Client Spotlight: Lighthouse Fitness Management

We support some really great businesses here at GYM HQ.  We're thrilled to highlight one of our favorites, Lighthouse Fitness Management, in our first ever Client Spotlight.  We've enjoyed supporting them as they work on smart growth, increased productivity, and delighting their customers.  The personal training niche can be challenging when a business grows into multiple locations in multiple states, but these guys strive to do the right thing by their clients and provide excellent service.  A good example of this is the very labor intensive project of addressing their BBB score. Any business owner will tell you that the BBB is a beast to deal with!  It's hard to get your complaints channeled properly, the size of the business is never considered (15 complaints for thousands of clients isn't too shabby!), and rarely do people take to the BBB to say good things. They've started the process of tackling this hurdle head-on. Their management team is top notch and they have HUGE goals to change thousands of lives as they grow their business.  This month we sat down to learn a little more about John Cuthill, CEO and Kyle Davis, Executive Vice President.  

GHQ: How did you get started in the fitness industry?

JC:  I was at a point in my life where just making money wasn't enough, I wanted to make a difference in people lives. I joined the Gold's Gym in Columbia SC, they offered me a complimentary session, and the next thing I knew I was meeting with the VP talking about an entry level sales position.  I started January 7, 2010 and never looked back. 

KD:  I changed jobs close to every year due to lack of interest. I was going through a money vs. happiness dilemma and as I was sitting in my gym in between sets I decided I might be happy working in a gym.  So I quit my job and start looking for a job in fitness. I found one within a few weeks and after about 6 months as an AGM, I decided that selling memberships wasn't enough.  I felt like all I was doing was selling people parking passes to their favorite event, but what they needed was the actual ticket to the show and that's when I knew I needed to get into the PT side of the business. 

GHQ:  What are some of the biggest changes you’ve seen occur in the industry over the years?

JC:  Low cost models. I remember paying $50 per month and thinking it was a good deal. 

KD:  How many different ways people can change the words and methods they use to describe exercise science and convince people it's different from the previous words and methods people have used to describe exercise science.

GHQ:  Where did the Lighthouse Fitness brand come from?  

JC:  The Lighthouse Fitness brand has a spiritual meaning.  We are called to be the light of the world. We all were thinking of a great name that had power and meaning and Lighthouse hit me like a ton bricks.  I knew that was the name. 

GHQ:  And what does it stand for?  

JC:  At Lighthouse Fitness we want to show you the way to health and fitness.   Most people are lost when they join a gym and we want to be the guiding light to help them every step of the way. 

KD:  Yeah, we are your guiding light in health and fitness...

GHQ:  What do you currently have in the pipeline for growth and expansion?

KD:  Finding more club owners who need a guiding light in their gyms.

JC:  We are working with our existing partnerships and growing with quality as our focus.  

GHQ:  What is the Lighthouse experience for clients?

JC:  When people meet with a Lighthouse Fitness employee, they will feel like they are meeting with a good friend that cares about their well being. Our goal is to help them reach their goals.

KD:  We try to be more than just personal trainers and personal training sessions. We want to create an environment where we are more than that. The idea of selling training sessions to someone, forcing the client to use them as quickly as possible and providing them zero knowledge as to what to do in between sessions and when they run out if they can't afford more is disgusting to me.  I want to create a personal training experience full of motivation and education so that one day our clients won't need us anymore but may still want us. It's really hard to build a car from the chassis up. Even if I gave you a state of the art garage with every tool under the sun and the parts to build your dream car it would be really hard for you to put it together especially if I just walked away and wished you the best of luck. Now on the other hand, if I stayed with you for a year and helped you build your dream car and taught you what we were doing as we put each part together, then at the end of that year when I hand you the keys for the very last time you could certainly maintain that car on your own. It's hard to build a car but if you know how it went together you could easily change  the oil, rotate the tires, flush the radiator, maintain it. I want to help people build them dream bodies and lifestyles in a way so when we are done they can maintain that hard work on their own.  

GHQ:  What have been the most challenging aspects of the business?

KD:  Finding club owners who would prefer their  patrons to get results instead of simply paying for a membership they won't use.  Also, finding people in the employment pool who are willing to work for what they want instead of expecting it to be handed them.

JC:  Definitely finding people to join our team that care about the clients as much as we do. 

GHQ:  How important are back-office functions for the business and why did you decide to partner with GYM HQ?

JC:  Choosing Gym HQ was an easy decision.  We knew we could count of them to service our clients and staff as if it was their business.  The back-end functions are very important to helping our team accomplish our goals. 

GHQ:  What gems of advice would you like to share with others looking to own their own fitness business?

JC:  It is like a marriage, if you want it to work it takes dedication and hard work. 

KD:  Never allow yourself to completely compromise your morals or integrity in exchange for financial gain. This is an industry full of ego and everyone's is different.  You can't manage any two egos the same way. 

Lighthouse Fitness Management is an outsourced personal training business providing services to members of Gold's Gym, 10 Gym, BFit, Omni Fitness, Club Fitness, and Fitness Unlimited locations throughout the country.  If you're a gym owner interested in outsourcing your personal training department and want to learn more about Lighthouse Fitness Management, contact John at jcuthill@lhfmgmt.com or 910-527-3305.

14045672_1777368965876336_4229865162736388256_n.jpg

 

 

 

 

 

 

What is your company culture?

Culture is something we talk about quite frequently here at GYM HQ.  When we founded the company, it was very important to us that we always remain a place our employees looked forward to working — a place where they felt appreciated, supported and invested in.  We wanted them to see our vision and care about the mission we were on a much as we did.  Over the last several years, as our client portfolio has expanded, we’ve seen our team grow from 5 to 40 (with new team members being added monthly)!  The growth has been exciting and challenging.  It’s brought with it all the standard pain points growing businesses face: thinking through systems, upgrading tech, and honing in strategy.  But one that caught us a bit off-guard, was the need to actively focus on our culture.   When you have a small team, it’s easy to ensure everyone is on the same page, understands where you’re headed, and feels like an integral part of the mission. When you grow, that message can get muffle, diluted, or lost completely!  It takes a clear and ongoing effort to shape your culture.  In the absence of any meaningful or focused discussion on culture, mission, or core values, an unintended culture will install itself. 

So how does a company go about working on its culture?  First, you must truly believe that working on culture is an important endeavor. It must come from a place of authenticity and an understanding that change can happen and is important.  Once you’ve cleared the thought hurdle, get to work!  Sometimes the hardest part is just getting started.  Below are a few key steps to help you through the process.

Who are we right now?  Start with an audit of where your organization currently stands.  What culture has devolved organically?  An easy way to do this is to simply ask your staff!  Take time to ask them leading questions about who they are, what their career objectives they have, and how they’re fitting into their role with your company.  Starting the conversation with them as the focus makes it much easier to transition into questions about their perceptions of the company’s mission, work environment and vision.  Ask about the business’s current strengths and weaknesses.  What are you as a leadership team doing well and where do you need work?  You’ll walk away from this exercise with plenty of insights for not only your culture project but several process improvement projects!

What do we want to be?  If you could snap your fingers and have the perfect culture, what would it be?  Culture is like a personality.  It is made up of the values, beliefs, underlying assumptions, attitudes, and behaviors shared by a group of people.  If you take the pure dictionary definition, culture is “the manifestation of human intellectual achievement regarded collectively”. It’s the culmination of all your team’s effort boiled down to its essence. 

Take the time to list out your core values.  Here are a few from GYM HQ to help you brainstorm.

RESPECT: We treat our customers and each other with respect.  We keep the golden rule front and center.

COMPETENCE: We are the professionals who know back-office work.  We built trust in our clients by demonstrating competence every day.

CONSISTENCY: Once we decide on a process, we follow it every time.

PASSIONATE: Love what you do, otherwise do something else. 

ONE TEAM: Everyone has an important role.  Understand your role and how you fit into the larger picture.

CREATE YOUR HAPPINESS: Personally, and professionally, you control your own destiny.  No victims.  Your thoughts create your reality.     

Find the disconnect.  If there a big gap between who you want to be and who you currently are, what needs to change to fill the void?  What tools are you missing?  Are there systems in place that nurture you core values?  For example, if one of your core values is consistency (as it is here at GYM HQ) and you don’t have clearly documented policies which guide your daily operations, you’re not going to be very successful in getting that value to take root.  It’s okay for core values to be somewhat aspirational, but moving from dream to goal takes action!  It’s one thing to proclaim you care about your member experience and value your team, it’s another to roll up your sleeves and make it happen if you aren’t quite hitting the mark. As the old adage says, actions speak loader than words.

Work at it daily.  A great culture isn’t magic.  Realizing this is empowering in and of itself.  Each day you and your team have a new chance to define what the “culture of the day” will be.  String enough great days together and a cultural pattern starts to take shape.   Have a stressful few weeks and take your eye off the ball you need only hop back in and get back on track.  Nothing in business is ever perfect, what matters is planning and effort. 

Make sure that all team members realize their impact.  A change starts with one person in one department and it spreads.  While your leadership team may be at the helm of the ship, it’s the crew members who provide the momentum.  Get buy in and acknowledge good examples of team members who exhibit the culture you want for your entire team!

Make it authentic.  There are some great examples of companies who do culture very well.  A quick Google search will yield, well, Google!  While taking inspirations from companies like Google, Zappos or Southwest Airlines is smart, your culture should be yours.  Maybe free lunches, pajama Friday and open work spaces work for you, but probably not!  Culture can’t be copy and paste.

Finally, it’s important to remember that just because a business is big and successful doesn’t mean it isn’t struggling with a crisis of culture.  Uber, the top riding sharing service in the US, enjoyed a valuation of nearly $70 billion as recently as February of this year.  However, issues with bad press and struggles with identity and culture have diminished their value over the last several months (with some putting them down $20 billion).  On June 5th, Uber brought on Frances Frei, Senior Associate Dean for Executive Education at Harvard Business School, as senior vice president of leadership and strategy. Her entire role focuses on shifting their company culture (including a perception of sexism) and working with the leadership team on strategy and management training.  The takeaway is that you’re never too big to have to start over on culture or put in a concerted effort.  Luckily, it should be much easier to shift the culture within the four walls of our fitness clubs vs. across a remote network of thousands of independent contractors. 

Happy strategizing!  Feel free to shoot me your ideas.  I’m eager to hear about the values that your brand holds near and dear.

Don’t Go There: What NOT to Ask During a Job Interview

Recruiting and interviewing are among some of the toughest skills for many new hiring managers to acquire.  Analyzing a candidate’s ability to perform, the likelihood of them committing to the team for the long-term, and their fit within the company culture, all within the span of a 45 minute interview, is a challenge.  A hiring manager should focus on developing a carefully curated list of questions for each position.    These questions should seek to gather as much information as possible about the candidate.  However, regardless of the position, there are some questions that are legally off limits.  Below are some areas in which an interviewer should tread very carefully, or not at all.

AGE

DON'T ASK:

How old are you?  When were you born?  What year did you graduate?  How long have you been in the work force?

INSTEAD ASK:

What are your long-term career goals?  Are you over the age of 18?

Age is a protected class under the Older Workers Benefit Act and discriminating based upon it will land you in hot water.

MARITAL & FAMILY STATUS

DON’T ASK:

Are you married?  Do you have children? Who will take care of your children while you’re at work?  Do you plan on having more children?

INSTEAD ASK:

Would you be able to work a 9:00 AM to 6:00 PM schedule?  Would you be willing to relocate if necessary?  Would you be willing to travel as needed by the job?  Would you be able and willing to work overtime if necessary?

A candidate’s familial status should not be considered when making a hiring decision.  There are federal laws that relate specifically to women including the Pregnancy Discrimination Act (PDA) -- prohibiting discrimination on the basis of pregnancy, childbirth, or related medical conditions, and the Family and Medical Leave Act (FMLA) -- prohibiting discrimination against pregnant women and parents who take leave from their employment responsibilities to care for a newborn baby, sick child, or aging parent.  Many states also have anti-discrimination laws geared toward protecting a woman's right to fair employment.  What may be considered is their ability to work a specific schedule and meet the demands of the position.  These alternate questions are okay to ask, as long as they’re asked to all applicants.

DISABILITIES & QUESTIONS RELATED TO HEALTH

DON’T ASK:

Do you have any pre-existing health conditions?  Are you on any medication?  What are the nature and/or severity of any disabilities that you have?  How’s your health?

INSTEAD ASK:

Can you perform the essential functions of the job, with or without reasonable accommodation?  Are you able to lift 50 lbs (as long as the job requires this)?

A candidate’s health and disabled status are protected under the Americans with Disabilities Act (ADA) which prohibits discrimination in the workplace based on a person's physical disabilities, including a prohibition against pre-employment questioning about the disability.

CRIMINAL RECORD

DON’T ASK: 

Have you ever been arrested?  Have you ever spent time in jail?  Have you ever been caught drunk driving?

INSTEAD ASK:

Have you ever been convicted of a crime?  Be careful with this one.  The answer should only be considered when a conviction is for a crime which will have a potentially negative impact on the business.  An example would be a fraud conviction when the position involves handling funds or sensitive personal information. 

There is a growing movement toward “banning the box,” which prohibits employers from including a check box on their applications which asks if applicants have a criminal record.  At this point, nine states, DC, and fourteen cities and counties have adopted this stance.  It does not prevent employers from asking about criminal convictions during an interview.

CREDIT RECORD

DON’T ASK:

Do you own your own home?  Have your wages ever been garnished?  Have you ever declared bankruptcy?

INSTEAD ASK:

None.

Credit references may only be used if in compliance with the Fair Credit Reporting Act and Consumer Credit Reporting Act.  The candidate must be provided with the necessary notices and disclosures and give their written permission to procure the consumer report.  If, after reviewing the report, the employer decides to take adverse action, they must notify the candidate prior to taking such action. It’s important to note that ten states have passed laws prohibiting employers from pulling credit reports at all.  The latest recommendations advise limiting this assessment step to only positions where the the candidate will be involved in accounting or money management or where there is potential for fraud and embezzlement.

RELIGION

DON’T ASK:

What is your religious affiliation?  What religious holidays do you celebrate?  Do you attend church every week?

INSTEAD ASK:

Weekend and holiday work is required.  Will this pose any difficulties for you?

Federal law (Title VII of the Civil Rights Act) and the laws of most states prohibit an employer from engaging in religious discrimination.

NATIONALITY

DON’T ASK:

How long has your family been in the U.S.?  That’s an unusual name—what does it mean?  How did you learn to speak Chinese? 

INSTEAD ASK:

Are you eligible to work in the U.S.?  What languages do you read, speak or write fluently?  This question should only be asked if it’s relevant to the performance of the job.

Federal law prohibits discrimination against national origin.

USE OF LEGAL & ILLEGAL DRUGS

DON’T ASK:

Do you drink socially?  Do you smoke? Have you ever been addicted to illegal drugs?  What illegal drugs have you taken?

INSTEAD ASK:

Have you ever been disciplined for violating company policies about the use of alcohol and tobacco products?  Are you currently using any illegal drugs?

Concerns about drug, alcohol or nicotine addictions are valid as they can impact an employee's quality of work and the rates of a company's health insurance coverage. However, an employer should be mindful to frame questions about these potential problems in a careful manner.  Also, under the Americans with Disabilities Act (ADA), recovering alcoholics don’t have to reveal any information that might hint at their status.  It's also illegal to question job applicants about when they last used illegal drugs, although asking if they’re currently using illegal drugs is permissible.

MILITARY SERVICE

DON’T ASK:

Was your military discharge honorable or dishonorable?  Why were you discharged?  Will you be deployed anytime soon? 

INSTEAD ASK:

What type of training or education did you receive in the military?  What did you do in the military?  If the applicant is currently serving in the National Guard or Reserves, an employer is not permitted to ask them if they are going to be deployed. 

State and Federal Equal Employment Opportunity (EEO) laws do not prohibit an employer from asking about the type of discharge.  However, asking a veteran to reveal the nature (“characterization of service” in military parlance) of their discharge is considered private information, similar to asking someone “what kind of a disability do you have?”   Therefore, it’s advised to avoid any questions regarding discharge.  Law also prevents and employer from discriminating based on current military service in the National Guard or Reserves.

One final point, when it’s all said and done, a hiring manager really only needs to know if the candidate can perform the necessary duties required for the position.  If they can’t, there is no need to know the why.  Why can lead to discrimination, which leads to legal issues.

5 HR Slipups to Avoid

You're now several weeks into your New Year’s business resolutions as you're reading this post.  Much like the start of a new year presents a good time to set new goals and work toward your best you, it also offers the opportunity to review your business, look for the gaps, and work toward bridging them.  Due to its complexity and direct impact on legal risk, a review of your HR and pay practices is a great place to begin.  We’ve gathered the top five areas in which we receive the most questions or have spent the most time coaching. 

Issue #1: Employee misclassification

We start with an issue that should be relatively fresh in most owners’ minds.  Preparing for the salary base increase that was set to go into effect on December 1, 2016 led most businesses to take a hard look at the team members being paid salary and being treated as exempt.  While the proposed changes only impacted the minimum salary requirements, many owners noted that they may also need to make some changes based on the existing duties requirements.  Below are the three categories for exemption based on duties:

EXECUTIVE EXEMPTION:

·         Regularly supervises two or more other employees, and also,

·         Has management as the primary duty of the position, and also,

·         Has some genuine input into the job status of other employees (such        as hiring, firing, promotions, or assignments).

Supervision means what it implies. The supervision must be a regular part of the employee's job, and must be of other employees. Supervision of non-employees does not meet the standard. The "two employees" requirement may be met by supervising two full-time employees or the equivalent number of part-time employees. (Two half-time employees equal one full-time employee.)

"Mere supervision" is not sufficient. In addition, the supervisory employee must have "management" as the "primary duty" of the job. The FLSA Regulations contain a list of typical management duties. These include (in addition to supervision):

·         Interviewing, selecting, and training employees;

·         Setting rates of pay and hours of work;

·         Maintaining production or sales records (beyond the merely clerical);

·         Appraising productivity; handling employee grievances or complaints, or disciplining employees;

·         Determining work techniques;

·         Planning the work;

·         Apportioning work among employees;

·         Determining the types of equipment to be used in performing work,          or materials needed;

·         Planning budgets for work;

·         Monitoring work for legal or regulatory compliance;

·         Providing for safety and security of the workplace.

PROFESSIONAL EXEMPTION:

Staff within the fitness industry typically doesn’t fall into this set (ie. lawyers, doctors, dentists, teachers, architects, nurses, accountants, etc.)

ADMINISTRATIVE EXEMPTION:

The most elusive and imprecise of the definitions of exempt job duties is for exempt "administrative" job duties.

The administrative exemption is designed for relatively high-level employees whose main job is to "keep the business running." A useful rule of thumb is to distinguish administrative employees from "operational" or "production" employees. Employees who make what the business sells are not administrative employees. Administrative employees provide "support" to the operational or production employees. They are "staff" rather than "line" employees. Examples of administrative functions include labor relations and personnel (human resources employees), payroll and finance (including budgeting and benefits management), records maintenance, accounting and tax, marketing and advertising (as differentiated from direct sales), quality control, public relations (including shareholder or investment relations, and government relations), legal and regulatory compliance, and some computer-related jobs (such as network, internet and database administration).

Issue #2: Lack of Documentation

A general lack of documentation seems to plague many fitness businesses even outside of the realm of HR (customer relations, contracts, etc.).  When it comes to employees, the two biggies are a failure to outline policies in writing and a failure to document issues.  Think of your Policy and Procedures Manual and/or your Employee Handbook like the playbook for your business.  They lay out expectations for team members, explain the business objectives behind those expectations, and provide the framework for how to carry them out.   Without a playbook, you and your staff are essentially flying blind!  This is not a good place to be, especially when issues arise. And issues always arise!  It’s recommended that a business employ a policy which provides for a method of documenting all employee dealings relating to performance (both positive and negative) and requires signatures where appropriate.  Clear and consistent documentation ensures the employee understands the reasons for your actions and what your expectations are of them moving forward.  If the time comes when employment must end, it also provides a history should a claim arise (unemployment benefits, discrimination, wrongful termination, etc.). 

Many managers equate the word discipline with punishment versus thinking of it as the process of helping an employee understand their role and how to perform more effectively or efficiently.    If meetings with a supervisor involving documentation are always viewed as negative and seen as a threat, that’s exactly what they end up being and the policy loses any potential positive impact.  You end up with a too little, too late situation because even you avoid discussing employee issues!

Issue #3: Lack of Time Keeping

This issue generally falls into one of three categories:

·         Connected to a misclassification issue where an employer is treating an employee as exempt when they shouldn’t be.  All nonexempt employees should be keeping time records.

·         Time records are being kept in an inaccurate or haphazard manner.  This typically comes in the form of written time sheets that don’t capture time in/out to the minute or assumed time clocks that simply plug in the employee’s standard schedule and ignore actual reporting times.  While this is better than nothing, it won’t hold up to scrutiny should questions of proper payment of wages occur.

·         Failure to keep time records for piece rate employees.  The previously advised method of paying trainers by the session or group instructors by the class is shifting.  Current best practice advises tracking actual time worked (including prep and wrap time), paying to the clock, and then adding in a bonus based on total classes taught or sessions completed (if desired).

Issue #4: Use of Independent Contractors

I’ve written and spoken so extensively on this topic that it seems redundant to include it again here.  However, rarely does a week go by that I don’t get a call from an owner attempting to find a way to “1099” someone.  Here’s the bottom line, in 99% of cases the person you’re dealing with is an employee.  Sure you can manufacture a creative reasoning for paying them as a contractor, but it’s generally not worth the risk given the severe penalties associated with misclassification. You can see moredetailed information on the topic on our website under past blogs, but it all boils down to this:   if the position requires the person to be directed as to how, when, where and with what to do the job, he’s an employee.

Issue #5: Lack of Knowledge of and Adherence to State Labor Laws

Every state comes with its own unique challenges for business owners.  Minimum wage changes, special break requirements, mandatory check information, employee notices, rules governing final wages, workers compensation requirements…the list goes on.  HR and payroll practices are certainly not one size fits all and it’s imperative that a business owner investigates the rules in his or her home state.  These should be reviewed frequently to plan for and implement any changes.  It’s the owner’s responsibility to be informed.

 

Feeling overwhelmed by all of the HR laws and guidelines?  Wish you could focus only on increasing your revenues, managing your team, and growing your business?  GYM HQ may be your perfect solution.  Let us take a look at your pain points and come up with a solution tailored to you.  We’re your one-stop-shop for:  HR best practices & guidance, payroll, accounting, customer service, past due communications, and operations best practices & guidance.  

Contact us today:

info@gymhq.club

404-921-2269

 

Top 10 Mistakes Gym Owners Make

It’s that time of year again!  Time to look back on 2016, find opportunities for improvement and plan for a bigger, better 2017!   We work with many operators who are doing some really exciting things.  Some have gotten it nearly right from the get- go and others have learned from a few bumps along the way.  Getting to be at the helm of the behind the scenes team here at Gym HQ as these businesses grow and prosper is a fun, fulfilling, and exciting experience.  I’d like to pass along some of the big no-nos we’ve seen and areas we’ve noted many owners have questions.  I’ve included notes on what we’ve uncovered in businesses throughout the years as examples or steps to take on each item.  While space won’t allow for a full workup of each topic, hopefully these will give you a few items on which to focus in the coming year.  You work hard to drive revenues at for business; we want to make sure you hang on to them!  Here are our Top 10 Mistakes Gym Owners Make.

#1:  LACK OF CONSISTENT AND ACCURATE FINANCIALS

Timely P&Ls ensure that you’re keeping an eye on your margins each month so that adjustments can be made accordingly. 

What we’ve seen:

With no clear understanding of the business’s performance, it’s fairly common for an owner to overestimate performance (revenue) and underestimate liabilities (expenses).

 #2:  NO BUSINESS REPORT ANALYSIS(MISSING KPI REPORTS)

Without knowing your numbers, business analysis and action planning is impossible.

In one instance, after a single month of analysis for one business, we found:

  • High instance of client “no-shows”.  Cost to business $2100/month.
  • Average price per session was too low.  $5 below targeted margin. $28,000/month. 
  • Average trainer rate was too high.  $1 above target margin.  $3,000/month.

#3:  PAYING STAFF AS 1099 INDEPENDENT CONTRACTORS

There is no such thing as a “1099 employee”.

What we’ve seen:

Multiple employees being paid as 1099 Independent Contractors.

It’s important to do an analysis of each position from a behavioral, financial and relationship stand point.

#4:  EMPLOYEE MISCLASSIFICATION

Exempt vs. Non-Exempt Status

What we’ve seen:

Multiple employees misclassified and exempt staff being underpaid.

All job descriptions and pay should be reviewed regularly for compliance.

#5:  LACK OF HOURS TRACKING AND OVERTIME PAY

Coaches, trainers and fitness instructors are an especially touchy area.

What we’ve seen:

Trainers being paid by the session and not utilizing a time clock.

What you should know:

We’ve been very attentive to the recent case law in our industry.  There have been multiple class action law suits concerning trainer pay in the last several months:

In March, a class of more than 80 personal trainers seeking a jury trial in federal court against a Gold's Gym franchisee group over alleged unpaid overtime wages scored a legal victory in the case. The judge ruled that the defendant, Gold's Texas Holdings Group Inc., cannot use an exemption in the Fair Labor Standards Act (FLSA) to defend itself against allegations of employee misclassification should the case go to trial.

In February, Equinox Holdings Inc. settled a class action lawsuit for a maximum of $4 million brought by former employees who alleged the company failed to pay them fully or provide breaks.

In January, a federal judge in Illinois denied a group of four former Life Time Fitness personal trainers' motion for conditional class certification in a lawsuit alleging unpaid minimum wages. That case is currently stayed pending the outcome of private mediation, according to court records.

SUGGESTED METHOD: 

  • Pay hourly and required clock in/out.
  • Provisional bonus pay is okay.

#6:  LACK OF WRITTEN POLICIES AND PROCEDURES

Does your staff have a playbook?

What we’ve seen:

No existing Employee Handbook and incomplete New Hire Packet materials.

Steps to take:

Think of your Policy and Procedures Manual and/or your Employee Handbook like the playbook for your business.  They lay out expectations for team members, explain the business objectives behind those expectations, and provide the framework for how to carry them out.   Sitting down and committing your business essentials to writing is important for several reasons:

  • It causes you to really “think through” how you’re carrying out the   day-to-day. 
  • It memorializes when a policy was put in place.
  • It gets everyone on the same page, literally.

#7:  IMPROPER OR MISSING STATE REGISTRATIONS AND BONDING

Do you know the rules of engagement for your state?

What you should know:

  • Each state has different requirements for business                           registration.
  • Some states hold fitness businesses to special requirements underHealth Spa Statutes.  These states require specific language for membership and service agreements and sometimes require businesses to hold a bond (especially for presale).
  • The application of sales tax to products, memberships, and services varies by state. 

#8:  MISSING PROCEDURES FOR CUSTOMER SERVICE

Issues are inevitable.

What we’ve seen:

  • Open permissions allowing staff members to cancel agreements and invoices.  In one example we found an auto-renewal percentage s at 6% vs targeted 20% for the sales model due to sales people cancelling draft and creating new agreements.  $13,000 in draft impact + overpayment of commissions
  • Not adhering to cancellation procedures outlined in member agreement.

#9:  FAILURE TO TRACK, ANALYZE, AND ACT UPON CUSTOMER ISSUES

Where? When? Why? What’s the fix?

Steps to take:

  •  CS volume through all channels should be measured and root causes for complaints tracked:
  • Reason for complaint (staff, facility, contract)
  • Staff involved
  • ClubReady notated
  • Cancellations are categorized by type.
  •  Data is analyzed on a regular basis (calibration calls) and action plans deployed.

 

#10:  FORGETTING ABOUT PAST DUE MEMBERS

Getting members up-to-date is vital for a healthy draft. 

What we’ve seen: 

  •  Lack of system or schedule for follow-up.
  • No process for mandating contact information capture at POS

While this list may seem a bit daunting at first, you'd be surprised how much traction you can gain but simply starting with one area. Happy 2017--may your business thrive this year!

 

 

 

Guide to Preparing for the FLSA Exempt Pay Changes: Month Two, Analyze Your Pay Plans

Last month we began the process of preparing for the FLSA Exempt Pay changes, announced by the DOL in May, by looking at your workforce and their duties.  You can find that article and additional articles on the change on our website:  www.gymhq.club.  This month, we continue our preparation for the upcoming December 1st due date for compliance with a look at employee compensation.

The single biggest change for which owners need to prepare is the new salary minimum.  The salary threshold increases from $455/week ($23,660 per year) to $913/week ($47,476 per year).  If left alone with no changes to the current compensation plans beyond the required salary increase, an owner’s exempt payroll will double!  With payroll constituting one of the biggest expense categories for a business, this could have a major effect on the bottom line.  Here are several considerations to make and examples to use while analyzing a business’s current pay rates and retrofitting them to comply with the new DOL guidelines:

Calculate each exempt employee’s total yearly earnings.  You’ll need to include all compensation including salary, commissions, and bonuses.  Example:

GM Johnny has a salary of $36,000 per year.  He has a commission plan in place that pays him on any memberships sold by him directly as well as a bonus structure based on the achieving 100 new memberships per month.  Looking at the six months he’s been employed, it’s established that his average monthly commission is $300 and his average bonus is $500.  That gives him an estimated annual commission and bonuses payout of $9,600.  So Johnny’s estimated annual income is $45,600. 

If an employee’s current base salary meets or exceeds $47,476, no changes need to be made.

If the employee is close to the earning base stipulated by the new law ($47,476), consider making adjustments to their current compensation plan to bring it into compliance.  Continuing with our GM Johnny example:

The new FLSA pay criteria stipulate that up to 10% of the first $47,476 of the employee’s income can come from non-discretionary commissions or bonuses.  These are bonuses based on clear and measurable goals or a company’s profitability.  That means if we want to cap Johnny at $47,476 for his annual compensation, $4,747.60 of it may come from commissions and bonus.  We can bring his salary up to $42,729 and adjust our commission and bonus structure accordingly.  Where he may have been earning $300 in commission on 30 memberships, now his plan pays him $150.  His monthly bonus is adjusted to $250.  This brings his yearly earnings from these two categories to $4,800.  When combined with his new salary, Johnny’s yearly income is $47,529.  This is only a $1,929 increase to the business for the year. 

If the employee’s current earnings are much lower than $47,476 per year, consider moving them to hourly pay.  Example:

AM Adam has a salary of $24,000 per year.  He earns another $10,000 annually from commissions and bonuses.  That puts his annual earnings at $34,000.  While a review of his job duties indicated that his role does qualify him to be an exempt employee, the business owners have not budgeted $47,476+ each year for his position.   In order to comply with the new FLSA pay rates, Adam’s pay is changed to $11.50 per hour (his salary divided by 40 hour weeks x 52).  He’s required to clock-in and out and his commission and bonus structure remain the same.  GM Johnny carefully monitors Adam’s time clock reports to ensure he’s not exceeding 40 hours per week.

*Luckily our example gym isn’t in California, so Adam is not limited to less than 8 hours per day to stay out of overtime status.

If you’re moving a currently salaried employee to hourly, make sure you factor in the need for and frequency of overtime hours.  Example:

After reviewing the hours Adam typically works, Johnny realizes that he’s averaging 50 hours each week.  He reviews this with the club owners and all agree that Adam is needed for the extra 10 hours each week.  Therefore, Adam will be earning overtime pay.  Johnny will need to be careful to take Adam’s commissions and bonuses into consideration.  For the pay period of August 1st to August 15th, Adam worked 108 hours.  20 of these hours these were overtime.  He also earned another $350 in commissions and bonuses.  Here’s a breakdown of Adam’s pay:

 108 hours x $11.50 + $350 (commissions & bonuses) = $1592 (straight time pay)

$1592 divided by 108 hours worked= $14.74 (regular rate)

$14.74 x ½ = $7.37 (overtime premium)

20 hours of overtime x $7.37 = $147.40 (overtime pay)

Total payout = $1,739.40

If the owner had failed to consider the tendency of Adam’s position to require overtime and had set his hourly rate to $11.50 (and made no changes to his commission and bonus plan), Adam would be set to earn $41,745 per year, which is a lot higher than $34,000.  The cost to the business would be $7,746 annually.  By understanding the implications of overtime pay, the owner could adjust Adam’s hourly rate lower than $11.50 and/or modify his commission and bonus structure.  Considering the need for and frequency of overtime, as well as its cost, is a must when considering a future pay plan for a position.

Consider the cost of admin when deciding to move a salaried employee to hourly.  Who will track the employees’ hours, make adjustments when need, and police overtime?  Who will ensure calculations for overtime pay are properly made?  Does your pay cycle for hours align with your commission and bonus structure?  Example:

Gordon pays his team for hours and salary on a semi-monthly basis, but his commission and bonus structures are based on his club’s monthly sales and performance quotas.  His sales rep Samantha consistently works overtime and Gordon knows he needs to calculate pay based on her regular rate.  However, when he pays her for her hours from the first half of the month, commissions and bonuses are not available.  How does he ensure Samantha is paid out properly?

For August 1st to 15th, Samantha worked 92 hours.  4 of these hours were overtime.  Her hourly rate is $8.  Gordon should pay her the following on her check:

92 hours x $8 = $736

$8 x ½ = $4 (overtime premium)

$4 x 4 hours of overtime = $16

Total pay for this check= $752

At the end of the month, Samantha has $400 in commissions and a $100 bonus.  Gordon is able to attribute $150 of the commissions to August 1st to 15th and splits the bonus in half as it was earned over the entire month.  He then calculates the additional overtime pay due to Samantha for August 1st to 15th.

$200 (commission and bonus) divided by 92= $2.17 (additional income to add into hourly for regular rate)

$2.17 x 4 hours x 1.5 (time and a half) = $13.02 to be added to Samantha’s next check.

Finally, a great place to start when building a compensation plan is to determine how much the position should pay when an employee performs well (if commission/bonus based) and work backwards.

As you can see, there are a lot of points to consider as you work toward December 1st.  Starting now ensures you have the time necessary to put a thoughtful plan together.

Month-By-Month Guide to Preparing for the FLSA Exempt Pay Changes: Analyze Your Workforce

Over two months have passed since the Department of Labor announced the changes to the salary level for employees classified as exempt and we’re still getting a ton of questions on what the changes mean for fitness business owners. Read about the change here.

 Over the next several months, we’ll give you a few tasks on which to focus each month so you’ll be prepared for the December 1, 2016 launch.

August:  Analyze your current workforce. 

·         Review all employees and positions currently classified as exempt or those which you’re paying a salary and not requiring time records to be kept.

·         Review their job descriptions and duties to determine if these employees are currently properly classified (outside of the amount they’re paid).  If you can check off the majority of the following bullet points under the supervisory exemption (or make a case for an administrative exemption), your employee is properly classified as exempt.  If not, the position should be reclassified as non-exempt and be required to keep track of time.

·         Create a list of the positions which will need to be reclassified based on duties and those which will remain exempt. 

Supervisory:

  1.  Regularly supervises two or more other employees, and also
  2.  Has management as the primary duty of the position, and also,
  3.   Has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

When considering a supervisory exemption, the DOL is very clear that the employee must have management as the primary duty of their job.  Below are typical tasks that would be included in management duties:

  • Interviewing, selecting, and training employees.
  • Setting rates of pay and hours of work.
  • Maintaining production or sales records (beyond the merely clerical).
  • Appraising productivity; handling employee grievances or complaints, or disciplining employees.
  • Determining work techniques.
  • Planning the work.
  • Apportioning work among employees.
  • Determining the types of equipment to be used in performing work, or materials needed.
  • Planning budgets for work.
  • Monitoring work for legal or regulatory compliance.
  • Providing for safety and security of the workplace.

A good rule of thumb is that if the person is deemed “the boss” or “in charge”, they are cleanly classified as management.  In the fitness space, the general manager, fitness director, operations manager, and (sometimes) assistant manager roles may be considered exempt.  The most frequent misclassification made in the fitness industry is for the sales role.  If an employee’s job duties are primarily inside sales, regardless of their title, they are not exempt. 

Administrative:

This classification includes employees who job duties are:

·         Office or non-manual work, which is

·         directly related to management or general business operations of the employer or the employer's customers, and

·         a primary component of which involves the exercise of independent judgment and discretion about

·         matters of significance.

It is not enough for the employee to perform office work.  They must regularly exercise discretion and judgement, with the authority to make independent decisions on matters which affect the business as a whole or a significant part of it.  In a fitness business, there are very few roles which would fall under this exemption.

There is also a professional exemption which carves out lawyers, teachers, accountants, and other roles not typical of a fitness business. 

While the change to exempt pay is a challenging one for employers, it presents a great opportunity to review the entire business for duties based compliance.  The new DOL guidelines will likely lead to closer scrutiny of employee misclassification in the future.  We’ll also likely see a rise in the number of plaintiffs’ lawyers focused on bringing suit against employers under wage and hour law violations due to misclassification.  These cases are some of the most costly to defend for business owners. Being proactive now can save you majorly in the future.

Next month:  Assessing salaries.

Achieving Customer Service Gold

With the Olympic Games fast approaching, our attention will soon turn toward watching the world’s best athletes compete.  Those who are the best-of-the-best will walk away with gold medals.  It’s truly impressive to watch performance at such an elite level.  So much time and preparation has gone into a just few moments of competition.  We respect the effort and marvel at the results.  Shouldn’t we be striving for the same level of performance in our businesses?  Don’t our members deserve such a diligent effort and commitment to excellence? 

As you consider your commitment to providing an exceptional member experience, here are five factors to consider.

Have a plan.

Think through how you deal with the business’s most common issues.  While we don’t ever want to be in the habit of merely quoting policy to a member, we do need the framework of policy to serve as a guide for decision making.  It creates an environment of consistency and consistency is easier to scale and replicate—thus enabling our business to grow. We should also carefully consider each policy to ensure it makes sense for our specific business model and isn’t simply the fitness industry norm.

Clearly worded membership and service agreements.

While we know that most states mandate specific language and guidelines for fitness contracts, we’re not required to word our entire agreement in foggy legalese.  Why not simplify the terms?  Strip down the superfluous text?  Make it easier for our members to understand?  If we’re asking a member to jump through a series of hoops to manage their relationship with us, we should at least clearly lay out those hoops.

Have a system.

A sure fire way to botch the handling of a member’s account is poor communication.  What was discussed?  When?  With whom?   Our system should be easy to use (or it won’t be used) and should ideally allow for follow-up and interaction directly within the system.  When it comes to account changes, clearly notating a member’s profile is a key first step to ensuring that what was “promised” is delivered.  Member history should be accessible to all necessary staff members. 

ClubReady has a very simple, yet detailed member tracking and interfacing platform embedded directly within their club management software.  The easy to use interface, WorkIt,  allows for the addition of client notes, the ability to send out a text or email (which automatically saves as a copy to the member’s notes), notate a phone conversations, add a member alert to ensure all team members are aware of important details, and set follow-up tasks assigned to specific team members.  It also allows for easy contact reporting so management can monitor and direct all interactions.  Speaking of reporting…

What’s measured is improved.

One of the biggest mistakes we see owners making is simply not knowing the volume or causes of member issues in their clubs.  How do we get better if we have no knowledge of what’s wrong?

A good analysis starts with identifying what should be measured.  What’s import for our business?    What’s our retention goal?  How many cancellations are we seeing each month?  What is causing them?  Are members able to easily contact us and get a resolution to their issues in an acceptable time frame?  What is an acceptable resolution time?   Targets should be established, an information collection protocol developed, and reporting templates produced.  From there, let’s institute a consistent schedule to review, analyze, and improve.  For example:

Joe’s monthly cancellation target is less than 25% of the new member packages sold. So, if he sells 100 new memberships, he hopes to only see a fall off of 25 or less from his total member count.  Last month he noticed that his percentage of cancellations had climbed to nearly 50%.  He pulled the cancellation roster from his club management software to review.  He was happy to see that his staff had properly tagged each cancellation with a cancellation type.  However, he was concerned to learn that a significant number of cancellations stemmed from members moving to a defaulted status because they hadn’t made payment in 90 days.  From there he accessed his past due members report and reviewed outbound contacts made by his staff.  It was uncovered that they weren’t hitting their outreach target for billing issue resolution.  He scheduled a meeting with his GM to address this.  During the meeting, it was determined that the lack of contact stemmed from an oversight during a staffing change.  Outbound contact had once been the job of the afternoon front desk rep.  When she left and was replaced, the task had never been reassigned.  Joe and his GM established a new protocol of weekly contact auditing, assigned the task to the new front desk rep and reassessed the results until the process was back on track.

In our example, Joe started his review thinking only about cancellations and soon realized that it was unresolved payment issues causing his current cancellation spike.   Proper reporting is like a treasure map.  It guides us to the important areas for exploration and can uncover a wealth of information.  Sometimes that information isn’t positive, but knowledge is always a good thing.  And if we keep looking, we’re bound to find the path to gold!

Look in the mirror first.

Finally, we should always hold our facilities, team and services up to the light first, before addressing a member’s concern.  Have we delivered what was promised?  Are we being fair?  Sometimes members’ reasons for leaving are very valid.  It’s easy to employ a strict letter of the contract approach to how we deal with these concerns, but I’d argue it’s far less likely to have positive effect in the long run.  Let’s listen to complaints focused on resolution and improvement.  The value that exists in a lost member is learning how to prevent it from becoming lost members

What Do the New FLSA Exempt Pay Laws Mean for Fitness Business Owners?

Just when you thought that navigating the landscape of wage and hour laws was challenging enough, another mountain has cropped up on the horizon!  On May 18th, the Department of Labor announced major changes to the standard salary level for employees classified as exempt.  Under this new ruling, the salary threshold increases to $913/week ($47,476 per year) from $455/week ($23,660 per year). It was also announced that the DOL intends to automatically update the threshold every three years to adjust it to scale with exempt wage earners in the 40th percentile of the region with the poorest salary demographics (currently the south). 

As the new law goes into effect on December 1, 2016, business owners have some time to decide what adjustments should be made to their pay policies and staff structuring in order to comply.  Employers can:

  • Raise exempt employees’ salaries above the new threshold.
  • Switch exempt employees to hourly and limit their hours to 40 per week.
  • Pay time-and-a-half (double time in some states) for overtime work.
  • Some combination of the above.

What does this mean for the fitness industry?  The major impact will be to roles we’ve typically classified (in most cases correctly) as exempt, yet have consistently paid low base wages:  General Managers, Assistant Managers, and Fitness Directors.  It’s important to note that any commission or bonus pay may only account for up to 10% of the employee’s pay if it’s non-discretionary.  Non-discretionary incentives are tied to published goals and stipulations such as sales goals and profit targets.  Discretionary incentives, ones which are awarded on a purely subjective basis, may not be included.  In all likelihood, our industry will handle the change by moving most team members to hourly pay and requiring them to track work hours.  Here are a few key guidelines to consider as you make this shift:

Policy Changes

Make sure your employees are notified of the change in the method in which you intend to pay them and do so in writing.  Ideally, you have an employee handbook which addresses pay policies and practices.  Ensure all team members get an updated copy of this policy.   Be sure to clearly outline your policies for time keeping and scheduling.   Any change in the rate of pay should be documented and require employee signature. Finally, address overtime approval requirements and include a statement of how overtime will be paid.   

Overtime Payment

Speaking of overtime pay, it’s vitally important that any and all overtime worked is promptly (on the appropriate pay date) and properly paid.  If an employee is paid an hourly rate only and has no other method of increasing their earnings (commissions or bonuses), the calculation is simple; any hours worked in excess of 40 should be paid at 1.5x their hourly rate.  However, if, as with most of the positions mentioned at the beginning of this article, an employee earns commission and bonus, this pay must also be taken into consideration to determine an employee’s regular rate and to calculate overtime pay.  Example:  An employee has an hourly rate of $12/hour.  He also earns commissions totaling $250.   He works 46 hours for the week.

46 hours worked x $12/hour + $250 (commissions) = $802 (total ST compensation)

$802/46 hours worked = $17.43 (regular rate) 

$17.43 x ½ = $8.72 (half-time premium). 

$17.43 (regular rate) + $8.72 (half-time premium) = $26.15 (overtime rate)

Our employee’s pay for the week would be:

40 (straight time hours) x $17.43 (regular rate) = $697.20 (straight time earnings)

6 (overtime hours) x $26.15 (overtime rate) = $156.89 (overtime earnings)

Total earnings for the week:  $854.08

As you can see, calculating overtime pay when other incentives are involved can be somewhat tricky and labor intensive.  It’s important to develop a system to ensure this is done correctly. 

NOTE:  Some states have additional requirements for the payment of overtime wages.  For example, CA requires an overtime premium matching the employee’s regular rate (2x) and tracks overtime for the week (40 hours) and the day (8 hours).  It’s recommended that you consult with an attorney or HR professional who is well-versed in your state’s wage and hour laws.

Time Keeping Software

The most vital aspect of ensuring that you are paying accurately on all hours worked is your time keeping software.  The system should be easy to set-up and implement, provide for quick clock- in/out, and track all changes made to the time record with notes.  Not only is this system going to allow for painless payroll entry, but it will also be key to your defense should a wage and hour claim be brought against you.  As the employer, the burden of proof to provide documentation of all hours worked falls on you. 

ClubReady has a great time keeping system embedded within their club management software.  Along with tracking training sessions logged, it also allows for the tracking of all hours worked.  This is important for both the FLSA changes mentioned above, but also the swing we are seeing in most states requiring gyms to pay trainers based on hours worked vs. sessions trained (see recent cases against Gold’s Gym (TX), Equinox, and Life Time Fitness).  The system can be set-up to allow the time clock to function in parallel with the same method used for club check-in or training session tracking:  key tag, finger print, or PIN number.  Supervisors may make adjustments and add notation documenting the reason for any adjustments in the system (very important for pay disputes).  The time clock also displays as a widget on the employee’s dashboard so they can easily keep track of their current status and hours worked for the week.

Major changes in wage and hour laws are challenging to implement and can be majorly impactful on your businesses.  What’s most important is that you make thoughtful decisions on pay policy development and implementation.  Planning makes perfect.  Some time spent now on system selection and development will save you majorly later. 

How the Fair Labor Standards Act (FLSA) Affects Health Clubs

On May 18, 2016, the U.S. Department of Labor (U.S. DOL) issued its “Final Rule,” which expands the number of people eligible to receive overtime pay under the Fair Labor Standards Act (FLSA). The change will take effect on December 1, 2017. As a result, club owners should begin to assess now how this new law could affect their business

ClubReady and Gym HQ General Counsel, Jonathan Hill recently sat down with Club Solutions magazine to comment on the recent changes to the FLSA and it's likely impact on the fitness industry.  Check of the full article here.

Document! Document! Document!

If I have one phrase I utter more often than any other while navigating our wonderful business of fitness, it may well be some variation of:  “Is it documented?”    I get it; no one wants to take the time to write it all out.  It's time consuming and you could actually be 'doing' it rather than writing it down.  But here’s the thing, it’s absolutely key to your long-term growth and success that anything essential to your business’ operations or health be in writing.   To get you started on your adventure into the world of proper record keeping, here are three areas in your fitness business where I consider proper documentation to be of paramount importance:

1.       Policies and Procedures.  Think of your Policy and Procedures Manual and/or your Employee Handbook like the playbook for your business.  They lay out expectations for team members, explain the business objectives behind those expectations, and provide the framework for how to carry them out.   Sitting down and committing your business essentials to writing is important for several reasons:

·         It causes you to really “think through” how you’re carrying out the day-to-day.  Do your policies make sense?  Are they easy to adhere to, manage, and, in some instances, measure?  Are they legally compliant at both the federal and state level? 

·         It memorializes when a policy was put in place.  As yours manuals are updated, the latest versions should be time stamped.  This ensures that should you need to follow-up on when a new initiative went live, you can do so easily.  Example:  Knowing when a PTO policy went into effect and having it clearly detailed in writing, makes it easy to explain when a team member questions their balance.

·         It gets everyone on the same page, literally.  A written policy eliminates mistakes and misunderstandings.  It creates consistency among different supervisors and as the members of your team change.

2.       Employee Issues.  Inevitably issues with team members will arise.  Hopefully,  you have a solid Employee Handbook in place which addresses how to deal with these issues.  Most businesses strive for a system of progressive discipline.  This involves a series of procedures for dealing with shortcomings in a team member’s performance.  A good policy should provide for a method of documenting all employee dealings relating to performance (both positive and negative) and require signatures where appropriate.  Clear and consistent documentation ensures the employee understands the reasons for your actions and what your expectations are of them moving forward.  If the time comes when employment must end, it also provides a history should a claim arise (unemployment benefits, discrimination, wrongful termination, etc.).  Side note:   Many managers equate the word discipline with punishment versus thinking of it as the process of helping an employee understand their role and how to perform more effectively or efficiently.    If meetings with a supervisor involving documentation are always viewed as negative and seen as a threat, that’s exactly what they end up being and the policy loses any potential positive impact.  You end up with a too little, too late situation because even you avoid discussing employee issues!

3.       Member Relations.  Did your front desk person have a conversation with a member about freezing their account?  Where is that conversation notated so other team members can see it?  Hopefully your club management software offers basic CRM (customer relationship management) functionality.  Use it!  It’s extremely important that you’re tracking member interactions through clear notes on accounts.  This helps to provide the member with consistency in experience and prevents them from having to relay the same information multiple times.  It also eliminates the “he said, she said” trap in which we sometimes find ourselves by making it easy to look back on what was discussed during previous member interactions.  Bonus:  If your software allows for follow-up or ticketing, it makes it much easier to schedule any necessary tasks concerning members’ needs with your management team.   A system of proper notation and follow-up ensures nothing falls through the cracks.

 

So roll up your sleeves and grab your pen!  With some upfront effort to create clear policies, the discipline to adhere to those policies, and the dedication to follow through with consistent documentation, you set your business up for success.  

10 Tax Time Tips for Your Fitness Business

With April 15th fast approaching, now is a great time to start the prep work for filing your business taxes…for 2016.  If you’ve waited until now to start preparing for your 2015 filing, you’ve already missed the proverbial buck.  As with all other aspects of your business, organization, proper planning, and consistency are hugely important in making tax season as painless as possible.  Follow the tips below to ensure that next year’s filing is smooth sailing.

1.       Prepare early.  Not surprisingly, this ranks top on our list.  Procrastination will not serve you well when it comes to ensuring the documentation needed for your taxes are in order.  Late filings and amendments can cost time and money.  When you fail to file a Form 1120 (due March 15th for corporations and April 15th for LLCs), the corporation is charged a monthly penalty that's equal to 5 percent of any income tax that remains unpaid.  In addition to the penalties for failing to file, the IRS can charge the corporation a separate penalty for paying taxes after the filing deadline. This penalty will increase the amount of tax that the corporation owes by one-half of a percent for each month it remains unpaid.   

2.       Be consistent.  Ensure that your accounting and bookkeeping practices are accurate and occurring on a schedule.  Make sure your expenses are reconciled, tracked and supported with receipts.  At a minimum, spend time at least monthly to review your accounts—receivable, payable, credit card transactions, cash flow, etc.  You also want to ensure that all expenses and revenues are booked according to the same system each month.  Keep a depreciation schedule for all major asset purchases.  Make sure the schedule includes:  date put into service, original cost, accumulated depreciation up to this tax year, business use percentage (if applicable), recovery period of the asset.  You’ll also need any Section 170 Expense taken in the first year of service.

3.       Make sure you have W9s on file.  If you’re paying anyone as an independent contractor and their total payment exceeds $600 (or the payment is for legal services),  you’ll need to provide them with form 1099-MISC by January 31st.

4.       Take advantage of your liabilities.  If you’re on an accrual basis, make sure you accrue liabilities that occurred within the fiscal year to the take advantage of the tax deduction.  If you’re on a cash basis, make sure you stroke a check for any outstanding liabilities prior to year-end to reduce your profit.

5.       Be mindful of state apportionment.  Have locations in multiple states?  Then you need to prepare for state apportionment.  Make sure you’re dividing your revenue, expenses, and payroll appropriately throughout the year.  

6.       Don’t forget about the ACA reporting requirements.  Do you understand what your business’ requirements are under the Affordable Care Act (ACA)?  Reporting was due to employees in January.  The filing due to the IRS has been extended from March 31st to June 30th (if filing electronically) and from February 29th to May 31st (if not filing electronically).  Penalties are in place this year for failure to report or provide adequate coverage.  Make sure you look into the Small Business Health Care Tax Credit which is in place to help small businesses with low-  and moderate-income workers afford the cost of coverage.

7.       Avoid payroll mistakes.  Payroll tax compliance is something that many small business owners struggle with. The financial consequences of getting it wrong aren’t pleasant either. Statistics show that approximately 40 percent of small businesses incur an average of $845 per year in IRS penalties (not to mention issues with the states in which they operate). To make sure that your payroll taxes are deposited correctly, consider outsourcing your payroll function. The benefits often far outweigh the fees.

8.       Ensure your SUI rates are accurate.  Each year, the state(s) mail out a new unemployment experience rating for the coming year.  Make sure you update yours with your payroll team.  Failure to do so can result in under paying and receiving a nice bill, with interest, or overpaying and jumping through the hoops required to get a refund back from the state.

9.       It isn’t only the IRS.  The IRS is only a piece of the tax puzzle.  You’ll want to be mindful of other tax obligations like property, payroll, local taxes, excise tax, self-employment taxes, etc.  Failure to meet deadlines can result in some serious fees. 

10.   If you’re not prepared, file an extension.  If you haven’t heeded our advice and find yourself staring down a rapidly approaching deadline, probably the easiest way to avoid late-filing penalties is to file Form 7004 to obtain an extension of time to file. If the 7004 is filed by the original tax return filing deadline, you'll have an additional six months to file the Form 1120. However, the extension doesn't give you more time to pay the tax you owe, so it's best to estimate how much tax is owed and pay as much of it as possible by the original filing deadline to minimize late-payment penalties.

 

The beginning of the year is a great time to do a vital statistics check on your business.  Many of the practices required to satisfy Uncle Sam will benefit the overall health of your business.  So consider each of these pointers as time well spent.  Happy tax planning! 

Are You Staying Compliant With the New 'Ban the Box' Laws?

There has been a lot of chatter recently around the subject of inquiring about a candidate's criminal history during the interview process.  Several states have passed legislation mandating that employer's "ban the box" and reserve inquires concerning criminal history to further on in the hiring process; generally after a conditional offer for employment (subject to the return of a background check).  We'll be publishing some new HR best practices centered around helping you navigate this new legal landscape, but in the meantime, here's an article SHRM recently published:

"For more than two decades, civil rights groups across the country, in an effort to improve the job prospects for ex-offenders, have lobbied local and state governments to “ban the box”—a reference to the removal from employment applications of the box to be checked if the applicant has a criminal record. To this end, New York’s three largest cities—Buffalo, New York City and Rochester—have all enacted legislation prohibiting employers from asking applicants about their past criminal record on an employment application. Generally, employers subject to such laws are only permitted to ask about an applicant’s criminal record further on in the hiring process such as, for the New York City law, after a conditional offer of employment has been made.

If your company operates in any of these three cities and your application still seeks information about an applicant’s prior criminal record, you may want to sit up and take notice. The “ban the box” movement recently made headlines by virtue of two public settlements orchestrated by Eric T. Schneiderman, Esq., the New York state attorney general, and two national retail chains, Big Lots Stores and Marshalls, regarding those companies’ employment applications.

Despite the well-publicized implementation of such laws, an investigation by the Civil Rights Bureau of the Office of the Attorney General found that both Big Lots Stores and Marshalls distributed employment applications that made inquiries into the criminal history of prospective applicants seeking employment at their Buffalo stores. “Obtaining meaningful employment is often the most crucial step toward reducing the chances of recidivism among formerly incarcerated persons,” said Schneiderman. “That is why my office is committed to breaking down barriers that impede rehabilitation, especially those that prevent fair access to employment.”

The negotiated conditions of the settlements with these companies are significant. For example, Big Lots Stores agreed to pay a monetary penalty of $100,000 and Marshalls agreed to pay $95,000. In addition, both companies agreed to take steps to ensure that their non-compliant employment application will not be made available to prospective applicants. Finally, the retailers agreed to make affirmative efforts to recruit applicants with a criminal background through an organization which specializes in training formerly incarcerated individuals. Significantly, while only prohibited in certain locations, both companies have further agreed to remove criminal record inquiries from employment applications used in all of their New York state stores.

Given these stiff penalties, employers operating in Buffalo, New York City and Rochester should learn from the examples being made of such companies and ensure that they do not wind up on the wrong side of an enforcement proceeding or lawsuit. Accordingly, companies subject to such laws should take this opportunity to review their employment applications, as well as their interviewing and hiring policies, practices and procedures, to ensure compliance with these local laws that 'ban the box'."

Content written by:  Christopher G. Gegwich and Alexander Gallin and republished by SHRM

Christopher G. Gegwich and Alexander Gallin are attorneys in the Long Island, N.Y., office of Nixon Peabody. Republished with permission. © 2016 Nixon Peabody. All rights reserved. 


Catch Up on New State Labor Laws

SHRM just published a nice brief on some of the major state labor law changes hitting in 2016 (so far):

Paid Sick Leave

Several state and local paid sick leave laws passed in 2015, and more are likely in 2016.

In California, a state law mandating paid sick leave went into effect on July 1, 2015. Employees, including part-time and temporary employees, will earn at least one hour of paid leave for every 30 hours worked. An employer may limit the amount of paid sick leave an employee can use in one year to 24 hours or three days.

The city of Emeryville, Calif., also passed an ordinance in 2015 that requires employers to provide paid sick leave to workers.

Effective July 15, 2015, Massachusetts employers with more than 10 employees must provide one hour of guaranteed sick leave for every 30 hours worked, not to exceed 40 hours per year. Employees can use this time if they are ill, injured, or need to attend to a medical condition for themselves, a spouse, a child, or a parent. Employers with 10 or fewer employees are not required to provide paid sick leave, but they must provide unpaid sick leave under the same circumstances.

In Oregon, a state law mandating paid sick leave will go into effect on Jan. 1, 2016. This new law will require most employers with 10 employees or more to provide employees with one hour of paid sick leave for every 30 hours worked up to 40 hours a year. It will also require employers with fewer than 10 employees to provide up to 40 hours a year of unpaid sick leave.

In 2015, city councils adopted paid-sick-day laws in Tacoma, Wash.; Philadelphia, Pa.; and Bloomfield, N.J.  In July, Montgomery County, Md., became the first county to establish a paid-sick-day standard.

Accommodation of Pregnant Workers

Although pregnant workers are protected by federal law, some states have provided their own rules for the accommodation of pregnancy and pregnancy related-conditions. This too can be expected to continue into 2016.

Effective March 3, 2015, in the District of Columbia, pregnant workers, workers recovering from childbirth, and workers with related medical conditions (including lactation), must receive reasonable accommodations unless the accommodations impose an undue hardship on the business.

Nebraska’s law went into effect in September 2015, and requires employers with 15 or more employees to provide reasonable accommodations to workers who are pregnant, have given birth or who have a related medical condition unless the accommodations would impose an undue hardship on the employer.

In North Dakota, effective Aug. 1, 2015, employers must make reasonable accommodations for a pregnant worker who is otherwise qualified for the job, unless the accommodations would disrupt or interfere with the employer’s normal business operations, threaten an individual’s health or safety, contradict a business necessity of the employer or impose an undue hardship on the employer.

And, in Rhode Island, effective June 25, 2015,  employers with four or more employees must provide reasonable accommodations to pregnant workers, workers who have given birth and workers with related medical conditions (including the need to express breast milk) if they request them, unless the accommodations would impose an undue hardship on the business. The statute lists possible reasonable accommodations such as breaks, seating and a non-bathroom location to express breast milk.

Social Media Privacy

Another topic to watch in 2016 is the growing number of social media laws.

In 2015, Connecticut, Delaware, Maine, Montana, Tennessee and Virginia became the latest states to enact legislation banning employer access to workers’ social media accounts. These laws prohibit an employer from requiring an employee or applicant to provide it with a username and password or to access a personal online account. At least 17 states passed similar laws in previous years (Arkansas, California, Colorado, Illinois, Louisiana, Maryland, Michigan, Nevada, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, Utah, Washington and Wisconsin).

Wage Transparency

Connecticut is the most recent state to pass an anti-wage secrecy measure. On July 2, 2015, Gov. Dannel P. Malloy signed into law Public Act No. 15-196, entitled An Act Concerning Pay Equity and Fairness. The act went into effect upon its signing, and limits an employer’s ability to discourage employees from having open discussions about their wages.

On March 11, 2015, the District of Columbia's Wage Transparency Act of 2014 took effect. This act makes it unlawful for employers to prohibit employees from discussing their wages, and also prohibits employer retaliation against those who do. The act requires the mayor to assess civil fines against offending employers in progressively higher amounts for repeated violations. Other states with anti-pay secrecy laws include California, Colorado, Illinois, Louisiana, Maine, Michigan, Minnesota, New Hampshire, New Jersey, Oregon and Vermont.

More laws of this kind can be expected in 2016.

Ban the Box Laws

In 2015, New Jersey and Oregon passed “ban-the-box” legislation, which requires private employers to remove the conviction history question on the job application and delay the background check inquiry until later in the hiring.

The two states join Hawaii, Illinois, Massachusetts, Minnesota and Rhode Island and Washington, D.C, which had previously passed such provisions. Expect more legislation on this topic in the coming year.

ACA Reporting Requirements for 2016

If you’re panicking over the reports the Affordable Care Act (ACA) requires your business to produce this month, you’re not alone.  We’ve received numerous questions over the past few months from clients and blog readers.  In an effort to make the process easier, we’ve prepared the handy guide below.

How do I know what size employer I fall under?

For some, it’s very clear that you’re a small business.  You have a handful of team members (both full and part-time) at any given point in the year.  For others, it can get a bit cloudy.  Here’s what the ACA says about your business size: 

Small employers are those with fewer than 50 FTEs.

Applicable large employers are those with at least 50 FTEs.

First, you’ll need to determine how many full-time equivalent (FTE) employees you have.  Start by counting all full-time (30+ hours per week for at least 120 days) employees you had at the height of your employee count for the year (if your number of staff members/payroll has fluctuated).  Next, calculate your FTE employees; employees who worked less than 30 hours per week for at least 120 days of the year.  Take the payroll data from several payrolls throughout the year and do the following:   Add up all part-time employee hours (for those working or expected to work 120 or more days).  Divide it by 30.  Add that number to your full-time count, and you have your FTE number.  Look at several payrolls and go with the highest.  The IRS has a calculator to help with this:  https://www.healthcare.gov/shop-calculators-fte/

Which reports do I need to send?

Take your FTE count and your knowledge of the medical coverage your business currently offers and determine which reporting group you fall into:

Small employers (those with fewer than 50 FTEs) with a self-insured health plan must complete and file Forms 1095-B (Health Coverage) and 1094-B (accompanying transmittal form) with the IRS, as well as provide employees—specifically, those who are taxpayers responsible for showing they had health coverage during the year—with a copy of Form 1095-B.

Form 1095-B is used to report certain information to the IRS and to taxpayers about individuals who are covered by minimal essential coverage and therefore not liable for the individual shared responsibility payment.

The 1095-Bs will be provided by insurance companies for fully insured plans.

Applicable large employers (ALEs) with at least 50 FTEs must complete and file Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) and 1094-C (accompanying transmittal form), and provide each full-time employee with a copy of Form 1095-C.

Small employers with fewer than 50 FTEs also will be required to file Forms 1095-C and 1094-C if they are members of a controlled or affiliated service group that collectively has at least 50 FTEs.  This means if you have several different legal entities all operating under one brand and one management umbrella, you’ll need to count all of these legal entities’ FTEs together for reporting and coverage requirement purposes.

When are the reports due?

Reports due to the employees must be provided by January 31st.  Reports to the IRS are due by February 29th.

While the coverage requirements and penalties for 2015 only applied to applicable large employers (ALEs) with at least 100 FTEs, reporting is required for those with at least 50.  And in 2016, employers with 50 or more FTEs are subject to the employer shared responsibility provisions. 

*The employer shared responsibility provisions—also known as the employer coverage mandate—are the employer penalty provisions under the ACA. Penalties apply if an employer fails to offer minimum essential coverage that is affordable and provides minimum value to full-time employees working at least 30 hours per week

What else do I need to do to prepare?

Before you start working on your required forms, here’s one last recommendation, get your employees prepared.  Since this is the first year they’ll be required to report coverage with their tax filings, chances are they’re not prepared.  A little communication can go a long way. 

Three primary messages to convey to your employees:

1. Here’s what to expect. You will receive Form 1095-C for the first time in January 2016.

2. Why you should care. You will need information on the form to prepare your 2015 taxes.

3. Be on the lookout. Watch for the form in your mailbox in January or for it to be delivered by hand at the worksite.



A Forward-Thinking Back Office

While cleaning out my office (I always like to walk into a new year with a fresh, clean space!), I came across this quote I'd flagged in the June 2015 edition of IHRSA's Club Business International.  I think it speaks volumes about why Gym HQ provides such a vital service to the fitness industry.  We're happy to have made a positive impact for our great family of clubs and owners in 2015 and we're looking forward to all of the change and growth 2016 will bring.

"A club's back office may be out of sight, but it should never be out of mind.  In many ways, it's the brain, heart, and lungs that keep the member experience alive. It's responsible for, among other things, accounting, accounts payable, accounts receivable, financial support, record maintenance, data administration, human resources, regulatory compliance, and the management of member accounts.  And it contends with all of the challenges these raise."

Need help?  Why not make Gym HQ your HQ in 2016?

 


Your Back Office Should Be Like a Healthy Diet

How many times have we seen that member or client who comes to the club religiously but still can't seem to make any progress?  There they are every day, pounding the weights and killing it on the treadmill, and yet, they look exactly the same.  No weight loss, no change to their physique, no discernible progress. All of my personal trainers out there are already screaming at the screen, "It's their diet!"  What's the saying?  "Abs are made in the kitchen."  And it's true, you can work your tail off (or attempt to) in the gym day in and day out, but if your nutrition isn't dialed in, in the long-run, you're doomed.

Now, think of your back-office services exactly like your diet.  Much like a diet they don't have to be very great to get you by.  You can have an under-qualified team member or members handling important functions like accounting and HR, and things will get done, eventually, and maybe not correctly, but they will get done.  A diet of cheeseburgers will keep you alive-- at least for a while.  But how much better does your body run when you feed it healthy food from all of the necessary food groups?  How much healthier is it?  How much better is it able to perform?

What about if you just have a diet that provides  all of the necessary daily protein, but fails to ensure you're getting all of your veggies?  That's like having areas of you back-office under control while others flail in the wind.  Maybe the guy doing your books is top notch, but your customer service team leaves something to be desired.  Points for hitting a home run in one area, but that's still not a recipe for long-term growth and success. 

An unbalanced, unhealthy diet can leave us lethargic and lacking energy.  So what do we do?  Caffeine!  Except in the fitness business our caffeine is the constant sales special push to get the cash up and plug any holes in our monthly revenues.  Much like caffeine, a sales push should give you just that, a little push.  It's not intended to create the entire momentum needed to drive a business forward.

Broccoli, brown rice and a grilled chicken breast are hardly as easy, delicious, or cheap as the dollar menu at the drive-thru, but they're a much better choice in the long run.  Look at what you're asking of your business and how you're fueling it to perform.  Are your back-office services healthy?  Can they help support your business goals?  Are they balanced or are key areas lacking?  Are they simply getting the job done and getting you to the next sales cycle?  Or are they solid and able to support further growth and progress?

Consider what you're fueling.  Much like a professional athlete requires superior nutrition compared to the novice, a professional fitness business requires professional back-office staff and services to meet its true potential. 

Finally, just like a major modification to your diet can seem impossible at first, business office changes and improvements can seem daunting.  It really is just about taking an assessment, deciding to make a change for the positive, and staying the course once you hit your stride.  It only takes that first step.

If you feel like you're making all of the effort on the front-end, but are missing the results on the back-end, send me an email.  I'd be happy to take a look at your set-up and see what we can do to help.  mknowles@gymhq.club.

5 Ways to Recognize Your Team Members

If the customer is king, then I suppose the employee should be queen.  Amazingly though, many companies view their staff like expendable cogs in the business machine--if one cog fails, simply toss it and plug in another. According to Dr. Bob Nelson, a recognition expert, 58 percent of workers report that they seldom, if ever, receive a "thank you".  Crazy, because our teams are really what shape our businesses!  It takes time and effort (which equals MONEY) to restaff positions.  To use a worn out metaphor, wouldn't that time and effort be better spent getting the right people on the bus and making sure we keep them on the bus? The magic moment that management realizes that their success is directly tied to the efforts of their team, we all win-- owners, managers, staff members, and customers!

Here are 5 ways to ensure your team knows how much they are valued:

  1. Feedback:  Employees want to how they're doing.  The only one who can really  tell them that is you!  Check-in on a regular basis.  Ask them how things are going and whether they have any questions or need help with their work.  Provide them with feedback on their performance.  Express your appreciation for their efforts and  their successes.  Don't assume that a team member knows he's appreciated.  BONUS:  Recognize your staff in front of your customers when possible.  A business that is aware enough to recognize its staff is more likely to treat its customers well too.
  2. Take time for fun.  Plan a team breakfast/lunch, a cocktail hour, games, or a team-building outing.  Taking the time to chat with your employees when they aren't knee deep in their job is well worth the effort and cost.  Without the distractions of the their day-to-day work load (and yours) getting in the way, people open up.  You can learn a lot about your team and your business.  Plus, everyone likes a free lunch!
  3. Involve them.  Involving employees--especially in decisions that affect them-- shows that you respect their decisions and input.  Employees are generally closest to work processes and customers and are often in the best position to see the solution when problems arise. 
  4. Increased responsibility.  New opportunities to perform, learn, and grow are very motivating.  Few employees are satisfied going nowhere.  Most hope to learn more and be considered for advancement.  Gradually increasing their involvement in business functions shows that you trust and respect them.  You aren't going to motivate your team simply by building a fire under them.  That may provide a short-term push, but working to build a fire within them creates a environment where employees want to work and succeed. 
  5. Reward.  Aside from the given, promotions and raises, there are a myriad of ways to recognize your team on a more regular basis.  Even a traditional employee of the month program is a wonderful way to provide a pat on the back.  Never underestimate the power of a gift card, trophy, or certificate!  Great achievement emails, a hall of fame, an afternoon off, the ways to reward your team are endless.  Check out Inc's List for more ideas. 

What are your favorite ways to recognize your team?  Let me know!

Five Don'ts for Job Seekers

We just completed another hiring cycle for our Customer Service Representative role here at Gym HQ. While I enjoy bringing in new, talented team members, I’ve become increasingly disappointed in some of the things I’ve noticed in the last year or so while recruiting. I can’t even claim to be surprised or shocked at this point as some of these have become the norm, especially for more entry level positions. As LinkedIn is regularly frequented by those seeking new employment opportunities, I thought it may be worthwhile to put together a list of don'ts for job seekers. You may think that many of these are common sense, but trust me; I can assure you they are not!

Take some time to proofread your resume.

Contrary to what’s acceptable in the texting world, the business world still takes the time to use capital letters and punctuation. Your resume is your potential employer’s first opportunity to review your writing skills. If you can’t be bothered to take the time to present a polished resume, it doesn’t speak well of the likelihood of you producing well-written work should you be hired.

Dress for success.

It’s always better to be over-dressed than under-dressed. We have a fairly casual dress code here at our office, but candidates don’t know this ahead of time. Don’t show up to an interview looking like you just breezed in on your way to hang with your friends. This really goes for any job. Even if you’d wear a hard hat and work boots daily once you land the job,  show up to the interview in your best professional attire anyway.

Watch your language.

You may want to polish up your language prior to presenting yourself to your (maybe) future boss. The interview is not the place to use excessive slang or speak in a very relaxed, familiar manner.  And it’s certainly not the place to use derogatory or offensive slurs even in the context of a story. Yes, that really happened—and the word was used not once, but twice over the course of the interview. Also, remain aware of your body language. Sit up straight and present an engaged demeanor.

Know when to stop talking.

Answer the questions asked of you thoughtfully and thoroughly, but keep your responses focused and concise. Don’t launch into long-winded stories meant to support your answers that really only serve to distract from reviewing your skills and qualifications.

Don't overshare.

Any responsible interviewer isn’t going to ask for much in the way of personal information—in fact most of these types of questions are expressly restricted by law. So don’t volunteer your entire life story. An interview isn’t the time to launch into full explanation of your personal finances and responsibilities. The interviewer shouldn’t be able to create a list of all your burdens and problems.

 To end this post with some positivity, here are a few do’s to close us out:

Do take your job hunt seriously. Remember, you’re selling yourself and you want a buyer.

Do follow-up. A well-written thank-you email, complete with references, shows you’re both committed and courteous.

Do respond to the feedback your interviewer is providing—both spoken and unspoken. How are your answers being received? Do you need to change directions, clarify questions, or highlight additional skills that are relevant to the discussion?

Do know something about the position and company! If a position is important to you, show it. Walk in knowing as much about the company as some internet research allows. Be prepared with any questions to which you can’t find answers.

 We’re very pleased with our new class of customer service dynamos! For all of you hiring managers and business owners, here’s to hoping that your next hunt is more diamonds than rough! And for all of you career seekers, good luck.

www.usnews.com.jpg