Issue link: https://nebusinessmedia.uberflip.com/i/1504065
wbjournal.com | July 24, 2023 | Worcester Business Journal 19 By AiVi Nguyen AiVi Nguyen is a partner at Worcester law firm Bowditch & Dewey. Reach her at anguyen@bowditch. com. 10) Drafting new contracts. Entering a new business deal during a recession is risky. Boilerplate language is usually not enough to protect against that risk. 9) Reviewing existing contracts. Recessions cause businesses to default on contractual obligations. What is your exposure if you default or your right to damages if the other side defaults? 8) Reducing your workforce. Is it better for your business to reduce an employee's hours, lay them off, or furlough them? 7) Pivoting. Restructuring or implementing operational changes to survive a recession will have legal implications. 6) Winding up or dissolving. You cannot simply walk away if a recession causes your business to fail. You need a lawyer to help close- up shop the right way. 5) Capitalizing. Perhaps a recession puts you in the position to buy assets or hire talent laid off by competitors. Make sure you are not stepping on a legal landmine. 4) Compliance with reporting obligations. What duties to disclose information do you have to shareholders, investors, or your board of directors? 3) Avoiding litigation. Legal fees incurred for negotiating a resolution are a fraction of the legal fees incurred if you are a party to a lawsuit, no matter what side you are on. 2) Litigating. Sometimes it is unavoidable. 1) Networking. Whether you need help or are able to help, a well- connected lawyer can introduce you to the people you need to meet. K N O W H O W Unlocking the power of your executive benefits & compensation H uman resources departments have a core element in com- pensation and benefits packag- es. ey are motivators for things like productivity, engagement, and perfor- mance for existing employees, as well as a tool to recruit new talent. To overlook regular analysis and periodic revamps of these packages is to potentially make your organization less competitive. Here are some ways to think about compensation and benefits so they can pay off big for your company. Know what you're up against. Stay competitive in the industry. Monitor the recruitment landscape to see what other companies are offering and provide competitive perks, benefits, and bonuses aligning with what ideal can- didates want. For smaller companies, this could mean using free tools like Glassdoor to create benchmark salaries for a few competitors to see what they promote for benefits, compensation, and perks. Knowing larger companies have deeper pockets, "smaller compa- nies should look to pitch what's unique and appealing about their company," according to Recruitee.com, in the form of employer branding and culture messaging. Make room for seniority. "It's essen- tial to develop opportunities for career advancement," creating senior and entry-level roles for each company po- sition, says Patrick Proctor at Business- NewsDaily. e compensation matrix will need to be adjusted accordingly. It's all in the presentation, says Tess C. Taylor at the Academy to Innovate HR. It isn't enough to create a solid compensation and benefits package, you have to communicate it effectively, which sometimes means breaking it down during job offers so it's well re- ceived. "ere may be rewards that are not immediately perceived as valuable or very tangible, such as stock options," she writes. "Hence, a little crunching of numbers is in order to help make this information easier to digest." 10 THINGS I know about... ... Why your business needs a lawyer during a recession W O R K E R C O M P E N S AT I O N & B E N E F I T S Ryan Kittredge is a financial advisor and president of ClearPath Financial Partners in Northborough. Reach him at ryan@ clearpath-fp.com. BY RYAN KITTREDGE Special to WBJ M any businesses offer a suite of employee benefits ranging from retirement plans to insurance packages that may include health, life, and disability protection. For highly compensated executives, many companies offer supplemental plans to retain and incentivize their most talented and productive employees, extending beyond the traditional benefits packages. While maximizing Social Security benefits and retirement plan contributions is a foundational component, executives with aspirations of an early retirement or maintaining a higher standard of living in retirement will need to make smart decisions around these supplemental plans and utilize them effectively to optimize their long-term financial plan. Here are some considerations to get started. Understand your benefits. Familiarize yourself with the options available to you, and provisions of the plans. While you want to take advantage of plans like stock purchase plans and deferred compensation, it's important to understand key information such as vesting schedules, accessibility, and tax implications. Determine how they fit in your plan. Your executive benefits should be considered in the context of your W overall financial plan, which should incorporate other planning areas such as retirement planning, wealth accumulation, investment strategy, and income tax planning. Ideally, collaborate with trusted professionals including a certified public accountant and financial advisor with expertise in executive compensation planning. Weigh tax benefits against liquidity. Many supplemental benefits and compensation plans offer tax advantages, including deferral of taxation to future years, or preferential tax treatment of long-term capital gains rather than at higher ordinary income rates. at tax benefit usually comes with restrictions on accessibility to the funds, so ensure you have enough liquidity to meet shorter-term goals while the funds are illiquid. Exercise options strategically. Stock options require careful planning, including company stock analysis, tax consequences, market conditions, and your goals. Timing is critical, and you want to plan around exercise windows and vesting schedules on a periodic recurring basis. Devise a strategy for each phase, including accumulation, maintenance, and disposition of the shares to properly manage taxes and avoid concentration risk. Paycheck protection. Attention should be given to your long-term disability insurance benefits. Many group insurance plans cap monthly income replacement benefits at $5,000 or $10,000 per month, which may not be enough to pay bills and still allow you to save the way you intended. You should review supplemental group or association plans to fill the gap. Mega backdoor Roth. e 2023 limit for employer-plus-employee contributions to a defined contribution plan such as a 401(k) is $66,000. at means, in addition to the regular contribution limit of $22,500 (or $30,000 for those age 50+) and any employer match, your plan may allow for an additional aer-tax contribution of $43,500, which can then be rolled over to a Roth 401(k) or IRA, where it will grow tax-free. Not all plans have this provision, but more are adding these features, so review your plan. W W