Hartford Business Journal

www.HartfordBusiness.com March 21, 2016 • Hartford Business Journal 21 EXPERTS CORNER What small business owners should know about paid family, medical leave By Lisa A. Zaccardelli T he General Assembly is currently con- sidering Senate Bill 221, which would provide paid family and medical leave for state residents. While analysts contracted by the Department of Labor recently made several projections for how to imple- ment and fund the program, how the bill will ultimately take shape is likely to be debated for some time. Since the pro- posed paid fam- ily and medical leave bill currently extends to employ- ers with as few as two workers, small business owners should consider how the program might affect them and their employees. In doing so, it is helpful to understand how paid- leave laws work in other states and the current provisions of Connecticut's proposed bill. Although the federal Family and Medical Leave Act of 1993 (FMLA) and similar state laws provide covered employees the oppor- tunity to take unpaid leave, Rhode Island, New Jersey, Washington and California have passed laws providing paid leave to care for a sick family member or bond with a newborn or adopted child. As Connecticut legislators consider how to implement such a law, it is helpful to understand Connecticut's current bill in the context of other states' policies. The maximum length of paid leave time varies from state to state, ranging from four weeks in Rhode Island to five weeks in Washington and six weeks in California and New Jersey. The benefit amount also ranges from $250 to more than $1,100. To fund paid leave, employees contribute percentages of their wages ranging from 0.9 percent in California to 1.2 percent in Rhode Island. New Jersey's program, however, is funded by a 0.25 percent employee contribution, as well as employer contributions. Under Connecticut's current proposal, the program would offer up to 12 weeks of paid family and medical leave during a 12-month period and provide 100 percent wage replacement up to $1,000 per week. Coverage extends to employers of two or more employees and, in order to qualify for benefits, an employee must earn at least $9,300 over 12 consecutive months. A report recently released by the Insti- tute for Women's Policy Research, which was contracted by the Department of Labor, estimates the program would cost approximately $462 million annually. There would be no costs to employers, however, because the program would be funded by a 0.54 percent payroll tax on all wages and bonuses. Although there are no direct costs to employers, small businesses in particu- lar should consider how the program might affect them and their employees. Federal and state family and medical leave laws have provisions for job rein- statement. As currently proposed under the new bill, Connecticut small businesses would greatly expand the state's FMLA cov- erage. Connecticut's current law states if an employee returning from leave is medically unable to perform his or her original job, that employee must be transferred to work suitable to their physical condition, if such work is available. Assuming job restoration requirements are ultimately included in the paid leave bill, it may be costly for small businesses to keep a job open for 12 weeks while continuing to pay for other benefits. While the payroll tax approach would fund paid leave at no costs to employers, there are indirect costs to consider. When an employee of a small business goes on leave, his or her employer may not have the resources to find temporary staff. As a result, small business owners will need to consider how to fill in the gaps, manag- ing employee schedules and overtime pay to ensure proper staffing. Employers may also have to find a suitable alternative job for an employee returning from leave. Ultimately, employers large and small will need to listen to their employees to ensure their workloads are manageable and provide them with the support they need to be happy and productive over the long term. n Lisa A. Zaccardelli is a partner at law firm Hinckley Allen in Hartford. THE RAINMAKER Business focus areas that enable growth By Ken Cook W hat did the manufacturing compa- ny president say when asked what enabled his company's growth over the last year? Focus, focus, focus. Some manufacturing business leaders were talking recently about growth and one of the par- ticipants shared what he and his company did last year to expand significantly, while positioning them- selves for even stron- ger growth in 2016. Staying focused was a key theme; he identified and paid attention to custom- ers where the com- pany had a strong differentiation and strong margins. At the end of 2014 the company did $14 mil- lion in revenue. At the end of 2015 they were just shy of $18 million in revenue. By the end of 2016 they expect to exceed $24 million in revenue. That's a 42 percent revenue increase over two years, and all of it is organic growth; no acquisitions or mergers. Of even greater impact is the fact that the company's gross margins over the two-year period will grow by over 25 percent, and the net profit will grow from 9 percent to 16 percent. To explain further, the company paid atten- tion to market openings, customer interactions, and their people. Here's the path they took. They began with a detailed analysis of their customer base and where they made money. And when I say detailed I mean it. They deter- mined on a customer-by-customer basis total revenue, gross margin, contribution margin and net profit. This entailed not only assign- ing to individual customers the direct costs to serve them, but the indirect costs as well. Their financial people worked overtime on the allocation formulas, but it was worth it. Once they understood how much each indi- vidual customer was worth to the company, they prioritized the customers. The important ranking was for the contribution margin and the profitability. Gross revenue dollars mat- tered, but efficiency and profits mattered more. The end result of the analysis was clear identification of market openings where the company could leverage their expertise. They learned there were a few clustered markets where their most profitable customers resid- ed. The company's offerings were very good fits for the needs of customers in those mar- kets. Competition existed, but it was not com- petition tied to price. The competitive battle was around quality and delivery. Knowing the market opening was impor- tant. How they interacted with customers was as important. In essence, the company and customer became virtual to each other. The IT team worked with individual custom- ers to integrate their systems. Customers could go to an online portal to place, check on and expedite orders, and personally inter- act with operations, sales, etc. The transparency factor mattered most to customers, and the company took advantage of this. They invested in their IT and connec- tivity with customers. It gave the company a distinct advantage that the customer valued, and was willing to pay for. The third link in the chain was to focus on their people. They trained their people on how to interact with customers, most importantly in terms of their communication skills. The company realized that what they did enabled deals with customers. Keeping those customers relied on the ongoing rela- tionships they developed with them. In summary, one manufacturing company's three areas of focus that enabled growth are: Market openings: Pursue opportunities where you are distinct and valued in the mind of the customer. This is where your return on your resources and investment will be great- est, and your potential for growth is strongest. Customer interactions: Understand how the customer wants to connect and interact with your business. Touch points with custom- ers shape the customer's reality. Make sure the touch points work and deliver value. Your employees: Help employees think about the customers first. Provide the train- ing on communication skills and relation- ships that strengthen the bonds with cus- tomers. What you do gets the deal; how you interact keeps the customer. Focus enables growth. Look for the mar- ket openings where you are valued by the cus- tomers. Focus on your employees and their interactions with those customers. n Ken Cook is the co-founder of How to Who and co-author of How to WHO: Selling Personi- fied, a book and program on building busi- ness through relationships. Learn more at www.howtowho.com. Ken Cook Lisa A. Zaccardelli ▶ ▶ Once they understood how much each individual customer was worth to the company, they prioritized the customers. ▶ ▶ Since the proposed paid family and medical leave bill currently extends to employers with as few as two workers, small business owners should consider how the program might affect them and their employees.

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