Business Education

Tired of New Employees Abruptly Quitting? Here’s a Novel Solution for Recouping Your Training Costs

One of the most costly and infuriating aspects of running a business is training new employees only to have them up and abruptly quit. It takes a lot of time, effort, and extra expense to onboard new hires and get them familiar with practices and procedures. When they depart shortly after their training, it means having to fill that position all over again. Since this is such a huge hassle and a costly one at that, some companies are actually billing employees who quit. The strategy is to ensure new employees don’t receive critical industry training only to leave and use their new skills at a competitor paying higher wages and/or offering more enticing benefits packages.

Companies Recovering Employee Training Costs through TRAPs

Healthcare, retail, trucking, beauty, and more companies are adopting a new approach in order to reduce their workforce losses. Known as Training Repayment Agreement Provisions or TRAPs, these clauses are included in employee contracts. Nearly 10% of all American companies are now using these provisions, according to a recent report by Reuters News.

When a valued employee quits, the loss can have a detrimental effect on the person’s team and department and maybe even on the entire company. Not only can an unexpected departure lead to lost revenue, but it also could lower the morale and productivity of remaining employees. —Society for Human Resource Management

Other industries may follow this emerging trend if it proves successful and legal. There are already federal and state government agencies looking into the practice, and it appears to be legitimate. If it continues to grow in popularity, it should be not only a big benefit to businesses but to employees as well, as both parties will know precisely what’s expected of them and how to proceed accordingly.

How to Use Employee Training Repayment Agreement Provisions

Because this is somewhat new, it’s very important to take thoughtful, measured steps in order to implement such a practice. Here are some suggestions for how to use an employee training repayment agreement provision in your business:

Consult a labor law attorney. The very first thing you should do is to speak with a lawyer who specializes in labor law in your state. Even if a future employee willingly signs such an agreement, there may be something on the books that does not allow you to enforce such a provision. So, be crystal clear it is legal and actionable in your state.
Speak with your human resources department. Obviously if you are able to include an employee training repayment agreement provision in your hiring contracts, you’ll need to get the right people in your organization on board and in the know. You can help to develop a new section in your training process that discloses and advises potential hires and new team member about this provision.
Make sure new hires are made fully aware of the provision. When you’re recruiting someone new to your organization, be sure this is made abundantly clear before you proceed with follow-up interviews and probably before the very first, initial interview. Any job candidate should be made aware of this provision well before you get deep into the hiring process.
Include a mechanism to recoup new employee training costs. Of course, you’ll need a way to actually recoup those training costs. So, if you offer a sign-on bonus, that may be one way to recapture the expense. Here again, you’ll need to consult an experienced, licensed labor law attorney in your state to establish a recuperation mechanism for the provision.

What else would you suggest business owners do to deal with new hires who quit shortly after being brought on? Please share your thoughts and experiences so others can benefit from your input! Interested in learning more about business? Then just visit Waters Business Consulting Group.

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Reasons Why Small Business Loans are Denied

May 24, 2017 No Comments

Small business owners can easily find themselves in the unenviable position of needing capital, but, not having ready access to cash. It presents an age-old problem, buying equipment ties cash up, even though said equipment is considered an asset. Such assets can depreciate, which worsens the situation all the more. On the cash liquidity side, there are tax consequences to having a certain level of retained earnings. This is why debt instruments are a part of doing business. However, even profitable small businesses can be denied for a loan, and, there’s ample evidence to support this phenomenon. In the first two quarters of 2014, about half of applicant businesses received any funds, according to a survey conducted by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia. Reasons Why Small Business Loans are Denied Unfortunately, present trends don’t show much improvement in the access to capital, or, in reducing operational costs. In fact, since November 2014, three out of ten businesses reported more difficulty in trying to reduce operating expenses, and, one-quarter reported unexpected expenses too hard to plan for, according to a study conducted by Nav (formerly Creditera), a business credit management company. If your company recently applied for business credit and was rejected, you’re not alone. So what can you do if your business credit application is denied? Start by trying to find out why. The Federal Trade Commission suggests submitting a written request for the reasons within 60 days of the denial, and the creditor must give you the specifics in writing within 30 days of the request. Consider discussing any concerns you have with your lender, and you may be able to resolve the issues. —Washington Post Within the same survey, about 20 percent of participant companies considered closing their doors, citing two primary reasons: lack of growth and issues with positive cash flow. These factors are likely why 53 percent of all companies applied for lines of credit or loans over the past half-decade, with more than one-in-four attempting to access capital numerous times. During the same five year period, one-fifth were denied and of those, 45 percent reported being turned down more than once. Twenty-three percent of all those denied loans or lines of credit did not know the reason why their applications were denied. So, why is this happening and what makes it appear so prevalent? There are reasons why small business loans are turned down, and, it’s actually not complicated. Here are some of the most common reasons small business loans are denied: Having no credit or even bad credit. Some business owners do not realize they have two credit scores: their personal credit and their business’ credit. What’s worse, some owners have relied on personal lines of credit and have seriously driven their DTI or debt-to-income ratio into dangerous territory. Making payments on-time, keeping a low balance, and not seeking to continually open new credit lines are all necessary to improve both personal and business credit. Too little collateral. Since most business owners aren’t willing to sign a personal guarantee, leveraging their personal vehicles and home to secure a loan, there’s little to nothing left to pledge as collateral. Lenders aren’t keen and will not provide financing that constitutes an unnecessary risk. Anemic cash flow. After all other expenses are paid, lenders want to see demonstrable proof there’s enough cash to repay the loan. Too tight a margin and banks won’t be willing to approve a business loan. Lack of strategic planning. It’s often true that business owners don’t understand the loan process, including the application itself, and all necessary documentation and that can lead to being turned down. Applicants must provide a clear forecast and show a realistic, actionable plan. Under capitalization on loan applications. There are sometimes more assets available to claim than applicants realize and as a result, their loan application makes the organization appear under capitalized. Some assets aren’t immediately clear, which means all potential assets ought to be identified. Another reason businesses might have trouble securing debt instruments is industry-specific difficulties. For instance, a construction company that’s operating in a locality where people are moving away from, or, a taxi company that’s facing tougher licensing regulations or an industry disruption as we have recently seen with Uber. The best solution in the short term is to reduce your Cost of Goods (labor and materials) to improve Gross Margins and reduce Expense Overhead to increase Net Profits which will help with cash flow and operating capital. Also, negotiating terms with your Receivables and slowing growth will allow for an influx of cash. Where possible, attempt to self fund your growth. If capital is required for growth, pursue alternative lending sources other than banks. There are several available and feel free to contact us if you are in need of alternative lending sources. Want to find out about what a business coach can do for you? [shareaholic app=”follow_buttons” id=”26833294″]

How Smart Businesses are Adapting to the Quiet Vacationing Trend

January 2, 2025 No Comments

Last summer, several families skipped the usual bustling theme parks and crowded beaches for a serene cabin tucked away in the mountains.

What is a PEO Service and Does My Small Business Need One

November 22, 2023 No Comments

What is a PEO Service and Does My Small Business Need One? As a small business owner, you are constantly juggling a multitude of tasks, from managing finances and operations to overseeing marketing and sales. With so much on your plate, it can be difficult to keep up with all the administrative and HR responsibilities that come with running a business. And, this is where Professional Employer Organizations (PEOs) can step in and provide valuable support. What is a PEO? A PEO is a company that provides a comprehensive suite of human resource (HR) services to small and medium-sized businesses (SMBs). PEOs essentially act as an extension of your company’s HR department, handling tasks such as payroll, benefits administration, workers’ compensation, and employee relations. However, they don’t run your company. They don’t get involved in business decisions. Nor do they enter day-to-day operations – all of that remains your exclusive domain. How Does a PEO Work? So, when you partner with a PEO, you actually enter into a co-employment relationship. This means that the PEO becomes the legal employer of record for your employees, while you maintain control over day-to-day operations. The PEO usually assumes responsibility for all HR-related tasks, including: Payroll processing and tax administration Benefits administration and enrollment Workers’ compensation insurance and claims management HR compliance and regulatory guidance Employee training and development Recruitment and onboarding Performance management Employee relations and conflict resolution Benefits of Using a PEO There are numerous benefits to using a PEO, including: Reduced administrative workload. PEOs take on the burden of HR administration, freeing up your time to focus on core business activities. Access to expert HR resources. PEOs have a team of experienced HR professionals who can provide expert advice and guidance on a wide range of HR-related matters. Improved compliance. PEOs ensure that your business is compliant with all federal, state, and local employment laws. Reduced risk of HR-related lawsuits. PEOs have the expertise to handle HR issues effectively, reducing the risk of costly lawsuits. Access to better benefits. PEOs often have access to better benefits at more affordable rates than small businesses can obtain on their own. Streamlined onboarding and offboarding. PEOs can streamline the onboarding and offboarding process, making it easier to hire and terminate employees. Does My Small Business Need a PEO? Whether or not your small business needs a PEO depends on several factors, including your company’s size, growth plans, and HR needs. If your business has fewer than 50 employees and is experiencing rapid growth, a PEO can be a valuable asset. PEOs can also be beneficial for businesses that have complex HR needs or are facing HR challenges. Here are some questions to ask yourself to determine if a PEO is right for your business: Do you have the time and resources to manage HR tasks effectively? Are you confident in your ability to comply with all HR laws and regulations? Are you concerned about the risk of HR-related lawsuits? Would you like to access better benefits at more affordable rates? Do you want to streamline the onboarding and offboarding process? If you answered “yes” to any of these questions, then a PEO may just be a good fit for your business. How to Choose a PEO If you decide to use a PEO, it is important to choose a reputable and experienced provider. Here are some factors to consider when choosing a PEO: Experience. How long has the PEO been in business? Reputation. Does the PEO have a good reputation in the industry? Services. What services does the PEO offer? Costs. How much does the PEO charge for its services? References. Can the PEO provide references from other small businesses that they have worked with? Wrapping It All Up PEOs can be a valuable resource for small businesses that are looking to reduce their administrative workload, improve HR compliance, and access better benefits. If you are considering using a PEO, be sure to do your research and choose a reputable provider that can meet your specific needs. Now, do you want to grow your company in 2024 but you are not sure what is required to make that growth happen? Attend our “Planning for Growth” half-day workshop where you will get amazing details specific to your business for what’s needed from your marketing, your sales team, your production team, and your financial performance to enter 2024 with confidence you can indeed grow as planned. You will have the clarity you’ve always wanted but didn’t know how to create. This is a $1495 value we are offering in November for only $99. Contact us for dates and times. We offer a 100% money-back guarantee if you don’t leave the workshop confident that you know what to do to grow your company in 2024. So, go ahead and contact us by phone or email! By phone 602-435-5474 By email: SteveM@WatersBusinessConsulting.com Don’t wait! This is a great opportunity to propel your business forward!