those who have taxable trusts will owe their first estimate in September and if they don’t pay on time they will have to pay penalties,” says Press.
The Ohio Department of Taxation has released a release to professional practioners however the new tax has otherwise not received a lot of attention. When asked if he thought there might be a public awareness issue regarding the new legislation, Press said, “I don’t think there is any public awareness.”
How to reach:Bick Fredman & Co., (216) 426-2100
At the end of last year, Senate Bill 120, dealing with joint and several liability, passed the Ohio House of Representatives by a 79-17 vote. According to Rodger Geiger, state director of the National Federation of Independent Business (NFIB), one of the organizations pushing the reform, the legislation brings Ohio in line with 34 other states that have modified or eliminated the rule of joint and several liability.
The ruling has a potentially significant effect on what three out of five Ohio businesses that are sued in an average year.
"Before, if a defendant was found to be just 10 percent at fault, a jury could require them to pay 100 percent of the damages," says Geiger. "Under (Senate Bill 120), those defendants that are found to be less than 50 percent liable will pay only a proportionate share of the damages."
Many business owners have found themselves in court defending against a claim for a product or machine that wasn't maintained, assembled or used properly by another party, only because, as Geiger says, "Their label was there and they have insurance and can pay.
"You (could) be as little as 1 percent liable, but if you are perceived to be the deep pockets, you end up paying 100 percent of the jury verdict," says Geiger. "This creates a second victim."
Senate Bill 120 is one of the fragments of House Bill 350, Ohio's hallmark tort reform bill that was originally passed almost 10 years ago.
"It had 45 issues, and the courts struck it down," says Geiger. "The court claimed it violated the single subject rule, and now, in response, we are coming at it one piece at a time."
In addition to the joint and several liability legislation, the General Assembly passed reform bills on noneconomical and punitive caps, and on peer review discovery in medical malpractice suits. All of these, says Geiger, will help Ohio businesses stay in business.
He thinks the new rulings protect business while still allowing victims to be compensated.
"Let's create some parameters and get rid of the lottery system," says Geiger. "The civil justice system does play a role in punishing bad companies but should it be there to make people millionaires." How to reach:National Federation of Independent Businesses Ohio, (614) 221-4107 or www.nfib.com/oh
In response to the calling up of reservists, as opposed to initiating a draft, Congress passed the Uniformed Services Employment and Re-employment Rights Act (USERRA), a law that safeguards those employees' jobs, and their health care and retirement benefits.
"The law was enacted after the Gulf War in 1994 to help the reservists," says Scott McHenry, an actuary with Moskal Klein. "There was an older 1940 Soldiers and Sailors Act, but USERRA is much more broad."
Basically, USERRA ensures that employees who have been called to active duty are entitled by law to re-employment and continuation of benefits when proper notice is given by the employee. It applies to all branches of the military and to all businesses.
"With many laws, there are different standards for small and large employers, but this is a blanket ruling," says McHenry.
USERRA also details options for employees in regard to their retirement plans.
"As far as pensions, retirement and vesting go, for the period that (the employees) are gone, they must be treated as if they had been employed," says McHenry.
Employees -- by law and without IRS penalties -- are allowed to make up all retirement plan contributions if they return within five years of their deployment. Plan eligibility is not affected by an employee's time away during military service.
"Pension and vesting for the period that you are gone must be treated like you were employed," says McHenry.
If the vesting period is five years, and in one or more of those years an employee is away, he or she is still vested five years from the plan participation start date.
Any make-up contributions can be ignored in the nondiscrimination testing employers are required to do. Make-up contributions are also not taken into account for determining deferral limits, deduction or plan limits. However, those year's limits do apply for the make-up contributions.
"From the date of the rehire, the contributions must be made by the same period of the military service times three," he says.
Contributions can be made at any point during that time period, but may not exceed five years from the date of re-employment. How to reach: Moskal Klein Inc., (216) 771-4242.
Environmental disclosure is one area where manufacturers will see significant changes.
"The SEC was approached by stockholders and numerous investment firms," says Nick Zingale, president of Affinity Consultants, an environmental and safety consulting firm. "They are asking the SEC to force companies to disclose environmental information to report these environmental exposure issues more aggressively."
Previously, it was very much a "don't ask, don't tell" mentality. Even during a merger or acquisition, businesses were not required to reveal possible or pending EPA violations to investors and stockholders
"(The company) knows what it is facing, but because there is no formal litigation, it is not disclosed to the stockholders before a formal settlement," says Zingale.
With recent pressure, potential environmental liabilities must be disclosed on Item 303 of Regulation S-K, the form that requires companies to disclose known risks and uncertainties that are likely to affect future financial performance. This includes everything from having the proper air permits to pending fines for stream run-off or Superfund cleanup.
But Zingale points out that disclosing that information to shareholders, potential investors and/or partners is just the tip of the iceberg. The real potentially problematic issues come with disclosure to the public.
"The bigger issue is how the company is going to handle the public disclosure and the outrage related to the issue," says Zingale.
Zingale stresses there is an emotional side to any large environmental problem, and businesses have to be prepared to deal with that as well as with the technical issues. He suggests that any company facing these issues keep some things in mind.
"First, stake out the middle ground and not the extreme," says Zingale. "Just come out and say you did it."
Take a cue from Exxon and the Valdez crisis -- don't try to lay blame where is doesn't belong. Also, "the more often you apologize, the sooner people will want to move on ... the public gets conditioned.
"Share control and be accountable," Zingale says.
If you allow regulators, activists and neighbors to share in controlling the situation, then they take on some of the accountability. How to reach: Affinity Consultants, (330) 854-9066.
"Most states have some sort of whistle-blower protection, but you have to jump through a lot of hoops," says Leonard D. Young, of counsel at Ulmer & Berne and former general counsel of Ferro Corp. "But before Sarbanes-Oxley, there was no federal statute specifically related to public companies and fraud against shareholders."
The whistle-blower provision of Sarbanes-Oxley requires that public companies establish procedures for employees to disclose "the confidential, anonymous submission ... of concerns regarding questionable accounting or auditing matters."
In addition to sweeping reforms regarding employee protection, Sarbanes-Oxley outlines significant civil and criminal penalties regarding retaliation against whistle-blowing employees.
The new whistle-blower provisions are consistent with other Sarbanes provisions that hold individual executives liable for their actions.
"What is interesting about Sarbanes-Oxley is it does something that other federal statutes, like that of sexual harassment, do -- it specifically permits a lawsuit or a private right of action against supervisors."
An employee has 90 days to file a complaint. However, if the Department of Labor does not resolve the matter within 180 days, the employee can sue in federal court.
In addition, once the suit goes to court, the burden of proof falls on the employer, who must prove by "clear and convincing evidence" that any action taken against the employee is irrespective of that employee's "protected" action.
The stakes are high for the employer, says Young.
"(Employees can sue for) reinstatement, back pay, interest and compensatory damages and the big one -- litigation costs."
As with many issues that begin with public companies, closely held and private businesses should be careful when drafting new policy. Young suggests businesses take a good look at existing ethics policies and guidelines, then, "train, train, train ... this is not something that you can put in the employee book and forget about it."
Young adds that smaller companies are better off in state court than in federal court.
"If they are not a listed company and Sarbanes doesn't apply to them, then the company should stay with the state statute, which is a little more business friendly." How to reach:Ulmer & Berne; www.ulmer.com
Did I mention that the only access to this wonderland is a landing strip that sits on a 45-degree angle, and that planes take off by falling off the side of a mountain? Or that the length of the trip is 23 days, and the plan calls for hikes through all types of weather in areas where even the guides don't know the language?
Believe it or not, this is David Weiss' idea of a good time. Weiss, president of Lucerne Asset Management, thrives on adventure, and his management style reflects his unique out-of-the-office interests.
So why do people seek adventure? Why do they take risks? The questions have promulgated since the 1950s, when Sir Edmund Hillary ascended to the summit of Mount Everest. For centuries before that, however, adventure was a necessary by-product of life. Today, risk-taking allows people to be introspective and relate lessons learned from the experiences to daily life and, in the case of business owners, to their companies.
"It isn't an escape from reality, it is an escape to reality," says Marcia Mauter, director of the Institute for Creative Living, an experiential-based leadership and team development organization. "I think ballroom dancing is extreme ... because I don't do it and I'm not interested in it any more than some people don't want to build igloos and live out of them."
Physical activity and challenges are visceral learning experiences, suggests Nate Bender, a clinical counselor and Institute board member.
"People make associations," he says. "Climbing a wall is an experience. Associating that with the feeling and relationship they had doing it vs. talking about it is grounded in a kinesics aspect of our learning. It is retained in our body."
Bender claims that people who undertake these so-called extreme experiences retain them to use in other aspects of their life. For a business owner, that translates into interaction with management teams, employees, customers and partners, how a company is run and why decisions are made.
In business, risks come in many shapes and sizes. They include employee issues, contract negotiations, customer service, cash flow problems and investment options. At stake is the reward, which in many cases is in direct relation to the risk.
All of this begs the question: Do people who take risks and participate in what some consider dangerous activities make better leaders?
SBN Magazine found two Northeast Ohio CEOs who have extreme or unusual pursuits and interests. The goal was to determine whether their behavior affects their management styles and their corporate decisions.
What David Weiss and Jim Cole do isn't about thrill-seeking or even tempting fate. But their interests do have a direct effect upon their companies.
Jim Cole jumps out of an airplane at least once each year. He shoots guns that most people outside the military don't even know exist.
He hobknobs with the likes of H. Ross Perot and G. Gordon Liddy, and is debriefed on covert U.S. military operations by high-ranking generals. He has black belts in three martial arts disciplines and can break a plank with a single knuckle.
But if you ask Cole, CEO of Berea-based Noshok Inc., he'll simply say he's your average ex-Special Forces, parachuting, black belt CEO. For him, jumping out of an airplane or breaking a board with a body part is just part of who he is. His need to frequently face challenges and take risks is not just a part of his past; it resonates through everything he does in the present.
"Dealing with challenges is very important as a CEO," explains Kristin Tull, vice president of Pradco, an employee assessment firm. "You are going to be challenged all the time."
Risk-taking, she says, is a key trait in decision-makers. By taking risks to deal with challenging situations and overcoming them, the challenger gains confidence that can be used as a strong foundation to build upon.
Cole does not eschew difficult situations. When he was 18, he left home to enlist in the U.S. Army.
"All I ever wanted to be was a soldier," he says.
Growing up in North Carolina, in the shadow of Fort Bragg, Cole watched the soldiers train. And, coming from a long line of veterans, he knew early on he would join the military.
"I'm a three-time volunteer," he says. "I volunteered for the Army. I volunteered for Special Forces. And I volunteered for the war."
Cole's military service took him to Southeast Asia during the Vietnam War, where he stayed and worked with the Vietnamese government for six-and-a-half years. From there, he went to Africa to work on a large infrastructure project. Along the way, he became fluent in Vietnamese, French and Lingala -- a language spoken in Zaire -- as well as a master in three martial art disciplines.
The military model stays with you for life, explains Bender.
"People that go through the kind of rigor that the military provides -- jump school, ranger school, parachuting at night with 100 pounds on your back into a swamp -- experience things that normal people do not. If you survive, you're able to pull back from all of the stimuli around you."
It helped Cole develop a sense of objectivity and detachment, as well as a commitment to teamwork that has proven a central part of his business philosophy. Bender, an ex-soldier and high adventurer himself, says his experiences have provided similar traits.
"I fear less," he says. "I have more perspective and can be the observer of my own drama and the drama around me."
In 1976, Cole gave up the battlefield for the boardroom when he bought Noshok, a switch and gauge manufacturing firm, from the father of a fellow soldier. He didn't know anything about the business of gauges, but was willing to risk his investment so that he could learn something new.
Bender argues that combat experience directly translates to an ability to effect success when running a company.
"I'm willing to bet that CEOs that put their personal ass on the line and put themselves beyond the normal security of their role have potentially more ability to be detached and participate in the bigger picture of the organization," he says.
Another by-product is the ability to handle failure. That is even more important when you consider the high failure rate in business, and that leaders regularly find themselves on the line for making decisions that could result in failure just as easily as success.
Bender compares the situation to that of a professional athlete who takes the field game after game.
"Competitive athletes can hold an advantage over noncompetitive athletes because they have encountered losing and the extreme emotional swings," he says. "(They say to themselves) I've been knocked down so many times that I don't worry about failure."
Whether it's a reflection of his larger-than-life attitude, his refusal to look at failure as anything other than a learning experience or simply his go-for-the-gusto style, nothing Cole does is small. Take, for example, his new office building. It's designed with the normal amenities of a functioning office, but it also contains a two-story water fountain in the foyer, state-of-the-art kitchen, tanning bed, steam and sauna, a full workout room and a dojo, where every day Cole not only practices, but offers martial arts training to any employee willing to take up the challenge.
Every detail of the new building was planned or scrutinized by Cole.
"I had financing for $3.8 million, but it ended up at $6.9 million," he says, adding that he justified the extra out-of-pocket cost as a means "giving back to the people who have given to me."
For Cole, those people are his employees.
"There has been very little attrition here," he says, pointing out that his president, Jeff Scott, has been with the company 26 years. Cole's 28-year-old son, Christian, named after his best friend, Christian Girad, who was killed in Cambodia in 1969, joined the company as vice president of operations recently, but has been helping out since he was eight years old.
Cole is able to give back because over the past 23 years, he has grown Noshok's annual revenue to $14 million and is looking to capture 70 percent of the fire and emergency vehicle market. Plans are underway to expand operations into Colorado and Chicago and to export to six South American countries, China, Singapore and Bangkok.
If you are not familiar with Special Forces, you may recognize it by the term Green Beret. Cole served as the one-zero (commander) of his unit.
"Special Forces works in small, independent groups that can break into smaller groups and work independently," explains Cole.
The key word is "team."
Getting the full effect of Cole's commitment to family and friends requires a visit to his office. The wall directly outside of it is adorned with a tribute to John Wayne and Martha Ray, who, according to Cole, were some of the strongest supporters of the Special Forces. Inside is a wall of pictures, mostly of his family, including one of his son at the military school where he graduated first in his class, and one of his daughter standing outside the car she races.
Cole's ties and commitment to the military don't end there. He makes a concerted effort to hire ex-military.
"We have all branches of the military represented here," he says proudly.
It's what he refers to as the bamboo grapevine.
"If you have been to war together, you are brothers."
That attitude extends to nonmilitary employees.
"The relationship begins from Day One," he says. "Any employee can come in and cry on my shoulder."
One of the consequences of having 33 years of martial arts training under your belt is that you never feel pressured to back down. That ability has served Cole well in the business world, as well as in his travels.
"I have no problem walking on any street anywhere," he says.
Don't confuse this attitude with cockiness. With his training comes "humility and a level of comfort that you don't have to prove anything to anyone," he says.
Focus and balance are two words Cole uses when explaining why he has spent half of his life mastering a skill that he says he continues to learn from.
Effective business leaders, says Pradco's Jim Mowry, are the ones who always seem to be looking forward, learning from the past or getting something positive out of a negative result. They don't let emotions influence their judgment, and they accept the fact that no matter what preventive measures they take, there's still a good chance that something will go wrong.
It's how they deal with the situation that separates them from their peers.
David Weiss tries not to think about the things that could go wrong, either in business or on an adventure.
"To me, going to Europe is like visiting (a building with) old U.S. plumbing where the heating isn't very good," he says. "You aren't without a sense of confidence going to head off to the relative unknown. You know you just have to get through the day (and) worry less about today and live more for the future."
Weiss runs two firms, Lucerne Asset Management, which buys charged-off debt from banks and credit card companies, and Agin Court, a company that provides bridge loans for urban properties. And, while most people may find spending the first seven days of a trip hiking to the nearest village a bit daunting, Weiss claims he likes the distraction.
"I go to work (hiking and climbing) to get away from work," he explains. "It's a real break. You don't have time to think about work when you're moving every day."
Hiking may not sound that extreme, but remember, Weiss and his group hike in the Dopol region of Nepal, where cold weather and sloped and terraced hills at high altitudes are the norm. And just in case that doesn't seem dangerous, consider this: One of their group had to flown back for emergency medical treatment after coming down with an intestinal problem.
Just the act of packing up the tent when you are cold and often sick can be tiring.
"There were times that I thought I had frostbite," Weiss says. "Getting a cold down here is bad, but it really does you in up high."
Cold? Sick? Tired? It begs the question: Why?
Several reasons, Weiss says. First, the sense of adventure, love of the outdoors and, of course, the great scenery. Then there are the memories. In addition to Europe and Asia, Weiss has hiked in Africa and Chile. He's also spent eight weeks on a bicycle trek down the West Coast of the U.S.
"Getting to the top of a pass you worked on for hours is a feeling you can't express," he says.
Bender, of Pradco, associates the adventurous experience with the level and type of risk people are willing to take in their businesses.
"Everybody is on a journey," he says. "Some people may be comfortable with a low level type of risk. Their steps might be a little smaller. Maybe it is related to having a higher degree of confidence or being vulnerable and showing their frailties. That allows them to take risks in another way."
When he finally returns to a safe altitude, Weiss says he brings with him a sober sense of perspective.
"If you get sick there and you keep going, it makes things here seem a little easier," he says.
That holds true when business is slow, customers are hard to come by and employees aren't in the highest spirits.
"If I realize I can't do anything about it, I focus on what I can do," he says, adding that risk is relative, but worrying about things you can't control can paralyze your ability to run a company.
"Maybe that is why I can go out on my own (in business)," he says. "The risk is high, but so is the reward."
This returns us to the difficult question of whether taking these risks results in better leaders. According to Mauter, it boils down to assignment of value. For those who value the experience and subsequently learn from it, there is no substitute.
"The reality is that it is real hard work," she says. "It is arduous at best, and excruciating. But there is an internal reward that you would be hard pressed to find any other way."
This holds true in the boardroom, the executive office or anywhere else they do business.
So are Weiss, Cole and other CEOs like them better leaders because of their experiences, or do they participate in those experiences because they're born leaders with a streak that yearns for risk and adventure.
The truth undoubtedly lies somewhere in between. What's certain is that the actions of extreme CEOs are reflected in their business decisions and leadership styles which, more often than not, helps translate into a drive to succeed, no matter the circumstances or the difficulty of the challenge awaiting them. How to reach: Noshok Inc. (440) 243-0888; Lucerne Asset Management, (440) 543-5415; Institute for Creative Living, (216) 932-3785; Pradco, (330) 405-5000
Kim Palmer (firstname.lastname@example.org) is managing editor of SBN Magazine.
ShoreBank is by no means the biggest bank in Cleveland.
It can't boast that it has given billions of dollars in loans, and branches don't even give away toasters. But what ShoreBank does makes it one of the most innovative financial institutions of its kind.
ShoreBank Corp. has banking, development, for profit and not-for-profit entities under its umbrella. The bank itself specializes in small business financing, but for ShoreBank and its president and CEO Eric Von Hendrix, that's just the beginning.
"We focus on the riskier customers," says Von Hendrix. "Whether it's through our bank (ShoreBank) or ShoreBridge Capital or ShoreGrowth fund, we deal with community development."
ShoreBank is an FDIC bank but is flanked by two capital funds (ShoreBridge and ShoreGrowth) that provide seed and mezzanine financing, as well as a host of other development and entrepreneurial services to Cleveland's inner city residential and business development.
"We have to make money, but at the same time, we are focused on community development," says Von Hendrix.
Churches, childcare and small businesses are at the heart of ShoreBank's mission, and it is through the support of these entities that Von Hendrix hopes to strengthen the community.
"Traditionally, financial institutions have stayed away from financing religious institutions," says Von Hendrix. "The idea is that no one wants to foreclose on God."
But as Von Hendrix points out, churches historically have a low default rate and, like small businesses, banks and schools, they are a big part of the inner city community.
Last year, the bank, that has been in Cleveland since 1994 loaned out $55 million, with loan amounts between $50,000 and $500,000. That may be well below the amount of the larger, better known banks in the area, but as Von Hendrix says, "What we do is unique ... although maybe in a few years it won't seem so unique because I don't think making money and helping the community need to be mutually exclusive."
And it seems that ShoreBank has the support not only of the community but of those other, bigger banks.
"Every large bank in the city has a significant deposit in this bank," says Von Hendrix. "They are not so much our competitors as they are our supporters." How to reach:ShoreBank Cleveland, (216) 681-8901
According to the 2002 SBN/ERC Workplace Practices survey, local business owners are planning on budgeting pay increases, albeit small ones.
The survey showed the average increase in base pay projected for hourly workers and salaried workers is 3.1 percent, down .9 percent from last year's survey.
The survey also found that the average hourly wage went up 8 cents from last year's average of $8.30, not surprising considering what the local and national economy have been through in the last year.
Patti Flauto, a consultant for the Employers Resource Council (ERC), says the average hourly wage and general pay scale of Cleveland companies are in line with national numbers.
"They (local companies) are paying what the market pays ... and sometimes more," she says.
Flauto says the average cost-of-living increases locally for the past few years "have been about 4 percent and hovering."
But even 4 percent is unrealistic for some companies, and the problem comes when profit-sharing bonuses aren't there. Flauto says there is often a disconnect with employees who don't understand that yearly bonuses are tied into the company's overall profits.
"The problem is they have this bonus plan, and now employees expect it," she says. "They don't understand it is tied into the profit."
Flauto stresses that to get the most out of any bonus program, bonuses should be the result of measurable goals.
"Employees should not just get this check at the end of the year and not know why," she says.
Although that may not be a problem when times are good, it is when times are bad. If that's the cause the key is communication. If times are bad and bonuses are not forthcoming, Flauto says, "It should never be a surprise to the employee."
Employees tend to rely on year-end or quarterly additions to their paychecks and unfortunately, she says, "they may have already spent that money." How to reach: Employer's Resource Council, (216) 696-3636 or www.ercnet.org