Workplace dynamics continue to change. Regardless of industry, employers need to set themselves apart.
“With more women in the workforce, a divorce rate of 50 percent creating more single parents, and a significant increase in mobile or remote employees, the need for a competitive and employee-centric benefits package is critical,” says Ron Carmassi, a sales executive at JRG Advisors, the management arm of ChamberChoice.
“A package that includes voluntary benefits will help attract and retain quality employees, while at the same time reducing overhead and improving morale. A win-win scenario,” he says.
Smart Business spoke with Carmassi about how your company can use voluntary benefits to create flexibility for employees, while saving money on benefit premiums and underwriting.
What are voluntary benefits?
Voluntary benefits consist of a variety of insurance products offered at the workplace through the convenience of payroll deduction. They can be added to your current benefits package.
Employers might offer a mix of products including critical illness, cancer, accident, disability, life, pet, auto, homeowners insurance and more. Employees then have the flexibility to choose the coverage that fits their personal needs and budget.
What is the value of voluntary benefits?
The needs of each employee vary based on family and financial dynamics. There is no one-size-fits-all solution for benefits in today’s work environment.
Full-time employees still expect their employer to provide some level of health insurance. However, they are looking for additional offerings to protect themselves and their families. One employee may have a need for pet insurance. Another may have young children and find peace of mind in an accident plan. While another has a family history of cancer, thereby finding great value in a cancer policy.
In addition to choice, voluntary benefits offer a one-stop shopping experience, making it easier for employees to purchase insurance that typically is not offered at the workplace, such as auto and homeowners. These types of benefit packages also often have discounted premiums and/or reduced underwriting.
What is the future of voluntary benefits?
There is a marked increase in the number of employers offering a defined contribution model, which provides a complementary platform for voluntary products. A defined contribution or cafeteria-style approach offers choice among medical, dental and vision benefits and also includes a variety of voluntary benefits.
The defined contribution model allows employers to identify a specific dollar amount or ‘defined contribution’ for each employee, typically by coverage tier. Each employee selects benefits based on their individual needs. Any costs in excess of the defined contribution allowance are the responsibility of the employee.
The defined contribution model gets away from the one-size-fits-all mentality and allows employees greater choice while offering the employer more budget certainty.
How can business owners get started with adding voluntary benefits to their benefits package?
Voluntary benefits are a great way to enhance your benefits package, differentiate from competitors and increase employee satisfaction — all with little or no impact on your budget.
Work with your advisor to decide what voluntary product offering makes sense for your team and educate your employees on the advantages of these voluntary benefits so you both can reap the rewards. ●
Insights Employee Benefits is brought to you by ChamberChoice
The Ohio Bureau of Workers’ Compensation’s (BWC) Destination Excellence program allows employers to choose programs that best fit their risk management needs. It focuses on safer workplaces, return to work and savings options for administrative functions.
“These programs essentially offer discounts for things employers already do,” says Randy Jones, senior vice president of TPA Operations at CompManagement, Inc.
Smart Business spoke with Jones about Destination Excellence and how it fits with Ohio’s other premium discount programs.
What programs make up Destination Excellence and what are the discounts?
- Industry Specific Safety Program — Complete one to three loss prevention activities related to your industry, depending on your total payroll, as well as an online safety management self-assessment. Activities include industry specific training classes, attendance at BWC’s Safety Congress & Expo and/or on-site field consulting with a member of the BWC’s Division of Safety & Hygiene. The benefits are an increase in workplace safety and the implementation of industry best practices. It offers a 3 percent discount.
- Drug Free Safety Program — Prevent on-the-job injuries by integrating drug-free efforts into your safety program. The benefits are an increase in workplace safety, productivity and morale. The basic program offers a 4 percent discount, while the advanced program offers 7 percent.
- Safety Council — Regular attendance at safety council meetings in your community to increase awareness of workplace safety and health issues as well as affecting the frequency and severity of claims in your workplace. It’s a chance to learn best practices, increase collaboration among local business owners, improve public relations and increase safety. It also offers a 2 percent discount each for participation and performance.
- Transitional Work — Program to return injured workers to productivity in the workplace by providing modified job duties and other methods that accommodate medical restrictions. There are 3-to-1 matching grants available from BWC to start a program. This could lead to lower injury downtime, improved employee recovery time and increased worker morale, all of which protect your workforce. It also offers up to a 10 percent bonus discount for using an established and approved transitional work program with applicable claims that have dates of injury within that policy year.
- Go Green — Report your company’s payroll electronically and pay premiums in full on the BWC’s website. This reduces paperwork and helps the environment. It also means a discount of 1 percent of your premium, up to a maximum of $2,000 per policy period.
- Lapse Free — Pay premiums on time without a lapse in coverage during the past 60 months and get a 1 percent discount on your premium, up to a maximum of $2,000 per policy period.
Are the Destination Excellence programs compatible with other BWC discounts?
While participating in the Destination Excellence program, employers can participate in the following programs:
- Group Rating.
- Experience Modifier cap.
- $15,000 Medical-only.
- Grow Ohio Incentive Program.
- One Claim Program (private employers).
- Early Payment Discount (cannot be combined with Go Green).
The Go Green and Safety Council discounts within Destination Excellence are compatible with the above programs, as well as Group retrospective rating, Individual retrospective rating and Large/Small Deductible. Small Deductible also can be used with the Drug Free Safety Program.
What are the enrollment deadlines?
The private employer deadline is the last business day of February. For public employers, it’s the last business day in October. Employers wishing to participate in a Safety Council must enroll in a local program by July 31.
What’s the best way to calculate savings?
Contact your workers’ compensation third-party administrator to request a ‘feasibility study.’ It can help you evaluate how the programs could impact your costs. ●
Randy Jones is senior vice president of TPA Operations at CompManagement, Inc. Reach him at (800) 825-6755, ext. 65466, or email@example.com.
Insights Workers’ Compensation is brought to you by CompManagement, Inc.
So the construction of your new office is nearly done and you’re getting ready to move in. Have you considered how you’ll populate your space with furniture, what type it will be and where you’ll purchase it?
“Practicality and well-being should be considered first when selecting office furniture,” says Kelly Colamarino, interior designer at SMC Consulting, LLC. “We all want our offices to look cool, but aesthetics should be accompanied by functionality. Choosing the right furniture for your office will increase productivity, employee satisfaction and company profits.”
Smart Business spoke with Colamarino about selecting furniture for your office space — from comfort and aesthetics to styles and finishes, and even where to go for the best prices and service.
What’s involved in the furniture selection process?
The first step in selecting furniture for your office is to hire a design firm to do programming on your current employees’ needs. Programming includes evaluating your existing furniture to find out what is working and what isn’t. It also involves assessing the way your employees and company groups work — whether they need an open, collaborative space to work together or closed spaces for privacy. This will help determine what type of furniture will work best in your office.
The next step is to select a furniture style. A design firm can help to decide if traditional, modern or transitional furniture is best for your office. The firm also will make sure to select finishes that relate well to the atmosphere and functionality of your office. Careful selection of fabrics and finishes will enhance office functionality.
Make sure to keep your future needs in mind while going through the furniture selection process. If your company is projecting growth in the next few years, it might be smart to look into systems furniture that can be easily reconfigured and added to, which will accommodate additional workspaces.
What comes after choosing furniture?
Now that you’ve selected your office furniture, you need to decide where to make your purchases.
There are many furniture stores that sell practical office furniture but do not offer the same benefits as purchasing through a dealership. A design firm can provide expert advice and guidance to help you select a furniture vendor, offering an objective opinion when it comes to vendor selection, and negotiating on your behalf. Your designer will review each vendor’s bid and help you understand the content of each, reading between the lines to provide insight.
Designers at the firm will help you find furniture that is within your budget. However, it is important to hold value over price. With furniture, like most purchases, you get what you pay for. Buying an inexpensive chair might help your immediate budget, but in the long run you must think about the costs of repairs and replacements of cheap chairs. Rather, it’s often better to pay a little extra upfront for something that will last longer.
What are the benefits of hiring a design firm to help furnish an office?
Hiring a design firm establishes a long-term relationship with the firm as well as the dealer. A good design firm will ensure that the dealer will be there for your company long after the point of sale.
After you’ve made your purchase, client support is necessary for any problems that may arise with your furniture. The firm will be there to help with any issues that may arise through the furniture purchasing process. It will work with the dealer to give you warranty information, as well as replacements for damaged or defective purchases. The firm also will keep your furniture selections on file, making it easy for the firm to contact the dealer to purchase additional furniture as needed.
Selecting office furniture is an important process every company should go through wisely. Working with a design firm through the process can ensure a functional and aesthetically pleasing office. ●
Insights Facilities is brought to you by SMC Consulting, LLC
Business, in the age of the smartphone and advancing technology, relies heavily on electronic data. Many companies have a large amount of their value tied up in information assets. Cyber liability is the potential exposure of losing, destroying, or unauthorized disclosures of that data. Hackers elicit the greatest concern, but employee theft and loss can be severe as well.
“Any company that conducts business over the Internet or stores and/or provides confidential information is at risk of a data breach,” says Jayce Stewart, Commercial Risk Consultant with RiskSOURCE Clark-Theders.
Smart Business spoke with Stewart about how to address cyber liability and protect your data.
Why is cyber liability a growing concern?
One reason is that the concept of personal identifiable information (PII) is getting broader. In the past that term referred to information that could be used to identify, contact or locate an individual. In some recent court cases, we’ve seen it include zip codes and email addresses. As that area broadens, data breaches within that PII realm get easier.
There are 46 states that now have regulations concerning cyber liability. That just shows the importance. When dealing with a potential data breach, you need to be up to date on the state regulations, and how to respond and notify the correct parties.
Who should be thinking about this risk?
At first, when cyber liability became an issue, it mostly affected Fortune 500 companies because they store so much data and confidential information. They have such a big platform to be breached. More recently, we’ve seen an increase in data breaches at smaller companies. Verizon recently reported that 72 percent of data breaches from 2009 to 2011 were with companies with fewer than 100 employees.
What steps can businesses take to manage this risk?
One area we’ve found to be important is password security. Make sure your employees have strong passwords. Here are three tips: Don’t use actual words in your passwords. Don’t store them or write them down at your desk. Change them every one to three months.
Another issue is finding the resources to conduct a network security assessment that will show where you have gaps in your system technology and firewall. That service can be accessed through a variety of outside vendors.
The main focus is on the importance of cyber liability insurance. There are three main coverages associated with cyber liability: the cost of notifying customers after a data breach, the cost of replacing lost income for having your business interrupted, and the legal expenses and fines associated with court cases and lawsuits.
How can a company determine how much cyber liability insurance it needs?
The most common misconception is that a commercial general liability policy covers all of your cyber exposure. This is not the case. There are tools now that insurance companies provide for assessing your exposure. Research has shown that the average cost of a record being breached could be up to $200 per record, depending on the size of the breach and the type of data. Discuss this with your insurance agent or your broker. That’s the first step in figuring out how much you need.
What should businesses do to prepare for a possible data breach?
Developing an incident response plan for who’s going to do what and how to notify stakeholders if a breach occurs is a proactive step that will make this exposure a little less invasive.
Come up with a team and figure out the roles. Who’s going to contact our stakeholders, who’s going to contact our insurance agent to file a claim, and who’s going to contact our IT professionals to find out the scope of the breach and figure out how to stop it? ●
Insights Business Insurance is brought to you by RiskSOURCE® Clark-Theders
Networking is key to growth when it comes to business development. Women business owners, however, face unique challenges, especially in a rapidly growing, male-dominated energy industry.
In a recent survey conducted by First Commonwealth Bank® and Campos Inc. of 125 local women-led businesses, more than 47 percent of respondents said business development was their greatest need.
“Based on this percentage, it shows that there is a significant opportunity for women to better understand how to network and successfully grow their businesses through these unique relationships,” says Megan A. White, Vice President and Regional Manager at First Commonwealth Bank.
Smart Business spoke with White about how women in business, particularly within the energy industry, can tackle business development.
What challenges do women face with developing their businesses?
In the same Campos survey, 67 percent of respondents said they seek business advice and guidance from peers and colleagues.
However, the challenge for many women is that they do not know who to network with for business advice beyond their peers and colleagues, and sometimes need help getting outside of their industry. When they expand to other industries, such as education, finance or government, it helps them build a solid network and creates many opportunities for developing their business.
How can women build networks that become their center of influence?
One way to create a networking system to benefit your business is to reach out to business professionals — your banker, attorney and accountant — who each have networks that you can plug into.
People often have tunnel vision, thinking a banker only does loans and deposits, but a good banker who wants to see your business grow and succeed can help with all your business needs, and connects you to community leaders or business owners.
A banker, along with the network of other professionals, can open doors, make introductions and be your strongest advocate.
With the energy industry’s growth, what’s important for women to understand about business development in this arena?
According to Rigzone, which provides oil and gas industry news and information, in the first quarter of this year, more women than men entered the oil and gas industry. Locally, many women operate in leadership positions within the manufacturing and service industries related to oil and gas. People may think of the energy industry as male-dominated, but it’s an avenue for women to build leadership roles and own companies within the industry.
Like many, when I first started to develop contacts within the energy industry, as a woman I thought there might be hurdles to overcome. However, in general, everybody within the industry is very welcoming, which helps you learn the network, and a lot of women already operate within the space.
Women shouldn’t hold back, assuming they may have a hard time, when they actually have a skewed perception of the industry. It’s also short-sighted to assume their company may not tie into the energy industry because they’re just thinking of the wells, pads and drilling. That’s not really looking at what the industry can do, or what your business can do for the industry.
Is there still a ‘boy’s club’ mentality in the energy industry?
Not as much. We do have a lot of room to grow, quite frankly, but there are women’s organizations that help with that. For example, the Women’s Energy Network, which was primarily Texas-oriented, formed an Appalachia chapter in 2011 that focuses on Pennsylvania, Ohio and West Virginia.
Women in the energy industry are being proactive. They want to get together to form a team and network within themselves, as well as being able to work together to become an industry force.
Business is still very much relationship driven. Yes, you need to have a competitive product and know what you’re doing in your industry. But in order to grow with other companies in your market area, it’s important to understand what each industry is doing and how you can work with others, or create something that makes your market stronger. ●
Call (800) 711-BANK (2265) or visit fcbanking.com/womenfirst for resources specific to women in business, local events and more.
Insights Wealth Management is brought to you by First Commonwealth Bank
Owners of privately held midsize companies are increasingly using performance-based bonuses as a key way of compensating executives.
“Companies will pay for performance, but they want to see value,” says Tyler A. Ridgeway, director of Human Capital Resources at Kreischer Miller.
“Whether it’s a CEO, CFO, COO, vice president of sales or vice president of marketing, it’s about how they can create value for owners in an organization. If it’s a CFO, for instance, it’s not just about crunching numbers; it’s about being a strategic business partner,” Ridgeway says.
Smart Business spoke with Ridgeway about performance-based bonuses and other trends in executive compensation.
Why has there been a trend toward performance-based pay?
A lot of companies have been through tough times, but they’ve also learned to better operate their businesses. Many have available cash right now and are wondering whether to incentivize the current team, pursue an acquisition, launch a new product or upgrade their talent.
For some who’ve decided to incentivize the current team, one option has been to reward their top performers by creating phantom stock or stock appreciation rights plans. These plans can motivate key executives to stay, and also reward them as the company grows.
If they’re hiring an executive, the interview process is now much longer than it was five years ago because they can’t afford to make a mistake. When they upgrade talent or bring in a new CEO, companies want the entire management team involved in the decision. As a result, the chosen executive candidate can build trust and rapport with management before they even start. This allows him or her to hit the ground running.
Companies want to make new executives happy from a compensation perspective, but they don’t want to give away everything. So, they’re designing packages that provide long-term rewards. They’ll negotiate a base salary everyone is happy with, and then determine how to link the bonus to company performance.
How do phantom stock and stock appreciation bonuses work?
Companies are increasingly using these plans that put a percentage of an increase in revenues over a specified period of time into an executive’s retirement plan.
With these plans, the executive doesn’t own equity in the company but shares part of the increase in value. These vehicles reward executives for growth and profits with a focus on specific goals and objectives that need to be accomplished.
Are companies trending away from any particular types of compensation?
Mid-market companies — $20 million to $500 million — realize there is a talent war and know they need to pay for top talent. However, they want to share risk. One way to do this is by offering more in bonus compensation than salary. Executives might be asked to accept less cash upfront in return for the potential upside in bonus compensation and earn-outs.
Some owners might be reluctant to negotiate upfront agreements relating to severance because they may have been burned in the past, such as having to pay severance to a sales professional who was not driving revenue. While many companies do not proactively offer severance, depending upon leverage, executives can have success in gaining some change of control protection.
Most companies are trying to avoid employment contracts as well. Instead, the offer letter now summarizes expectations and includes some measures of protection.
All of this comes back to companies expecting value creation from their new hires. When an executive joins a company, it’s difficult to know upfront exactly where or how he or she will add value. But if the executive helps generate leads that double revenue, for instance, companies are willing to revisit compensation because they want to reward that behavior.
Companies have become more transparent — owners are more willing to allow key team members to know the company’s cash position, and understand why bonuses are down if it’s not a great year. Their philosophy is that everyone is in this together, and, if the business grows, everyone will win. ●
Insights Accounting & Consulting is brought to you by Kreischer Miller
Anyone surfing the Web has likely come across cybersquatters. The owner of a website stating, “This domain may be for sale,” might not actually have legal rights to the domain name.
“Third parties without any legitimate interest or rights in a domain name will often purchase one knowing that someone else owns the trademark rights to the name. This forces the true owner of the trademark to either purchase the domain name from the third party or seek out another avenue to acquire the domain name,” says Jeff Nein, an associate at Kegler, Brown, Hill & Ritter.
Smart Business spoke to Nein about the process of acquiring a domain name and what to do if someone already has the Web address you want for your business.
What is the most common source of domain name disputes?
Typically, it’s cybersquatters. They’ll buy domain names with the intent to sell them directly to the trademark owner, which is a blatant example of bad faith registration. Another scenario is called typosquatting — a third party will register a domain name that’s similar to the trademark but with a letter or two out of place. In that instance, the third party usually benefits by receiving click-through revenue from links on the page.
How should a business proceed with securing rights to a domain name?
First, be aware that the Internet Corporation for Assigned Names and Numbers (ICANN) has created the Uniform Domain-Name Dispute Resolution Policy (UDRP), which authorizes domain name registrars to forcibly transfer domains in the event an approved dispute resolution service provider determines a domain name was improperly registered. Utilizing this dispute resolution process is quick and relatively inexpensive compared to traditional litigation. Any legitimate registered domain name registrar will be subject to the UDRP, which means almost every domain name falls under the governance of ICANN.
Next, evaluate the circumstances. If someone owns a domain name that encompasses your trademark in whole or in part, determine whether your trademark rights predate the current domain name holder’s registration. If so, examine how the website at the domain name is being used, if at all. If the website is not being used for a legitimate purpose — say, for instance, there is nothing but text that says ‘coming soon’ — this will work in your favor.
If your trademark rights do not predate the current domain name holder’s registration, the likelihood of successful transfer to you from the domain name holder dramatically decreases. Likewise, if the website is being used for a legitimate purpose, and the other party didn’t know you had trademark rights in the name and simply registered the domain name before you, there’s not much you can do. At that stage, the best option may be an offer to purchase the domain name from the other party.
What if they’re not using the domain name?
In those cases, we start by sending a letter outlining our client’s rights in order to effectuate transfer of the domain name without involving any sort of legal authority. If that doesn’t work, we file a complaint under the UDRP rules and start the arbitration process.
At arbitration you will need to show that you own the trademark, that the other party has no legitimate rights or interest in the domain name, and that the domain name was registered and used in bad faith. Once the other party is given an opportunity to submit its response, the arbitration provider will make a recommendation and advise the registrar on a course of action to take, which is often to immediately transfer the domain name to the trademark holder. The entire process only takes two to four months.
How can trademark owners stay ahead of the curve?
In light of the impending release of new generic top-level domains, trademark owners that want to avoid disputes should consider taking action now. Trademark owners have the option to register with ICANN’s Trademark Clearinghouse, which will verify your rights in any trademarks you submit for approval. Once you receive approval, the Trademark Clearinghouse will provide you with a defined window of time to purchase domain names that encompass your trademark at the new, generic top-level domains before they are publicly available. ●
Semanoff Ormsby Greenberg & Torchia: How letters of intent provide a road map for business transactionsWritten by Jayne Gest
A letter of intent, memorandum of understanding or term sheet — all essentially the same — is intended to be a nonbinding expression of the parties’ intended business transaction, creating a framework for putting a deal together.
It’s useful for a merger, acquisition or other combination, stock purchase, joint venture, real estate sale or lease, purchase or licensing agreement, or business contract.
Business owners usually aren’t in the business of doing deals, so it’s better to address the salient, material business points upfront in a simple, understandable way, says Peter J. Smith, a member at Semanoff Ormsby Greenberg & Torchia, LLC.
“The last thing you want is to go through an entire negotiation, do your due diligence, get your financing and then find out there’s an issue that becomes a deal killer,” he says. “You’ve now spent tens of thousands of dollars in time and expense on a deal that doesn’t, or won’t, close.”
Smart Business spoke with Smith about why using a letter of intent makes sense.
What is the purpose of a letter of intent?
It allows the parties to see if there is a basis for, and to document as a preliminary matter, the terms of a deal before expending time, energy and money. It’s better to determine if you can reach an agreement on the basic framework before you and your organization spend significant time, plus out-of-pocket expenses for attorneys, accountants, inspections, application fees, appraisals, travel and more.
The letter of intent also lays the groundwork for the transaction, including areas businesspeople don’t consider at first like non-competes, non-solicitations or indemnification. If it is sufficiently detailed and anticipates all major points, a letter of intent limits future negotiation, surprises and issues that could derail the deal, making the transaction more efficient and likely to close smoothly.
How detailed should a letter of intent be?
Unless there is a specific reason not to, a letter of intent should be as detailed as possible. The more you can include, the less there is to argue about later.
Sometimes business owners want a quick, one-page agreement that doesn’t get too hung up on the details. However, parties tend to be more agreeable and reasonable at the letter of intent stage. Plus, in my experience, the more detailed the letter of intent, the more likely the transaction is to close. Letters of intent also help minimize the ‘difficult lawyer’ problem, when counsel wants to continually negotiate the deal or make so many changes that the deal doesn’t come to fruition.
How can you negotiate important points if you have only done limited due diligence?
You can ask for the information upfront to resolve the issue, which is probably the best solution. If this is not practical, use a range or formula, or you can raise an issue, but leave the details for after due diligence.
What good is a letter of intent if it’s not binding?
Though not legally binding, a letter of intent has a psychological impact. It memorializes the understanding of the parties, and most people don’t want to be seen as breaking their commitments. Parties should sign a letter of intent, even if there are no binding provisions, solely for the emotional effect.
Nevertheless, a letter of intent often contains binding provisions such as confidentiality, no shop, non-solicitation of employees or customers, good faith negotiations or best efforts. It may provide a timeline for deposits, break-up fees or other provisions that become binding over time.
A letter of intent also can be provided to third parties to evidence the parties’ commitment and terms of the deal, perhaps in support of financing applications, approvals, etc.
In addition, you may not want to read a 30-page agreement, line-by-line, that is full of legalese. That’s why you pay a lawyer. With a letter of intent in place, counsel can say, ‘Yes, the agreement says the same thing as the letter of intent, and here are the five additional things you need to know.’ A detailed letter of intent helps you understand the deal better and results in a smoother, more cost-efficient transaction. ●
Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC
The growing prevalence of cloud computing has driven astronomical growth in the amount of data center traffic passing through networks. A 2011 survey projects this traffic to hit 468 Exabytes in 2016. To put that in context, worldwide Internet traffic surpassed one Exabyte for the first time in 2003.
The fuel behind this widespread adoption is cloud computing’s cost-effectiveness. With a “pay only for what you use” pricing structure, midsize companies can ramp up or down with minimal startup costs. In addition, there are tax benefits to having cloud computing as an operating expense, rather than a capital expenditure.
However, one factor stands in the way for many businesses — an outdated network infrastructure that is unable to operate efficiently using cloud-based systems.
Smart Business spoke with Kevin Conmy, regional vice president, Business Services, at Comcast Business, about how businesses can use Ethernet to maximize cloud computing, and the competitive advantage it brings.
Why are some companies unable or slow to take full advantage of the cloud’s potential?
The first hurdle to get over is the trust factor. Business owners are hesitant to hand over sensitive information and transactions to a third party. But as the use of cloud applications becomes widespread and the ease of the applications themselves make them harder to resist, more and more companies are jumping on board.
The second obstacle is often the company’s network and whether they are using the public Internet or a private Ethernet.
While a public Internet service is cost-effective and accessible from just about anywhere, the flipside to that is increased security risks that are a very credible concern.
Latency — the time it takes for data to make a round trip between two points, such as from your office to the data center where the cloud application is hosted and back — is another problem when using a public connection. Some applications, such as email, can tolerate longer latency, but others like video, are latency-intolerant.
How is private connectivity, Ethernet, better matched to cloud services?
For mission-critical applications hosted at a data center or cloud provider, private connectivity provides secure, high availability and low-latency access.
Ethernet technology, which has been around for 40 years, has become the de facto technology in offices around the world, linking computers and servers together in a high-speed local area network (LAN). A metropolitan area network (MAN) can link computers over a larger area, like between buildings in a metro area, with low latency.
One service provider manages the Ethernet traffic and applications within the private network, resulting in better security and performance. Companies still have the ability to integrate Internet traffic, but the low latency causes remote offices, and even those applications hosted in third-party data centers, to feel like they are on the LAN.
Data centers and cloud providers generally don’t provide dedicated network infrastructure with their cloud offerings, but they are reporting that clients are increasingly purchasing dedicated high-speed fiber connections from separate service providers for accessing these cloud services.
Do businesses leaders understand how important it is to have the right network services?
A recent CIO/Computerworld survey found that 70 percent of IT executives considered reliable, high-capacity bandwidth as a transformational or strategic asset, up from 42 percent two years ago. The majority of respondents believe high-performance connectivity increases productivity and efficiency. It’s clear that business owners increasingly view high-performance network services as a prerequisite for future growth. ●
Insights Telecommunications is brought to you by Comcast Business
Your company doesn’t need to have laboratories filled with beakers to be eligible for tax credits provided for research and development (R&D) activities.
“Many people don’t think they’re doing the type of research that qualifies. But in this context, research is a tax definition. And while there may be similarities to the laboratory sense of the word, it covers a wider range of activities,” says Christopher E. Axene, CPA, a principal in tax services at Rea & Associates, Inc.
Smart Business spoke to Axene about activities that qualify for credits and the application process.
What is the credit?
It’s an income tax credit available to U.S. companies for R&D activities within the U.S. While companies conducting research are already deducting those expenses, the credit is better because it’s a dollar-for-dollar reduction in their tax liability.
The credit has been around since the early 1980s, but has expired many times and continues to be extended by Congress every year. It’s set to expire again at the end of 2013 unless Congress takes action.
There are three main categories of credits:
- Labor or the wages of people involved in R&D activities.
- Supplies expended as part of the process.
- Costs relating to hiring an outside company to assist with research, provided that the company paying for the services is at risk regarding the success or failure of the work.
For most companies, only the first two categories would apply.
There are two types of credits, a regular credit and a simplified credit. The regular credit is often referred to as a 20 percent credit, which is something of a misnomer because there’s an adjustment to prevent double dipping. Since companies are already deducting the expenses on their tax returns, the net credit given is 13 percent. Few companies claim this credit because of the detail required with the filing. The simplified credit is more common and is 4.5 percent of every R&D dollar spent.
Is the credit just for manufacturers?
No, it has wide potential applicability because it’s not limited to a particular industry. It’s truly about whether a business is performing qualified research. Lean manufacturing and Six Sigma certainly qualify, but so do other activities. For example, a software company that averages $10 million in annual revenues routinely gets $80,000 a year in credits because it continually upgrades and enhances its products.
There’s a four-part eligibility test for the credit:
- There must be some uncertainty that the activity is undertaken to eliminate. If you know the result before you start a process, it wouldn’t qualify.
- It must be for a permitted purpose, such as to develop or improve a product or process.
- There has to be a process of experimentation. Failure is a good thing — it shows a process.
- It must be technological in nature, which means it relies on a hard science. It’s physical, biological or computer engineering rather than one of the social sciences.
Why don’t more companies apply for the credit?
Many aren’t aware of the credit because advisers haven’t informed them or they don’t use advisers. Others don’t think they do R&D because they don’t have employees wearing lab coats.
There also are owners of pass-through entities who don’t bother applying because the tax credit is not available to individuals who are subject to the alternative minimum tax (AMT). If it were allowed as a credit against AMT, the percentage of people taking the credit would skyrocket.
Keep an open mind, have a conversation and determine whether the benefit is worth the time and effort to file the necessary paperwork. Also explore the state-level R&D incentives that can apply regardless of whether or not the federal credit is claimed. ●