FEBRUARY 2019 February 11th
Sales Roundtable
February 15th
Monthly Meeting
Inside This Issue:
DILL: THIS VALENTINE’S DAY FALL IN LOVE WITH THESE HIRING PRACTICES
KITTLE: FREE MARKET LIFTING PEOPLE OUT OF POVERTY IN WISCONSIN
OLLENBURG: NAVIGATING AGE-BASED EMPLOYMENT LAWS TO BRIDGE THE SKILLS GAP
Networking matters
At AT&T, we know that making connections is critical to success. In Wisconsin and across the nation, we link businesses with their customers and the world through our wireless network with access to the nation’s largest Wi-fi network. It’s just another way we help our customers stay connected. AT&T is proud to support the Independent Business Association of Wisconsin.
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IBAW thanks AT&T for it’s continued sponsorship.
MEDIA: IBAW sent a letter to our Wisconsin’s Washington elected representatives asking them to sit down to end the shutdown. Click here to read it.
Executive Director Steve Kohlmann
President
Dan Hansen
Secretary Charles Fry
Baird
Treasurer Tony Palmen
Sikich
Directors Jim Leef
ITU AbsorbTech Ann Barry Hanneman
Von Briesen Law OďŹƒce
John Weber
Hypneumat
Lisa Mauer
Rickert Industries
Robert Gross
Gross Automation
Scott Seroka
Seroka Brand Development
Tom Parks
Annex Wealth Management
Jake Hansen
Jacsten Holding
Scott Hirschfeld
CTaccess
Andy Oliver
Gear Wash
Al Leidinger
Mathison Manufacturing
IBAW Mission: To advance business prosperity through insightful programming, executive networking and member-driven public policy and advocacy.
Independent Business Association of Wisconsin
MONTHLY MEETING Monthly Meeting Friday, February 15, 2019 | Time: 7:00 am - 9:00 am Location: The Wisconsin Club, 900 W. Wisconsin Ave. Milwaukee
LOCATION
THE WISCONSIN CLUB 900 W. WISCONSIN AVE. MILWAUKEE
7:00 AM
CHECK IN, COFFEE & NETWORKING
7:30 AM
BREAKFAST & PROGRAM
9:00 AM
PROGRAM ENDS
Register at IBAW.com
Efficiency Before Tax Increases Steve Kohlmann, IBAW Executive Director
Last summer I was being interviewed by a reporter for a story about retail business in Waukesha County. The interview went well and pretty smooth. You never know how media interviews are going to go so it’s always a relief when they are over. After the official interview the reporter and I had a casual chat over coffee about a wide variety of political topics. And then, ladies and gentlemen, the reporter stabbed me with a red hot poker by saying; “I wish they would increase the gas tax so we could fix those potholes. They (the state) should help pay for pothole repairs in Milwaukee”. If this had scene had been in a saloon in the wild west, the piano player would have stopped suddenly and the crowd in the coffee shop would have fell silent. Stunned at the remark I asked; “What are you talking about??” “Well,” she said, “our roads are falling apart and it would be nice if the state would spend more money on roads.” “So, you think we don’t spend enough on road repair?” I asked her. “Yes, the freeways around here are falling apart.” She said. “You realize we just spent about $4 billion on the redoing the Zoo Interchange don’t you? And a few years before that we redid the Marquette interchange?” I replied. “Oh, yes, well, but the streets of Milwaukee are terrible.” She meekly replied. “Well, the state of Wisconsin does give Milwaukee funds for road repair through the General Transportation Aid ($436 million in 2018) and you do know Milwaukee County also passed a wheel tax to specifically repair bad roads. What do you think is being done with that money?” “Really?” She said, “Then why are the roads so bad?” “Well,” I said, “you’re a reporter, why don’t you investigate that?” Yes, why indeed doesn’t someone investigate that. Milwaukee Mayor Barrett was able to get a shiny new street car but why can’t he repair his bad streets in his city? (OK, they ripped up a lot of roads to put in the streetcar tracks so technically they did repair those roads. You just have to drive behind the streetcar to enjoy the new pavement.) A gas tax always seems to be an easy tax Wisconsinites are open to paying. I think it’s because those proposing it like to say, “Well, you want safe roads don’t you?” Or “Don’t you want pot holes fixed?” Of course we do. We all want safe roads, there’s nothing more maddening then hitting a pothole and experiencing a blowout or bending the rim of your wheel. But before we raise the gas tax I would like to raise the question “Are the taxes we pay now being used as efficiently as they should be?” And most often the answer to that question is almost always ‘No’. Wisconsin’s DOT has a budget of about $7 billion every biennium. Of that $7 billion, how much do you believe is wasted in some form or another? 20% maybe? 10%? 5%? 2%? Even 2% of $7 billion is $140 million. That’s a lot of money where I come from. Now some of you will say, “But Steve, it’s the government. You can’t expect the government to run that efficiently.” Actually I do - and so should you. Before we raise the gas tax, prove to me that DOT is running as lean and efficient as possible. Then, and only then should we be looking to raise a tax.
Sales Roundtable Monday, February 11, 2019 | Time: 7:30 am - 9:00 am Location: CTaccess, 740 Pilgrim Parkway, Elm Grove
7:30 AM - 9:00 AM. (Please arrive by 7:25 - we start at 7:30 SHARP. Location: CTaccess Conference Room 740 Pilgrim Parkway, (Lower Level) Elm Grove
Cost: Free, a benefit of your IBAW membership. Registration is required. This event is only open to IBAW members. Coffee provided by CTaccess, bakery provided by IBAW.
This Valentine’s Day Fall in Love with These Hiring Practices Jesse Dill, Ogletree Deakins As an IBAW member, you probably know that the hiring process can be one of the most stressful steps of any employment relationship. As the employer, you are opening your doors to somebody who is hopefully going to contribute to your company’s success. Moreover, hiring is a process that requires both time and money. Thus, employers often want to expedite the hiring process. Beyond the immediate goal of hiring the best candidate, employers may also want to regularly monitor and critique their hiring practices to ensure they are lawful and do not invite litigation. Federal, state, and local laws often establish boundaries on the information that employers may lawfully request from potential employees, but there are other, less obvious issues that can arise. Below are four areas where potential exists for employment law claims. 1. Diversify your job posting sources. In recent years, plaintiffs’ attorneys have focused on how and where companies advertise their available positions. Any job posting that targets certain demographics can be used as the basis of a discrimination claim alleging that a company is excluding a particular category of applicants. For example, an employer that uses social media to advertise a position and targets a post to appear in the newsfeed of individuals ages 25 to 35 only may face a claim that it is favoring younger workers, in violation of the Age Discrimination in Employment Act of 1967. An employer may be able to avoid or defend any such lawsuit by using multiple means to publicize job openings so that they are accessible to a wide range of candidates. 2. Avoid application and interview questions that are likely to elicit information about an applicant’s health before making an offer of employment. Employers may be familiar with the Americans with Disabilities Act (ADA), which prohibits discrimination on the basis of a qualified individual’s disability. This law also limits the information that employers may lawfully ask about any health condition that may potentially be a disability. Before an employer makes an offer of employment, or in the pre-offer stage, the ADA severely restricts companies from making disability-related inquiries or even asking questions that are likely to uncover information about a disability. During the post-offer, pre-employment stage, employers have more flexibility to ask questions about an applicant’s health and how it might affect his or her ability to do the job. 3. Carefully consider if and when to conduct criminal background checks. Employers may want to limit criminal background checks to positions in which there is a justifiable need for one based on the duties and responsibilities. This basis for requiring a background check, which the Equal Employment Opportunity Commission refers to as “job-related and consistent with business necessity” in its enforcement guidance, can be an important defense to any claim that a business used background checks to screen out candidates based on race, national origin, or another protected category under federal or state law. Wisconsin employers may want to take special care with the information they receive from a background check. The Wisconsin Fair Employment Act prohibits employers from denying a candidate an employment opportunity because of his or her arrest or conviction record unless a conviction is substantially related to the position. To avoid unlawful discrimination claims, employers may want to reconsider blanket policies that exclude applicants from consideration for any conviction. 4. Be cautious when hiring a competitor’s former employee. Employees who have access to internal confidential information or are in customer-facing roles often are subject to restrictive covenants. A restrictive covenant is an agreement that an employee will not compete with his or her former employer or solicit customers for business after the employment relationship ends. Someone who may seem like a strategic hire may be bound by a restrictive covenant. The former employer may not only sue its former employee to enforce their agreement, but it may also name the new employer as a defendant. In light of this, employers may want to ask whether an applicant is subject to any type of noncompete agreement before making an offer of employment. If an applicant denies having signed any such agreement, the hiring employer may want to ask him or her to confirm in writing that he or she is not subject to any agreements and is not in possession of or planning to use any competitive information. The hiring employer can use that document to avoid or defend against any claims that it acted improperly. Jesse R. Dill is an associate in the Milwaukee office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., a national labor and employment law firm. He has a wide range of employment law litigation and compliance counseling experience. He represents employers in singleplaintiff and class action employment law claims.
Tom Parks of IBAW’s Public Policy Committee interviews State Senator Dale Kooyenga about what’s coming up for small business in this year’s legislative session. The video releases soon! Save the date of April 11th for IBAW’s next Legislative Roundtable!
When Should a Start Up Start a Health Plan? Jon Rauser, President, The Rauser Agency Offering health insurance for the first time is an important step in growing any business. Especially in a full employment economy, when the ability to attract and retain quality employees can be significantly enhanced just by offering coverage. That’s in part because the options open to individuals through the ‘Obamacare’ Marketplace - except for those with lower incomes - are imperfect, at best. But offering coverage doesn’t have to break the bank. Surveys indicate employers on average spend > $10,000 per year per covered employee for group health coverage. That’s very misleading as those surveyed are larger Fortune 500 companies with deeper pockets than the average small business. Our strategies result in comprehensive benefits at total annualized costs of only $3,000 - $4,000 per enrolled employee. And, we can provide a Fortune 500 on line employee enrollment experience with human resources and compliance support. In short, we help you offer affordable best in class benefits while keeping you out of the insurance business. Here are some of the techniques for controlling the spend used by our clients: · On average nationally, employers pay 70% of premiums. That again, does not reflect local reality! Insurer’s require that an employer offering a group contract must pay a minimum of 50% of the single (employee only) premium. You are not required to pay anything toward the cost of dependents. The sample worksheet attached allows you to model various combinations. · Believe it or not, you need only two full time employees to offer group coverage and in some cases, only one needs to enroll. Depending on why people waive coverage, you may not need to meet a 50% (or other) participation threshold. · Even the smallest groups can have more than one plan design; two or three is common. Looking again at the attached client premium modeling worksheet, you might pay 50% of the lowest cost (high deductible) plan and allow each employee to buy up to the more expensive (lower deductible) options. Or you might provide a flat dollar amount – called a defined contribution – and let employees use that money to ‘shop’ for benefits, including medical, dental, vision, disability, etc. · There is a genre of small group products that operate by a different set of rules permitting insurers to underwrite - ask medical questions - group applicants. These “Level Funded” ERISA based contracts take a little longer to install but can result in rates 30-50% lower than guarantee issue ‘Obamacare’ plans. For younger, generally healthy groups, and in particular startup businesses, this is a great way to stick your toe in the water. When considering a group insurance plan for the first time, you might also want to know: · There is no one time yearend open enrollment for small groups (2-50 employees); i.e., the Affordable Care Act (ACA or ‘Obamacare’) requires insurers to accept all applicants on the first of any month regardless of pre-existing health conditions. Thanks to streamlined technology, enrollments can often be completed in literally days. Health insurers are inundated by large group, Medicare and ‘Obamacare’ Open Enrollments all on January 1. The best time for small groups to start a plan is any other month! · Premiums paid by the employer are tax deductible, and any portion of the premium paid by the employee can be set up as a pre-tax payroll deduction using a Section 125 Premium Only Plan (POP). This reduces payroll taxes; saving ~$300-$400/ year/enrolled employee for both the employer and employee. · Integrated wellness plans are standard with many health insurance policies. They often include premium reductions for engaged employees, not to mention enhanced morale and productivity. If you have 50 or more employees, benefits consultants are tripping over themselves trying to get your business. But if you’re a small or start up business, do you feel like plain Jane waiting for a dance at Homecoming? OK. Pick out tune. Let’s cut a rug! IBAW Member Jon Rauser, can be reached by email here.
IRS Issues Final Regulation For New 20% Deduction For Pass-Through Business James Brandenburg, Partner at Sikich
The IRS issued its final regulations on January 18, 2019 on the new 20% deduction for Qualified Business Income (“QBI”) for pass-through businesses (Section 199A). This new deduction was added as part of the “Tax Cuts and Jobs Act” (“TCJA”) enacted on December 22, 2017. BACKGROUND Congress enacted Section 199A to provide a deduction to non-corporate taxpayers of 20 percent of the taxpayer’s QBI from each of the taxpayer’s qualified trades or businesses, including those operated through a Partnership, S Corporation, or Sole Proprietorship. A deduction of 20 percent is also available for the taxpayer’s aggregate qualified REIT dividends and qualified publicly traded partnership (PTP) income. The actual deduction is claimed at the individual level. Section 199A limits the amount of this deduction for a trade or business to the lesser of 1 or 2 below: 1. 20 percent of the taxpayer’s QBI with respect to the qualified trade or business; or The greater of (a) or (b):
2.
3.
A.
50 percent of the W-2 wages with respect to the qualified trade or business; or
B.
The sum of 25 percent of the W-2 wages with respect to the qualified trade or business PLUS 2.5 percent of the Unadjusted Basis Immediately after Acquisition (UBIA) of all qualified property. There is also an overall limitation of 20% of taxable income (without the QBI deduction).
Section 199A also indicates that the QBI deduction is not available for an employee’s wages, guaranteed payments paid to partners, and for income from a “Specified Service Trade or Business (“SSTB”). Generally, the SSTB are service type businesses. Even if income was earned from a SSTB, the deduction might be available if the taxpayer’s taxable income is less than an applicable threshold amount. We addressed these provisions in an earlier Insight article in the Sikich Series on Tax Reform (please click here for a link to this article) when the IRS issued its proposed regulations. FINAL REGULATIONS The IRS issued proposed regulations on August 8, 2018. The regulations received many comments from taxpayers and tax practitioners. The IRS reviewed all comments and issued their final regulations on January 18, 2019 (please click here to view the final regulations). Here are several selected developments contained in these final regulations: RENTAL PROPERTY AND THE NEW 20% DEDUCTION One of the major unknown features of Section 199A (when the law was enacted and with the proposed regulations) is how to treat a rental property for purposes of the new 20% deduction. Would this be treated as a trade or business or not? The IRS did not provide clear direction for the definition of a trade or business in the proposed regulations, but merely offered two principles to guide taxpayers based on prior case law for Section 162. First, the IRS noted that the taxpayer should “enter into and carry on the activity with a good faith intention to make a profit or with the belief that a profit can be made from the activity.” Second, the IRS focused on the scope of activities and said this would require there to be “considerable, regular, and continuous activity” carried out by the taxpayer. There was much discussion and uncertainty on this matter following the release of the proposed regulations, and the IRS offered some changes in the final regulations.
Taxpayers and practitioners, however, were unsure if a rental real estate activity was sufficiently “regular, continuous, and considerable” for the activity to constitute a Section 162 trade or business. Thus, as part of the release of the final
regulations, the IRS also issued Notice 2019-07 (Please click here for a copy of this Notice) which offers a proposed “safe harbor” under which a rental real estate enterprise may be treated as a trade or business solely for purposes of Section 199A. “Under the proposed safe harbor, a rental real estate enterprise may be treated as a trade or business for purposes of Section 199A if at least 250 hours of services are performed each taxable year with respect to the enterprise. This includes services performed by owners, employees, and independent contractors and time spent on maintenance, repairs, collection of rent, payment of expenses, provision of services to tenants, and efforts to rent the property.” Please note that other activities carried out by the investor are not under this safe harbor, and thus not • included in this 250-hour threshold. These are also spelled out in Notice 2019-07. Again, this 250-hour threshold is part of the IRS established safe harbor, and if a rental real estate enterprise • does not meet the provisions of this Notice 2019-07, it does not necessarily mean the rental activity is not a trade or business; it just does not qualify under the safe harbor. For the 2018 tax return, a taxpayer or RPE that satisfies the requirements spelled out in IRS Notice 2019-07 for this “safe harbor” must include a statement to this effect in their tax return and it must be signed by the taxpayer or authorized representative. NEW AGGREGATION RULES Another area of uncertainty in the proposed regulations is the new aggregation rules. The proposed rules allowed the aggregation only at the individual level. The final regulations, however, provide that this can also be done in some cases at the entity level: “the final regulations permit an RPE (a “relevant pass-through entity”) to aggregate trades or businesses it operates directly or through lower-tier RPEs. The resulting aggregation must be reported by the RPE and by all owners of the RPE.” HOW TO DETERMINE QUALIFIED BUSINESS INCOME The IRS also added in the final regulations an explanation of how qualified business income is determined. The IRS indicated that all deductions attributable to the trade or business should be included in determining qualified business income. The preamble to the final regulations states: “deductions such as the deductible portion of the tax on selfemployment income under section 164(f), the self-employed health insurance deduction under section 162(l), and the deduction for contributions to qualified retirement plans under section 404 are considered attributable to a trade or business to the extent that the individual’s gross income from the trade or business is taken into account in calculating the allowable deduction.” Treating these deductions in this manner was not clear under the proposed regulations, but with this addition in the final regulations it may result in a lower overall QBI deduction depending on the taxpayer’s situation. WHAT IS A SPECIFIED SERVICE TRADE OR BUSINESS (SSTB)? Further, one of the key areas in the proposed regulations was the definition of what is and what is not an “SSTB” (“Specified Service Trade or Business”). The final regulations addressed many comments concerning each of the separate service disciplines that were covered in the proposed regulations and made several changes. For instance, one such change related to nursing care and assisted living facilities and indicated the following: “The Treasury Department and the IRS agree that skilled nursing, assisted living, and similar facilities provide multi-faceted services to their residents. Whether such a facility and its owners are in the trade or business of performing services in the field of health requires a facts and circumstances inquiry that is beyond the scope of these final regulations. The final regulations provide an additional example of one such facility offering services that the Treasury Department and the IRS do not believe rises to the level of the performance of services in the field of health.” Finally, it is important to review each of these SSTB services to see what the IRS descriptions are for these services: learn what is treated as an SSTB and what is not. There are also some useful examples included in the regulations by the IRS to assist taxpayers and tax practitioners. KEY TAKEAWAY Again, there is much in these final regulations, and we will offer a more detailed analysis later. There were also some proposed regulations issued in conjunction with the issuance of the final regulations dealing with other aspects of Section 199A involving trusts (please click here for these proposed regulations). These final regulations will impact many taxpayers and could have significant tax consequences in 2018, including additional complexity and compliance issues. But, there are also some opportunities for taxpayers to reduce their tax liabilities if they understand and plan with these new rules. Please contact your Sikich tax adviser with any questions or for any assistance.
Navigating Age-Based Employment Laws to Bridge the Skills Gap Jessica Ollenburg, CEO, HRS
The business case for age-friendly workplaces is strong. The trajectory of employer response is steep, and competitive edge will posture on employer response in 2019 and beyond. By the Numbers The Cornell University Employment and Disability Institute reports that 85% of Baby Boomers plan to continue working after retirement. Nearly half plan on working into their 70s and 80s. Similarly, according to report by a U.S. Senate special committee, the number of older workers is right now growing at a rate that outpaces overall growth in the labor force. By 2026, workers age 55+ will comprise 25% of workforce. As of 2010, BLS advises that 20% of workers were already over age 55. Navigating the Law with Precise Execution The Senior Citizens' Freedom to Work Act amends Title II (Old Age, Survivors and Disability Insurance - OASDI) of the Social Security Act to repeal the limitation on the amount of outside income which beneficiaries who have attained retirement age may earn without incurring a reduction in benefits. As a result, most aging workers are only semiretiring, and many have been “unretiring.” The Gig economy via self-employment is strong, yet age discrimination claims are a fast-growing category. Aging workers can present substantially different needs and often seek substantially different benefits. Legal experts to include those at HRS are diligently carving new employment classifications and court-recognized standards to safeguard employers as we powerfully construct new win-win opportunity for employers and aging workers alike. What Aging Workers Want? Motivation and passion can be strong in the aging workforce, but these factors are not necessarily the same as for other age groups along Maslow’s scale and lifecycle stages. If we allowed ourselves to stereotype for sake of addressing most popular needs, we’d consider that aging workers tend to seek the following:
· Viable work options and meaningful employment. · Respect for abilities and experience. · Inclusion rather than tokenism. · Equal access to skill acquisition. · Equity in mobility and promotions. · Reasonable accommodations. · Flexible work schedules.
Details and Case Study The Affirmative Defense Experts at HRS are crafting new employment classifications for OASDI beneficiaries. While the internal experts at each employer need to robustly participate, we are strongly recommending involvement of 3rd party court-recognized experts to certify each employer’s efforts as reasonable care in avoidance of fine and/or costly complaint. The upside is extraordinary if the holes are carefully plugged. Among the caveats, the option of reclassification needs to be a benefit, not a discrimination. Employers must avoid real and/or perceived noncompliance with FLSA, EEOC, HIPAA, ERISA, ADA and all relevant statutory or case law. Employment characteristics under specific review include scheduling requirements, remote work, technology use, working conditions; job descriptions, performance appraisals, benefits, equipment operation, safety and a wealth of relevant policies. By law, data collection and chain of custody must be carefully controlled. Advance agreements between employee and employer should not minimize accountability but should rather hold all accountable with clearly documented benchmarks, evaluations and retained evidence. In lieu of group health insurance, where applicable, onsite wellness, financial literacy, caregiving, job modification and other targeted benefits can be key to demographic success. We have learned definitively that aging workers can bring perspective, mentorship and positive culture where we properly carve out expectations and offerings. Younger employees appreciate working for an employer who promises them similar good care on their horizon; and this becomes a critical twist upon the default viewpoint of unfair bias through “halo effect” upon the aging worker. Organizational communication and deBono’s Six Hats of Thinking are among popular workshops to catapult productivity and problem solving among differentiated work groups. “Tired bodies” may or may not produce “tired minds.” That said, we are finding each and every employer who properly undertakes this mission to be enjoying the benefits of 1. Mitigated talent shortage, 2. Improved productivity, and 3. Avoidance of legal/fiscal risk, at a minimum. While we continue to encourage the facilitation of such efforts by deployment of 3rd party court-recognized experts, we at HRS pledge the ability to craft and/or properly safeguard these blueprints to success. Please contact HRS or your own legal experts for more information.
Jessica Ollenburg, CMC, CPCM is CEO and Senior Practitioner at HRS, Celebrating 35 Years at the Intersection of Employment Law, Business Prudence and Organizational Development Disciplines. Summary Bio at http://askhrs.com/our-ceo.htm
Free Market Lifting People Out of Poverty In Wisconsin Matt Kittle, MacIver News
MADISON — As the economy booms and wages climb, the defenders of big government are crying poverty. In his inaugural address last week, Democrat Gov. Tony Evers skipped over Wisconsin’s declining poverty rate and right into the left’s narrative of the swell of families suffering financially. Expect such rhetoric to be a common theme from the liberal governor, who inherited a smoking-hot economy thanks in large part to the limited-government policies of the Republicancontrolled Legislature and Evers’ predecessor, conservative Gov. Scott Walker. “When you look at the Census Bureau data measuring poverty, it’s not even anywhere near the number that the United Way reports,” said WMC’s Scott Manley. At an Economic Forecast Luncheon in Madison last week, Evers repeated his oft-turned claim that 870,000 families in Wisconsin struggle to afford the basics. He grabbed the statistic from the United Way’s ALICE(Asset Limited, Income Constrained, Employed) Project, the organization’s measurement of what it believes to be real financial instability beyond “misleading averages and outdated poverty calculations.” Some 37.5 percent of Wisconsin households couldn’t afford basic needs in 2016, according to the most recent ALICE report. Beyond the fact that the United Way, the nation’s largest charity, generates its $3.9 billion in annual revenue on the marketing of economic bad news, 870,000 households appears to be an inflated number when matched against anecdotal and empirical measurements. The United Way’s figure is equivalent to about 2.1 million residents of Wisconsin’s 5.8 million population, based on U.S. Census Bureau population demographic data. “When you look at the Census Bureau data measuring poverty, it’s not even anywhere near the number that the United Way reports,” said Scott Manley, senior vice president of government relations for Wisconsin Manufacturers & Commerce. The latest Census Bureau estimates show Wisconsin’s poverty rate at 11.3 percent, a full percentage point lower than the national rate. While it’s true that raising a family a four at the federal poverty line of $24,600 a year is tough, the latest Census Bureau data show an increasing number of Wisconsin households are climbing out of poverty as personal incomes rise. The reason? Wisconsin is working again, Manley and other economy trackers assert. “We’ve had a record-breaking number of months at or below 3 percent unemployment, and we’ve seen the smallest number of continuing unemployment claims since 1973,” Manley said. “We have one of the best labor force participation rates (68.9 percent in April ) in the country. If you break out the numbers to the prime working age of 18 to 55, we’re in the top 5 in the country.” For those able and willing to work, it’s an employee’s market in Wisconsin. As former Lt. Gov. Rebecca Kleefisch told MacIver News Service late last year Wisconsin went from historically high unemployment in the Great Recession to an era of more jobs than workers available to fill them. “Today our biggest challenge is trying to find enough qualified people for the jobs,” she said.
Preliminary data from the U.S. Bureau of Labor Statistics show Wisconsin’s economy added a “statistically significant” 9,900 private-sector jobs in November, the most recent information available. The economy added 40,500 private-sector positions between November 2017 and November 2018. Mike Fredrich, of Manitowoc’s MCM Composites, told CNBC in June that his custom thermostat molding company couldn’t find the workers needed to operate presses, so the machines long stood unmanned. “There are no workers, but there’s a huge demand. The economy has picked up, but the market is so thin, that we just can’t find them. We’ve gone to extraordinary means to find people that will actually work, including going to the local county jail and recruiting people to work from inside the jail,” Fredrich said. Wisconsin’s private-sector wages grew on average by 5.7 percent in the first five months of 2018, according to Census Bureau data. That compares to 2.7 percent for the entire U.S. The booming economy and the worker shortage have pushed wages up — way up, in many cases. Wisconsin’s privatesector wages grew on average by 5.7 percent in the first five months of 2018, according to Census Bureau data. That compares to 2.7 percent for the entire U.S. Last year alone Wisconsin median household income rose more than $1,000 to about $59,300, according to the Census Bureau. The state averaged a 3.6 percent increase in earnings, compared to the national average of 2.8 percent. Wages are up, too, because manufacturing is back in the Badger State. The critical sector, decimated in Wisconsin over a generation, is expanding and hiring again. According to the state Department of Workforce Development: * Wisconsin ranked 5th nationally in percentage growth in the state’s manufacturing industry from July 2017 through July 2018, and 2nd in the Midwest. * Wisconsin’s addition of 21,300 manufacturing jobs from July 2017 to July 2018 ranked 2nd nationally, and 1st in the Midwest. “That’s important … manufacturing jobs are well-paying jobs, with wages and compensation from fringe benefits that are about 50 percent higher than average wage and benefits from other sectors in our state,” Manley said. “I think that says a lot of very positive things about our economy, and I think that has helped drive a lot of the wage growth in our state.” Wisconsin’s economic turnaround has much to do with policies coming out of Madison over the past eight years. Walker and the Republican-controlled Legislature cut taxes by more than $8 billion, $3.56 billion of that in property tax cuts. The “taxes budget line” is one of the Household Survival Budget categories in the United Way’s study, along with the necessities of housing, food, health care, and transportation. Taxes are a burden on households that tax-and-spend politicians don’t care to talk about much, particularly for those living above the poverty line but still struggling to make ends meet. Tax cuts in Wisconsin and at the federal level have further bolstered personal income, Manley said, because workers everywhere are keeping more of what they’ve earned. Health care costs are a key component of the household budget, and premiums and co-pays have soared in the Obamacare era, as regulation-strapped insurers exit the marketplace. Look for Evers to continue to push the United Way figure — 870,000 households facing financial instability — to further push the left’s big-government policies, from Medicaid expansion to a $15 minimum wage. Manley said such policies are a good way to cool Wisconsin’s hot economy, and the gains the state has made in reducing poverty and rising wages. In short, to hurt the people big-government measures are supposed to help. “Market forces caused wages to go up in most cases far beyond the minimum wage or what some of our friends on the left believe should be the minimum or living wage,” Manley said. “It’s much better than the federal or state government stepping in.”
69% Of Employees Are Disengaged. How To Reverse The Trend Scott Seroka, Seroka Branding
The year was 1990, when I began working part-time as a collection agent at the second largest bank in the U.S. As a new employee, I wanted to prove my worth and impress my manager, so I always arrived to work a bit early and stayed a little later when I was able to. To learn the ropes, management paired me with Ron, a twelve-year collection agent who took me under his wing and told me from the beginning that no matter how hard I would work, I would never get anywhere at the company. Ron explained to me, and I quote, “The bank values people in collections about as much as the charred french fry found at the bottom of an order of onion rings from Burger King.” He went on to explain that if I did the bare minimum, it would be more than enough to keep my job, and that putting in extra effort would be a waste of my time because no one worth anything would notice. Sadly, from that day forward, I noticed there were many people like Ron who barely did anything all day, and some would snicker when I exceeded my goals and quotas. Unfortunately, Ron was right – management didn’t notice and didn’t seem to care because I noticed that they also did the bare minimum. Seven or eight years later, long after my departure to start my career, I wasn’t surprised to learn that the bank was suffering significant losses and was purchased. According to an October, 2016 article from Ragan Communications, disengaged employees cost the U.S. economy more than $500 billion every year. Yes, that’s awful, but your role isn’t to save the world – it’s to keep your company profitable and your customers fanatically happy. I’ve always believed that a company’s culture and its ability to deliver on its brand promise is only as strong as its most disengaged employee. Disengaged employees make costly errors, have little interest in keeping internal and external customers happy, aren’t motivated to do more than the minimum to earn a paycheck, and infect new or vulnerable employees with their attitudes. When disengaged employees talk or meet with customers, it can only lead to unacceptable outcomes including complaints, lost business and damage to your brand’s reputation. If you suspect one or more employees at your company may be disengaged, consider doing an anonymous culture assessment through your intranet or an online survey platform, such as surveymonkey.com. Ask everyone how they feel about your culture, leadership and quality of teamwork. Ask what they feel your internal strengths and weaknesses are. And also ask the obvious question: Are you happy here? Give them opportunities to explain their answers, especially if they gave low rankings so that you may know what needs to change. The success of the assessment will be based on the invitation coming from the owner or CEO, an opportunity to voice concerns by including a fair amount of open-ended questions, and assurance of anonymity as you don’t want anyone to be apprehensive about speaking their onions. If less than thirty percent participate in the survey, you may have a low engagement or a culture problem, even if the feedback is generally positive. Employees who genuinely care about their employer are typically more than happy to provide feedback when asked. If this turns out to be your circumstance, you can fall back on the findings of the research in Ragan’s article by offering employees the three things they value most in an employee/employer relationship: 1. 2. 3.
Regular meetings with management Help employees build their core strengths versus correcting their weaknesses Give recognition often
Note that the common theme here is positive engagement. And if you think about it, wouldn’t you want to provide these three things to your employees, at the very minimum? How else would they possibly be able to succeed, thrive and help your company grow?
China’s Slowing Economy and Trade Policy Raymond Keating, Chief Economist, SBE Council, Washington D.C.
China’s economic growth in 2018 registered 6.6 percent. If the U.S. were to experience such a level of growth, the reaction would be part euphoria, while others would speak dramatically about the economy “overheating.” But real growth of 6.6 percent in China was the slowest pace of growth in 28 years, since 1990. For good measure, growth is expected to slow further during the coming year in China. So, what do we do with this information? It’s hard to say, actually. Official GDP data from China is, to be generous, less than reliable. China remains a country under control of its Communist Party, which has every incentive to dress up economic growth. In addition, while it has injected certain market aspects into its economy, China remains a state-run economy. The government continues to manipulate production, debt, consumption, etc. For good measure, there are concerns about a global economic slowdown, which would inflict harm on Chinese exports. Plus, ongoing trade conflicts with the U.S. create additional problems – in China and in the U.S. Looking ahead, from the U.S. perspective, there are several matters of concern when it comes China: • First, the combination of a slowing Chinese economy and a trade war with the U.S. reduces opportunities for U.S. exporters and their workers. Consider that from 2000 to 2017, U.S. merchandise exports to China grew by a breathtaking 702 percent. Meanwhile, from March 2018 through October 2018 (latest data available), merchandise exports from the U.S. to China have steadily declined – from $12.4 billion in March to $9.1 billion in October. So, as the trade war has heated up, U.S. exporters have paid dearly. • Second, the U.S. should be pushing China to become more of a market economy, but demands by U.S. officials that China officials make sure that more products from the U.S. are bought effectively works in the opposite direction. After all, if a government controls such major transactions that means, by definition, the government controls the economy. The U.S. tacitly is reinforcing continued government-control over the Chinese economy. • Third, with an economic slowdown and the Chinese government’s reaction, it would not be surprising to see less progress being made on other fronts regarding the need for China to transform into a true market economy, including on the foundational issue of establishing and protecting property rights, including intellectual property. Due to ongoing economic ignorance and a focus on maintaining power, it would not be surprising for China’s government to continue talking a pro-property-rights agenda to the world, while in reality, persisting with a system that undermines such rights. • Fourth, as we have seen, U.S. tariffs on Chinese imports wind up hurting U.S. consumers and businesses, given increased costs for consumer goods and for the various products that serve as inputs for American businesses. On the policy front, trade policy stands out as a major uncertainty for U.S. entrepreneurs, businesses, workers and consumers. Indeed, the current trade agenda of increased tariffs and regulations flies in the face of and works against the non-trade agenda put forth by the Trump administration of tax and regulatory relief. The unfortunate question regarding the Trump administration’s trade policies is: How deeply will this ineffectual trade trade agenda undermine the growth being boosted by positive tax and regulatory policies? _______ Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Welcome New IBAW Members! Gravity Marketing
Universal Welding & Engineering
Michael Kuharske Outsourced Marketing Service
Doug Sawyer Full service metal fabricator
Selig Leasing
Primerica
Steve Schaefer Vehicle Leasing & Sales
Rick Fong Financial Services
Ansay & Associates
American Cylinder Gas, Inc
Jack Demski Risk Management Consulting
John Heckel & Kevin Heckel Distributor of industrial gases, welding and safety supplies
Novo Group
TopLine Results
Heidi Anderson Talent Placement
Fred Varin CRM, process consulting and digital marketing
IBAW Members Score Wine By Giving Referrals IBAW members can get a free bottle of wine every time they refer a business friend to IBAW and that persons joins. We want to grow the IBAW and since we are a member driven organization, we rely on you to help grow the group. Who makes a great candidate for IBAW? Any person or business that has a ‘pro business’ attitude is an ideal candidate. This can include businesses both large and small along with individuals who are entrepreneurs who are free market thinkers! Contact IBAW director Steve Kohlmann for details on how you can invite a guest to a monthly breakfast meeting.
President’s Circle IBAW / DALE CARNEGIE PRESIDENTS CIRCLE A LEADERSHIP PROGRAM FOR CEOs, PRESIDENTS, AND BUSINESS OWNERS
As the CEO, President, or Owner you are asked to produce more results with fewer resources, meet and exceed competition, innovate and motivate. This creates very difficult teams and leadership challenges. Leaders must encourage teamwork, bottom-up idea generation, alignment, loyalty and above all commitment. Rather than direct and dictate, leaders must inspire and motivate!
The Presidents Circle: The IBAW and Dale Carnegie Training have developed an exclusive Leadership program for IBAW members only. The Presidents Circle combines peer group engagement and highly targeted executive Dale Carnegie Training among peers to help you achieve significant results. These results will be achieved by providing insights, peer challenges, and developing leadership skills which are aligned with your organization and which will help drive agendas. By combining corporate mission, vision and values with our unique methodology employees will begin supporting a world they helped create.Ultimately, the only sustainable competitive advantage is the innovation, motivation, and creativity of the employees of an organization. Establishing a strong leadership culture provides the environment where innovation and creativity can flourish.
Program Specifics: • • • • • • •
Meetings with other IBAW CEOs/Presidents/Business Owners 10 monthly meetings Dale Carnegie Executive Leadership Training workshop each session. Round Table Issues Discussed and Resolved Guided Yearly planning Accountability among peers. Business Results
The President’s Circle will help you achieve results by: • • • • • • • •
Providing training among peers Creating and sustaining change initiatives Ensure continuous improvement and bottom-line impact Align the organization behind a common vision Develop a habit of fact-based decision making at every level. Strengthen and implement strategic planning Create a value based culture to ensure loyalty Build energy and trust up and down the organization to insure customer loyalty.
Commitments: • Attend meetings • •
Program Leader: Steve Bobowski
No cost for meetings, a benefit of IBAW membership Referrals or 3 enrollments
“Knowledge isn’t power until it is applied.” -Dale Carnegie
This program is now forming and is limited in the number which can attend. For more information, contact Program Leader Steve Bobowski by clicking here.
: S E L A S
2nd Monday of the Month SALES ROUNDTABLE 7:30 am - 9:00 am Free & open to IBAW members only Register at IBAW.com
Sales can be a tough road of ups, downs, potholes and a few bumps. But it can also be fast paced, exhilarating and rewarding. If you’re in sales, you know there are things only other sales people understand; the thrill of scoring the big account, the uncertainty of “let me think about that.”, the frustration of phone calls or emails that don’t get returned. IBAW’s Sales Roundtable is a support and knowledge resource for sales professionals, business owners, marketing and branding experts who are charged with driving sales. Join us to discuss the strategy, tactics, inspiration, and motivation to increase sales. It’s a FREE benefit of your membership! Who should attend: • Sales professionals of any level. • Business owners • Sales Managers • Marketing & P.R. Professionals
“For many years I ran sales meetings for as few as 3 and as many as 22 sales rep’s now I can go as a participant once a month to IBAW’s Sales Roundtable.
BONUS! Join the IBAW Sales Roundtable and get a compact disc with the BEST in Sales Survival Music. Play it to pump you up before that big meeting or to console you if you hit a sales slump. Guaranteed to make life better.
It’s a focused meeting and everyone wants the same thing – to be more effective at selling.” - Jerry Wick, CEO, Custom Data Too Mail
IBAW Public Policy Committee Hosts Legislative Roundtable in Brookfield
The IBAW Public Policy Committee hosts a Legislative Roundtable every spring and fall featuring representatives from Madison to discuss important issues business owners face. It’s your opportuntity to speak to your elected officials. Past meetings have had representatives Senator Lena Taylor, Senator Chris Kapenga, Representative Rob Hutton, Joe Sanfelippo, Christine Sinicki, Samantha Kirkman and Representative Dale Kooyenga. Meetings are held at the offices of Sikich in Brookfield. Welfare reform, excessive business regulations and the ever increasing shortage of a competent workforce were the main concerns of business owners as well as crime and the state of Milwaukee Public Schools. Save the date - our next Legislative Roundtable is April 11th!
IBAW is on an upward trend of growth and we are actively recruiting businesses just like yours to join! When you join IBAW your entire company is a member - anyone from your team can attend our fine educational and networking events. Help yourself, your business AND your Team Members. Come on in...we’re open for business!
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2019 Membership Committee
Jake Hansen Jacsten Holdings
Charles Fry Robert W. Baird
Mike Poludniak Merrill Lynch
Dan Hansen
Legislative Fix Moving Ahead for Wisconsin’s New Manufacturing & Agricultural Credit Jim Brandenburg, CPA, MST - Sikich LLP
In IBAW meetings and publications in recent years we have introduced you to Wisconsin’s new tax incentive - the Wisconsin Manufacturing and Agriculture Credit (referred to as the “MAC”). The MAC came about in 2011 to provide an incentive for Wisconsin manufacturers and agricultural companies to remain and grow here, and also perhaps to have out-of-state companies move here. It was scheduled to begin in 2013, and when fully phased-in by 2016 it would essentially exempt any Wisconsin manufacturing and agricultural income from Wisconsin income tax. The MAC was championed by Representative Dale Kooyenga and Senator Glenn Grothman in the legislature.
Magazine Content Needed Consider Submitting an Article!
The MAC, however, had some problems for individual taxpayers when it was drafted and this glitch was recently identified. Here is the issue in a nutshell: the MAC would reduce a taxpayer’s Wisconsin individual income tax, but then would trigger a Wisconsin minimum tax for nearly the same amount. Thus, there may be little, if any, net savings for the MAC in 2013 (a “MAC Attack?”). The legislature is trying to remedy this situation now so that taxpayers can realize the proper tax savings with the MAC on their 2013 Wisconsin individual tax returns.
The IBAW magazine is in need of content, we rely on our members and sponsors to supply us informative articles. The digital magazine is sent out to over 650 contacts statewide and the magazine is parked on the web where, on average, it gets over 1100 views.
Legislative Update: It seems that all key legislative leaders are now on board to correct this issue. It was approved by the legislature’s Joint Finance Committee last week. The Senate and Assembly will be in session in March and voting on final passage for several bills, one of which is this tax bill with the MAC correction. It looks like the legislative timetable will have the bill passed near the middle of the March, before going to the Governor. Thus, a best guess now is that the bill would be enacted into law somewhere in the latter half of March, 2014. MAC Attack Options: For any of our individual taxpayers taking advantage of the MAC, this may present some filings logistics. Here are the possibilities:
1. Best case scenario - in some cases the taxpayer’s share of the MAC for 2013 will be used and not result in a Wisconsin Minimum Tax. A taxpayer in this situation could go ahead and claim the MAC and file their 2013 Wisconsin individual return. There would be no need to wait for the legislation to pass.
Consider writing an article on a timely business related topic to your particular field of business. This is an outstanding opportunity for you and your company to gain exposure and increase your brand awareness to a statewide audience. There is no cost to submitting an article.
2. Next, a taxpayer has generated a MAC for 2013, but it will trigger a Wisconsin Minimum Tax. The taxpayer in this case could wait until the law is changed (and then wait a little for the WDR to update its computer processing systems) and then file their Wisconsin tax return and claim the MAC, and not incur the Wisconsin Minimum Tax. This could present a tight timeline for the April 15 deadline, and you may need to file for an extension.
3. Similar case as #2, but this taxpayer could file their Wisconsin individual return with the MAC, but also incur and pay a Wisconsin Minimum Tax for 2013. Then, once the corrective law is enacted go back and file an amended 2013 Wisconsin tax return to obtain the proper tax benefit of the MAC. You would not need extend, but you would need to amend. We’ll keep you posted as this legislation moves forward. If you have any questions, please contact Jim Brandenburg or Brian Kelley at Sikich, LLP in Brookfield (262)754-9400.
Contact Steve Kohlmann for details.
Articles submitted by our members & sponsors.
Welcome New IBAW Members!
Meeting Recaps 2014 Wisconsin Manufacturing Knowledge Summit
Power Test
On June 20, 2014 the IBAW partnered with the Tool, Die & Machining Association of Wisconsin (TDMAW) to offer Wisconsin manufacturers and their suppliers a unique look at trends within the industry and to also report on some of the challenges the industry faces in the next 5 years.
Power Test, Inc. is an industry leader in the design, manufacture and implementation of dynamometers and control systems.
Special thanks to the event sponsor, First Business Bank for their efforts in helping organize this event.
For more than 37 years, Power Test has provided specialized test equipment to manufacturers, rebuilding facilities and distributors globally. Our products can be found in use at these facilities in nearly 100 countries on six continents.
Chris Halaska
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Our headquarters and manufacturing operations are located in Sussex, WI with sales representatives worldwide. Our unparalleled customer service is well known throughout the industry. Power Test employs a dedicated staff of talented machinists, fabricators, electronic technicians, assemblers, designers, engineers, software developers, and administrative and customer service personnel. Our exceptional product life and excellent customer service is well known throughout the industry and has made us one of the industryleading dynamometer manufacturers. Our dedication to the customer and to the advances in powertrain component testing keep us there.
Power Test N60 W22700 Silver Spring Drive Sussex, WI 53089 Phone: 262-252-4301
4 Advanced Waste Services Advanced Waste Services is an environmental services company that provides wastewater recycling and other waste and risk elimination services to manufacturers in all industries. Each day, AWS helps hundreds of businesses, both large and small, meet their community and environmental obligations. Annually, we collect, treat and recycle more than 50 million gallons of contaminated wastewater into clean, reusable water and other valuable resources like fuel, steam and electricity. AWS is constantly helping our clients manage, reinvent and improve their sustainability successes. For example, we recently partnered with Forest County Advanced Waste Services Potawatomi Community to help Wisconsin food and beverage manufacturers convert 1126 South 76th Street food waste into clean, green renewable energy. Suite N408B West Allis, WI 53214 Founded in 1993, AWS employs 55 people in the Milwaukee area and a total of 150 people companywide in 5 states. 414-847-7100
Photo Key 1: A full house in the main ballroom of the Wisconsin Club as IBAW & TDMAW members prepare to hear about the state of manufacturing and the challenges the industry faces in the workforce.
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2: David Vetta of First Business Bank delivers opening remarks and highlights the importance of a strong relationship between banking and manufacturing working together for success. 3: New IBAW President, John Weber of Hypneumat addresses the change in IBAW Bylaws and calls for voting in new board officers. 4: Kent Lorenz of Acieta gives the main presentation on “Manufacturing Matters” pointing out the trends on manufacturing now and what to expect in the future. 5: Outgoing IBAW President, Steve Van Lieshout receives his award for his efforts as 2013 - 2014.
6 Photos courtesy of Tim Townsend.
6: IBAW Executive Director, Steve Kohlmann (Left) presents David Drumel with an award for his service on the IBAW board.
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THERE’S ROOM AT THE TABLE
As an advocate for small business, the IBAW offers intimate meetings on relevant topics such as Leadership, HR, Sales, and Political Issues. Business Leaders...Leading Business
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“ I almost always come away from an IBAW meeting with useable material that helps me with my business. Many times, a speaker will give me something that applies to ITU AbsorbTech. Other times, it is a conversation over breakfast that gives me value.” Jim Leef, President & CEO, ITU AbsorbTech
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