As a business grows, one of many challenges it faces is identifying a competitive yet manageable compensation structure. After all, offer too little and you likely won’t have much success in hiring. Offer too much and you may compromise cash flow and profitability.

But the challenge doesn’t end there. Once you have a feasible compensation structure in place, your organization must then set its course for determining the best way for employees to progress through it. And this is when you must contemplate the nature and efficacy of linking pay to performance.

Issues in play

Some observers believe that companies shouldn’t use compensation to motivate employees because workers might stop focusing on quality of work and start focusing on money. Additionally, employees may feel that the merit — or “pay-for-performance” — model pits staff members against each other for the highest raises.

Thus, some businesses give uniform pay adjustments to everyone. In doing so, these companies hope to eliminate competition and ensure that all employees are working toward the same goal. But, if everyone gets the same raise, is there any motivation for employees to continually improve?

2 critical factors

Many businesses don’t think so and do use additional money to motivate employees, whether by bonuses, commissions or bigger raises. In its most basic form, a merit increase is the amount of additional compensation added to current base pay following an employee’s performance review. Two critical factors typically determine the increase:

1. The amount of money a company sets aside in its “merit” budget for performance-based increases — usually based on competitive market practice, and2. Employee performance as determined through a performance review process conducted by management.

Although pay-for-performance can achieve its original intent — recognizing employee performance and outstanding contributions to the company’s success — beware that your employees may perceive merit increases as an entitlement or even nothing more than an inflation adjustment. If they do, pay-for-performance may not be effective as a motivational tool.

Communication is the key

The ideal solution to both compensation structure and pay raises will vary based on factors such as the size of the business and typical compensation levels of its industry. Nonetheless, to avoid unintended ill effects of the pay-for-performance model, be sure to communicate clearly with employees. Be as specific as possible about what contributes to merit increases and ensure that your performance review process is transparent, interactive and understandable. Contact us to discuss this or other compensation-related issues further.

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Perhaps you wrote a social media policy several years ago when your not-for-profit set up a Facebook page. Since then, not only has your nonprofit likely changed, but new social media platforms have emerged. At the very least, the sites you use have probably revised their terms of service. That’s why it’s time to revisit your policy.

The basics

A social media policy helps ensure that staffers, board members and volunteers use online accounts to promote and enhance — not damage — your nonprofit’s reputation and fundraising efforts. Without a policy, you risk confusing and offending stakeholders, inviting lawsuits and even incurring financial costs.

To prevent negative outcomes, your policy should address:

• Which sites you’ll use,

• Who in your organization has access to them,

• What subjects they’re allowed to discuss, and

• Whom they can “friend.”

Also specify whether staffers and board members can discuss their work on their personal social media accounts. If so, require them to post a disclaimer saying that their opinions about your organization are their own.

Evaluate site use

As you revisit your social media policy, consider the sites your nonprofit currently uses and whether they still enable you to reach your target audience. Do your staffers post frequently enough to be effective? Is your follower base growing? If not, you may want to shift resources elsewhere.

Another consideration is whether the social media outlets you use have changed their terms of service. In the past couple of years, many sites have expanded their rights to share user account information with third parties. Such changes may raise privacy concerns within your organization.

Other updates

Also review who has account access. In general, the fewer people with access, the less likely someone will post something damaging. But, if your nonprofit is struggling to maintain a regular posting schedule, it might make sense to add new, enthusiastic staffers to the account.

Be sure that, whenever you remove a user from an account, you change the password. Social media sites increasingly are being hacked, so your policy should require longer, more difficult passwords.

Another issue that you can’t afford to ignore these days is intellectual property (IP) rights. Contrary to what some believe, nonprofits aren’t immune from IP infringement lawsuits. Make sure you have permission from IP holders and properly credit them when you post third-party images, videos, music and text.

Fast-moving target

These are only some of the many issues that may require you to revisit your social media policy. Social media changes quickly. To use it effectively, pay attention to evolving developments.

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Under the Tax Cuts and Jobs Act, employees can no longer claim the home office deduction. If, however, you run a business from your home or are otherwise self-employed and use part of your home for business purposes, the home office deduction may still be available to you.

Home-related expenses

Homeowners know that they can claim itemized deductions for property tax and mortgage interest on their principal residences, subject to certain limits. Most other home-related expenses, such as utilities, insurance and repairs, aren’t deductible.

But if you use part of your home for business purposes, you may be entitled to deduct a portion of these expenses, as well as depreciation. Or you might be able to claim the simplified home office deduction of $5 per square foot, up to 300 square feet ($1,500).

Regular and exclusive use

You might qualify for the home office deduction if part of your home is used as your principal place of business “regularly and exclusively,” defined as follows:

1. Regular use. You use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use.

2. Exclusive use. You use the specific area of your home only for business. It’s not necessary for the space to be physically partitioned off. But, you don’t meet the requirements if the area is used both for business and personal purposes, such as a home office that also serves as a guest bedroom.

Regular and exclusive business use of the space aren’t, however, the only criteria.

Principal place of business

Your home office will qualify as your principal place of business if you 1) use the space exclusively and regularly for administrative or management activities of your business, and 2) don’t have another fixed location where you conduct substantial administrative or management activities.

Examples of activities that are administrative or managerial in nature include:

• Billing customers, clients or patients,
• Keeping books and records,
• Ordering supplies,
• Setting up appointments, and
• Forwarding orders or writing reports.

Meetings or storage

If your home isn’t your principal place of business, you may still be able to deduct home office expenses if you physically meet with patients, clients or customers on your premises. The use of your home must be substantial and integral to the business conducted.

Alternatively, you may be able to claim the home office deduction if you have a storage area in your home — or in a separate free-standing structure (such as a studio, workshop, garage or barn) — that’s used exclusively and regularly for your business.

Valuable tax-savings

The home office deduction can provide a valuable tax-saving opportunity for business owners and other self-employed taxpayers who work from home. If you’re not sure whether you qualify or if you have other questions, please contact us.

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The Donor Bill of Rights was designed about 25 years ago as a blueprint of best practices for not-for-profits. Some critics have since asserted that the rights are out of date or not comprehensive enough. However, revisiting the list’s basic principles can help you build solid relationships with donors — and even boost fundraising.

10 rights

Here are the rights and what they might mean for your nonprofit:

1. To be informed of the organization’s mission, how it intends to use donated resources and its capacity to use donations effectively for their intended purposes. This information is the bedrock of your outreach efforts and should be clear to your board, staff and anyone reading your organization’s materials.

2. To be informed of who’s serving on the organization’s governing board, and to expect the board to exercise prudent judgment in its stewardship responsibilities. You must be transparent about who serves on your board, their responsibilities and the decisions they’re making.

3. To have access to the organization’s most recent financial statements. Make your nonprofit’s financial data easily accessible to constituents, potential donors and charitable watchdog groups.

4. To be assured gifts will be used for the purposes for which they were given. Donors expect that you’ll minimize administrative expenses so their funds are available for programming and that you’ll honor any restrictions they’ve placed on gifts.

5. To receive appropriate acknowledgment and recognition. In addition to thanking donors, provide them with the substantiation required for a federal tax deduction and information about the charitable deduction rules and limits.

6. To be assured that donation information is handled with respect and confidentiality to the extent provided by law. Post your organization’s privacy policy on your website and be clear about what information you’re gathering about donors and how that information will be used.

7. To expect that relationships between individuals representing organizations and donors will be professional. Staff and board members should be trained in proper donor interaction — both off- and online.

8. To be informed whether fundraisers are volunteers, employees of the organization or hired solicitors. Again, transparency about your operations is critical.

9. To have the opportunity for donors’ names to be deleted from mailing lists that an organization may intend to share. Donors, not your nonprofit, get to decide whether their information can be shared. Make it easy for donors to opt out of email and other lists.

10. To feel free to ask questions and receive prompt, truthful and forthright answers. Open dialogue between your nonprofit and your donors fosters respect and deepens relationships.
Contact us for help implementing these 10 tenets or developing a customized donor bill of rights.

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Even though you can’t physically touch digital assets, they’re just as important to include in your estate plan as your material assets. Digital assets may include online bank and brokerage accounts, digital photo galleries, and even email and social media accounts.

If you die without addressing these assets in your estate plan, your loved ones or other representatives may not be able to access them without going to court — or, worse yet, may not even know they exist.

Virtual documents in lieu of hard copies

Traditionally, when a loved one dies, family members go through his or her home to look for personal and business documents, including tax returns, bank and brokerage account statements, stock certificates, contracts, insurance policies, loan agreements, and so on. They may also collect photo albums, safe deposit box keys, correspondence and other valuable items.

Today, however, many of these items may not exist in “hard copy” form. Unless your estate plan addresses these digital assets, how will your family know where to find them or how to gain access?

Suppose, for example, that you opened a brokerage account online and elected to receive all of your statements electronically. Typically, the institution sends you an email — which you may or may not save — alerting you that the current statement is available. You log on to the institution’s website and view the statement, which you may or may not download to your computer.

If something were to happen to you, would your family or executor know that this account exists? Perhaps you save all of your statements and correspondence related to the account on your computer. But would your representatives know where to look? And if your computer is password protected, do they know the password?

Revealing your digital assets

The first step in accounting for digital assets is to conduct an inventory of any computers, servers, handheld devices, websites or other places where these assets are stored.

Although you might want to provide in your will for the disposition of certain digital assets, a will isn’t the place to list passwords or other confidential information. For one thing, a will is a public document.

One solution is writing an informal letter to your executor or personal representative that lists important accounts, website addresses, usernames and passwords. The letter can be stored with a trusted advisor or in some other secure place.

Another solution is to establish a master password that gives the representative access to a list of passwords for all your important accounts, either on your computer or through a Web-based “password vault.”

We can help you account for any digital assets in your estate plan.

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