Tip: Employee Retention is a Big Issue for Small Businesses

“Our employees are our biggest asset.” It’s a well-worn phrase, and perhaps to some it’s just lip service. However, more employers and human resource professionals are recognizing the true cost of employee turnover because lower unemployment (4.6 percent currently) and rising salaries (wages are expected to increase by 3 percent in 2017) have created more job options. As the U.S. economy has continued to improve, workers are again willing to research pay grades in their area of expertise and to explore the job market in pursuit of more money. To a small business owner with fewer workers able to step up and cover the vacant slot, the loss of a skilled employee can be especially burdensome. In hard cash, an employer has costs associated with hiring a new person, expenses involving new employee training and development, as well as the cost of time or goods not sold when a position goes unfilled. Over the past 12 months or so, employers have been paying a lot more attention to employee retention.

Here is what some leading employment professionals are saying about retaining good workers:

  • Compensation must be commensurate with the job responsibilities and skills required. Researching pay rates in various professions and in specific industries is relatively easy for anyone with access to a computer. Employment research suggests that compensation is key when it comes to both retaining and recruiting – this holds true across all types of jobs regardless of gender, age, ethnicity or location.
  • The expectations of employees – especially millennials – have changed. Many expect advancement and new opportunities to be there on a timely basis. Millennials love to fast-track and are easily bored – once they’ve mastered a task they want to move on to the next challenge. Many employers have discovered that if they cannot offer promotions, lateral moves across an organization or an opportunity to change career focus can be as attractive to their employees as a traditional move up the corporate ladder.
  • The workplace has undergone radical change. Telecommuting – once rare – is increasingly popular. The never-ending flow of communication via email and phone calls means most of us work after-hours and weekends – and usually without additional pay. In this type of work environment, employees are often willing to shoulder more demands during off-hours if their employer will allow them some flexibility in return, such as flexible hours, telecommuting, job sharing, etc.
  • Beware the burnout factor. Technology has given us the ability to communicate and collaborate across time zones. It has also fueled customer expectations for immediate responses and fast gratification. Many companies are reporting turnover of between 20 percent and 50 percent as a result of employee burnout. Savvy employers recognize when employees are overworked and seek to counter it with ways that enrich the work environment. This might mean investing in continuing education programming, actively encouraging online study and offering off-site training opportunities that entertain while they educate.

In sum, people want to work in an environment where they feel truly cared for and nurturined. This can’t be faked. A culture where people respect and appreciate one another is crucial to most employees’ job satisfaction. As a business owner and manager, you are the one who holds primary responsibility for setting the tone and culture of your workplace.

Technology: What Impact Will the Repeal of Online Privacy Laws Have on You?

The recent repeal of an Obama-era law that would have required Internet Service Providers (ISPs) to obtain users’ permission before sharing their personal data with marketers and other third parties has created dissent within the technology sector. Not surprisingly, major ISPs like AT&T and Comcast backed the repeal effort, arguing that the law was unfair and that they would have been subject to stricter controls than companies like Facebook and Google. Consumer advocates believe the repeal will be detrimental to online privacy.

The repealed law, which was passed in October 2016 and included new rules created by the Federal Communications Commission, had yet to go into effect, so consumers probably won’t notice much difference. ISPs have been in the practice of monitoring network traffic – which means they can see which devices you use and which websites you visit – and sharing that information with third parties such as advertisers. An overview of how this might affect you follows.

Is This Repeal a Big Deal? 

Many consumer advocates involved with internet privacy issues believe this is a big deal. The new FCC rules would have created much stronger privacy protection for internet users. The law, which was passed just before President Trump’s election, would have required ISPs to get a clear go-ahead from users to share personal data – including precise location information, financial data, health information, Social Security numbers, app usage history, as well as information on the users’ children. In addition, the new legislation would have allowed users to protect less sensitive personal data such as email addresses.

Why has the New Administration Repealed It?

The new FCC chief, Ajit Pai, has said that the repeal would help level the playing field, citing that the new rules would have benefited “one group of favored companies over another group of disfavored companies.” He vowed to protect consumer privacy through a “consistent and comprehensive framework.” This response did little to reassure advocates of internet privacy rights. A group known as Fight for the Future issued a statement decrying Congress’ move, saying “…they care more about the wishes of the corporations that fund their campaigns than the safety and security of their constituents.” This group has launched a billboard campaign to identify the members of Congress who backed the repeal.

What Can You Do to Safeguard Your Data Online? 

Some privacy advocates are recommending that consumers use a virtual private network (VPN) to hide their browsing history and data from internet service providers. A VPN can also mask your location. If you wish to explore this option, be aware that VPNs are linked to service providers, which means it is incumbent on you to find a VPN whose privacy policies match yours. There is software available that also can hide your location and identity. These solutions have their issues, too. Some broadcasters – like Netflix – block VPN users from accessing their content. Software that hides your location and identity might slow your browsing down somewhat.

Internet privacy has been a hot issue for some time. These latest moves are likely to keep the topic in the headlines in the months ahead.

Tip: What the Fed’s Rate Hike Means for Small Businesses

The Federal Reserve’s mid-March hike to interest rates – its second increase to base interest rates in three months – was a strong confirmation that the economy is doing well. The Fed had kept interest rates at historically low levels in order to support a recovery after the recent recession (commonly referred to as the Great Recession), which occurred, roughly, between December 2007 and February 2010. The Fed’s move means that businesses will pay higher interest rates when they take out a loan. Some major banks have already indicated that the current quarter-point boost will translate into a prime lending rate of 4 percent (up from 3.75 percent). If you are wondering how this increase is positive news for small business owners and entrepreneurs, read on.

  • Look beyond the rate hike to consider the overall lending climate and general prognosis for U.S. businesses. Credit has been very tight after the Great Recession – especially for smaller firms. The rate hikes does mean that borrowers will pay more interest, but also that their chances of securing the loan they need have increased exponentially. When confidence in the economy accelerates, banks and lending institutions are more likely to approve loan applications from qualified applicants. Major banking institutions approved 24.1 percent of loan applications in February 2017 – making it the seventh consecutive month of positive growth.
  • Change gears if the time is right. Interest rates hovered around 2 percent or 3 percent for a long time, and many of us got used to it. Now we are seeing rates increase and the Fed is indicating that additional gradual increases might be on the horizon. If you have expansion or improvement plans in your back pocket that will require bank funding, it may be time to seize the moment. The cost of borrowing will – most likely – continue to increase.
  • Check out your local banks. Borrowing is expected to get easier for customers of smaller banks as well as large institutions. Amongst big banks, loan approvals currently are about one in four. Regional and community banks have not seen a big shift in approval rates in the last few months, with rates hovering around 50 percent. However, if the Trump Administration makes good on its intentions to reform the Dodd-Frank legislation and reduce the regulatory requirements on smaller banks, then banking analysts expect credit will flow more easily to Main Street.
  • Consider re-evaluating the basic tenets of your financial plan. Is it time to review your credit scores and address any issues that will improve how credit-worthy you appear to potential lenders? Perhaps now is the time to consolidate some of your debts. If you are paying off high-interest credit cards or other similar debts, consider taking advantage of today’s economic optimism to secure a loan with lower interest rates – and do so while these rates remain relatively modest. Decisions like this should be taken only after proper research and consultation with your tax and financial planning professionals.

Despite daily newspaper headlines featuring political issues, the U.S. economy continues to look good, and the Fed’s recent actions underscore this optimism. Make sure you and your business are ready to take advantage of the opportunities this presents.

What Is Reflation and How Does It Affect Investors?

After four years of inflation rates just at or below two percent, many economists believe America has finally entered a period of reflation. Reflation is the turning point and first phase of economic growth toward increased inflation.

Much of the recent impetus comes from the new administration, supported by campaign promises for tax cuts, new jobs, increased investment in building the country’s infrastructure, and strong economic growth. Indeed, reflation trades have driven a large share of market volume since the Nov. 8 election results.

Reflation is characterized by both a bump in the prices of consumer goods and a rise in wages with which to pay for them. The economic life cycle that starts with reflation typically follows a certain pattern. First, when more jobs are introduced employers must compete for the best job candidates, so they begin to increase compensation packages. Higher wages mean those companies must increase their prices for the goods or services they produce. Higher prices mean the next phase has kicked in: inflation. When inflation rises, the Federal Reserve Bank typically steps in and raises interest rates, as it did most recently in March. Raising interest rates makes it more expensive to borrow money, which slows down growth and the rate of price increases.

Higher interest rates can also have an impact on investor portfolios. Specifically, when interest rates rise, the prices of existing bonds drop. That is because new bonds are issued incorporating higher yields, so older bonds with lower yields lose value.

A retiree living on fixed income generated by a bond portfolio will continue to receive that income unabated until those bonds mature; however, many investors prefer to sell their older bonds in favor of those with higher yields. When bonds are sold in anticipation of new issues on the horizon, this is called a reflation trade.

Reflation trades also are popular in the equity market. In fact, between Nov. 8 and March 1, the Dow Jones Industrial Average rose more than 15 percent on the heels of one of the longest running bull markets in history. While a substantial hike in yields could make equities less appealing, stocks generally benefit from higher growth during inflationary times. Commodity, bank, and value stocks tend to be reflationary winners.

However, given the political turbulence that Trump has encountered since taking office, the market may be starting to lose a bit of wind in its sails. In a 1996 speech, former Federal Reserve Board chairman Alan Greenspan famously cautioned against similar false values, asking listeners, “how do we know when irrational exuberance has unduly escalated asset values…?”

In response to the recent market rally, one investment analyst warned that “the equity rally, and in particular the rotation into value sectors, post-Trump’s election has been massive – the second-biggest such move in over 30 years.” He explained that analysts “believe this rotation amongst investors has moved too fast and too far.” While investor sentiment remains positive for now, Trump’s policies thus far lack detail and show signs of opposition, which could mean a long, uphill battle. If that is the case, reflationary trades may require a long-term perspective to net expected gains.