GYM HQ Client Spotlight: Sky Fitness & Wellbeing

Two years ago, a great team out of Tulsa, Oklahoma joined our family of clients, Sky Fitness & Wellbeing.  From our very first call with owners Jay Wagnon and Travis Wood, we knew we were in for treat!  These guys truly "get" the fitness business.  Each interaction is a pleasure and we look forward to continuing to support their business as it grows.

Sky Fitness & Wellbeing operates two high-end facilities in Tulsa, OK and recently opened a third location in Broken Arrow.  

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OUR MISSION: IT STEERS OUR ENERGY.
At every interaction, on every day, we go out of our way to provide an exceptional experience for every member.
Our mission, vision, and beliefs all share a common focus: to “Wow” our members. We want to surprise, thrill and inspire our members with truly exceptional service and we understand that an exceptional experience is not a goal, it’s an ongoing process.

We sat down with Travis Wood, Vice President of Operations, to learn more.

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

TW:  I started in the fitness industry almost 20 years ago in Fayetteville, AR.  I started as an “opener” at the front desk and worked my way up through a myriad of positions including Member Service Manager, Program Director, and Asst General Manager.  I took over as a General Manager at a facility in Ohio and moved on to Sky in Tulsa to become the Vice President of Operations in 2009.

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

TW:  Obviously, the popularity of different modalities change almost yearly but, the number one thing that I’ve seen change in my career is the sheer amount of knowledge and education that the member is now coming into our facility with.  They are performing exercises that would have been advanced for Private Trainers just a few years ago. 

GHQ: Where did the Sky Fitness brand come from?

TW: As odd as it may sound, Sky was conceived from a combination of standards and frustration.  One of the owners, Jay Wagnon, was working with a franchise and becoming increasingly dissatisfied with the lack of emphasis being put on the member “experience.”  After a few months into the building process, Jay broke from the franchise and instead created a new brand – Sky Fitness & Wellbeing.

GHQ: And what does the Sky brand stand for?  

TW:  While I’m sure that every gym in the industry would like to think their employees make the difference because of their personalities, Sky focuses on being a piece of a bigger puzzle.  We focus on creating what we call an “Exceptional Member Experience.”  This is more of a holistic approach that goes beyond just a friendly smile.  It includes education, the fitness offerings, nutrition, and stress management (Sky’s circle of success) in a setting that is clean and welcoming. 

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

TW: We recently opened our third location in the Tulsa area and have plans to grow more in the near future.  We’ve made the commitment that Sky will grow with an importance on quality, not quantity.  We try to take a little extra time to make sure each location is not only profitable but set in the standards that helped create Sky.  With the competitive landscape becoming more and more crowded, our focus is even more important.

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

TW: The most challenging has been, is, and probably will continue to be the communication and execution of the brand ideals.  It’s easy for us to spout what we’re about, but it’s becoming increasingly difficult to educate the public in this climate of “information overload”.  Price and location are no longer the first two criteria from a prospective member, it’s now reputation and presentation.  Of course, it’s also critical to never take your current membership for granted.  Loyalty to a business is a fading ideal and we are constantly having to challenge ourselves to not accept the status quo and try to reinvent our offerings.

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

TW: Anyone that is in our industry that does not understand the importance of ‘back-office functions’ is basically on a list set for extinction.  From HR to A/P to Payroll, today’s workforce will not tolerate anything less than uber-professionalism.  This is exactly why we decided to partner withGYM HQ.  The idea of keeping up with the ever-changing laws was daunting enough that we knew we needed an outside vendor that specialized in it.  We looked at it like this; Our members expect a level of professionalism, knowledge, and expertise that they couldn’t obtain on their own so why would we differ in regards to our back office needs?

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

TW:  Gems, huh?  We’re still trying to figure it out as we go, but if I were asked what I’ve learned?

1.    This is not a hobby or “passion project”, it’s a business.  If you treat it any other way, you will get eaten alive. 

2.    The minute you stop advancing, you will be passed by someone who is.  New classes, new equipment, and reinvention of your offerings are a day-to-day operation.

3.    Many years ago when I was a novice to this business, I was lucky enough to have some important “nuggets” passed on to me by a trusted friend.  None of these stuck with me more than the following:  “Don’t f#@% with the money.”  Trust is such a vital part of the relationship now, as soon as you create a crack it will explode into a rift.  Be upfront with the dues, have open access to the billing history, and teach everyone on your team not to be scared about a member’s money.  Money is not a “dirty little secret”, it’s the absolute core of any business and avoiding it or treating it like it’s not important is a recipe for disaster.

earn more about Sky Fitness & Wellbeing by visiting their website.

Learn more about GYM HQ and the solutions we can provide for your business by requesting a discovery call info@gymhq.club.

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The Dreaded Chargeback

You’re happily growing your business—signing up new members and growing your draft—when bam, you see a negative amount show up on your remit or merchant statement.  You didn’t provide this member with a refund, so what could this be?  Meet the dreaded and largely misunderstood, chargeback.  Unfortunately, this little hurdle is a part of running a business.  And like most things in business and life, the more you know about it and the process behind it, the better off you’ll be.

Let’s start with the definition for a chargeback.  A quick Google search provided this handy definition. “A demand by a credit-card provider for a retailer to make good the loss on a fraudulent or disputed transaction.” Simply put, it provides the consumer protection and a pathway for recovering charges that they don't believe are justified.  So why do members chargeback payments?  There is a litany of reasons.  Perhaps they don’t believe they are getting the services they were promised.  Maybe they think they’ve properly canceled their contract yet are still being charged.  Possibly they want to cancel and are being held to the terms of their agreement (which you’re validly enforcing). Whatever the reason, when members initiate chargebacks, they’re basically saying, “I’m not going to take responsibility for paying this charge on my card because I don’t think it’s valid.” 

 

 HOW DOES THE CHARGEBACK PROCESS WORK?

The process begins when your member, the cardholder, “files a chargeback” – this means the cardholder notifies his or her bank of a transaction alleged to be in error. The cardholder’s bank (called the “issuing bank”) usually has its own internal process for pre-screening a disputed charge, and, if the issuing bank finds the charge to be valid, the cardholder will be charged. Typically, a processing fee is added. If, however, the issuing bank finds sufficient evidence to support the cardholder’s claim, it will open a file, notify the merchant’s bank of its findings, and temporarily re-credit any disputed funds to the cardholder’s account pending the outcome of the dispute. The merchant bank will then do its own investigation. As part of this process, the merchant bank may collect evidence in support of a disputed charge. Where the merchant bank deems the evidence collected as sufficient, it will present its findings, and the proof, to the issuing bank. If the issuing bank approves the merchant bank’s findings, the cardholder loses, and he or she will be liable for the charges and any associated fees. If, however, the issuing bank disagrees with the merchant bank’s findings, then the cardholder wins, and the recredited amounts will stick – the cardholder will not be liable for the charges.

HOW LONG DOES IT TAKE TO RESOLVE A CHARGEBACK?

Resolution of chargeback disputes can take anywhere from six weeks to six months. We generally see chargeback disputes resolved in about 45 to 60 days. This is a complex process that involves multiple parties; it’s not something that resolves quickly.

IS THERE ANYTHING I CAN DO TO BETTER MY CHANCES OF WINNING?

Glad you asked. Yes, there absolutely is. Keep in mind; the ability to defend yourself in a chargeback dispute will only be as good as the evidence you can present. And gathering that evidence starts at the club level. What you need, more than anything, is documentation which tends to prove the legitimacy of a charge. This could include:

▪ A signed and dated Membership Agreement, or PT Agreement, showing the cardholder as the “Buyer.”

▪ A written notice of cancellation signed and dated by the cardholder, detailing the reasons for cancellation.

▪ A checklist signed and dated by the cardholder showing receipt of legal agreements, or acknowledgment of key provisions.

▪ Email correspondence between you and the cardholder regarding the substance of the disputed transaction.

▪ The cardholder’s check-in history or PT session bookings log.

▪ Any notes in your club management system as it relates to a disputed transaction.

 

In addition, here are a few more best practices you can follow:

▪ The more you can resolve through customer service channels, the less likely it will be that you get hit with chargebacks. Take the time to properly train your customer service teams.

▪ Be thorough and complete in your approach to getting agreements signed. Make sure names are correct, payment terms are correct, and cancellation policies are clearly stated and adequately explained.

▪ Make sure the name on the credit card used by your member or client to pay for services matches the name on the agreement, whether as the “member” or the “buyer.”

▪ If you change your business practices in a way that materially changes your products or services, you should notify all members in advance of the change and, in some cases, get signed agreement modifications or new agreements altogether.

▪ Don’t load pictures (i.e., .jpg) of contracts to the system. What you need is the actual signed agreement as a PDF document.

▪ Please make sure all documentation is legible, and that there are no blank spaces in contracts.

▪ If you’re in a chargeback dispute, please respond to all requests for more information as quickly as possible. A delay could result in a missed deadline and a lost chargeback.

 

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Chargebacks aren’t always fair, and the decisions made by the member’s issuing bank may not be just either.  Remember, even when you do everything right, there is always a chance a member will chargeback a payment and win. In the end, you have to chalk these instances up to the cost of doing business.   The goal is to limit the number of chargebacks you have to fight and when you do face a chargeback, to have a full arsenal of facts and documents at your disposal to fight it. 

Don’t want to handle the chargeback process on your own?  Find help.  Several club management softwares offer solutions that will manage the chargeback process for you.  ClubReady’s fully managed software and billing platform takes this burden off your shoulders and works to fight any disputed charges on your behalf.  To learn more about this feature or the other solutions ClubReady offers, visit www.clubready.com.  In addition to billing assistance, ClubReady can also assist with other core back-office functions such as accounting, payroll, HR, operations, and customer service through their professional service division, GYM HQ.  Learn more about GYM HQ at www.gymhq.club.

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Business Back-Office Trends for 2018

What a difference a year makes.

Last January I put together a list of the top 10 mistakes gym owners make to kick off the new year.  While the vast majority of the items on this list still ring very true (you should review all 10 here), we find ourselves heading into 2018 with several very new areas of focus to add to this list. Here is what’s trending for 2018.

Pay Equity

In 2017 more and more states adopted a ban on previous salary questions on applications and during job interviews.  This trend is likely to continue this year. The intent is to eliminate the influence of gender and race on the wage-setting practices of businesses.  According to the Institute for Women’s Policy Research, “Women are almost half of the workforce. They are the sole or co-breadwinners in half of American families with children. They receive more college and graduate degrees than men. Yet, on average, women continue to earn considerably less than men. In 2015, female full-time, year-round workers made only 80 cents for every dollar earned by men, a gender wage gap of 20 percent.

Women, on average, earn less than men in nearly every single occupation for which there is sufficient earnings data for both men and women to calculate an earnings ratio. In middle-skill occupations, workers in jobs mainly done by women earn only 66 percent of workers in jobs mainly done by men. IWPR’s report on sex and race discrimination in the workplace shows that outright discrimination in pay, hiring, or promotions continues to be a significant feature of working life.”  This disparity in pay is still very prevalent for minorities as well.  It will take the next 44 years for women to reach pay equality, but Hispanic women will have to wait another 215 years and black women another 106 years based on IWPR’s research.

Other trends emerging in this arena are blind hiring and pay transparency initiatives.  Many companies are employing techniques that anonymize or “blind” demographic information for a candidate during the initial screening process. Pay transparency policies are becoming increasingly popular and more businesses (e.g., Google, Whole Foods, and Buffer) have begun to display salary info next to job postings or even lifting the lid on what employees within the company earn. This practice pushes businesses to do a better job explaining how pay rates are set.

Paid Sick & Family Leave

 Several years ago only a few states had mandated paid leave specific to personal time for illness or family care.  This is changing.  Eight states and Washington D.C. currently require paid sick leave (AZ, CA, CT, MA, OR, RI, VT, WA, and DC).   Moreover, five states and DC have paid family leave (CA, NJ, WA, NY, RI, and DC).  2018 will likely bring additional states to the table, and there is growing pressure to refine and implement a national program.  

Employers should be mindful of changes in their state’s requirements and ensure, where required, proper accruals and tracking are in place for their employees.  Failure to comply can come with stiff penalties.

Sexual Harassment Training

 Unless you’ve been under a rock for the last several months, you have undoubtedly already recognized that ensuring a safe and harassment-free work environment for ALL team members is more important than it has ever been.  From a risk management perspective, ensuring you have a comprehensive sexual harassment policy in place is imperative.  However, having a policy in your handbook is not enough.  Training of management and all staff on a consistent basis takes the necessary next step to ensure your team is well-versed in your policy, and your management team is capable of properly tackling issues as they arise.  Policy is all but useless without buy-in from your team and consistent application by your managers.  Not only is this the smart thing to do, any owner worth their salt should see the importance of their team feeling safe and comfortable while performing their job duties.

Privacy

The fitness industry has a somewhat spotty track record and a tendency to lag behind other sectores when it comes to the adoption of technology.   It is incredible to me how many clubs are still utilizing paper agreements!  However, the tide is turning, and even in our industry automation and paperless everything is becoming the norm.  With better tech solutions available, we find ourselves faced with a new dilemma, ensuring our members’ data remains private and safe.  Data security breaches are becoming more commonplace even at seemingly well-protected organizations (see the Equifax debacle), and legislation is rapidly being written to combat this issue and force companies to take additional protective measures.  A recent example of this type legislation is the EU’s General Data Protection Regulation (GDPR) which goes into effect May 2018.  Even if your business is 100% US-based, the GDPR may still affect you.  Say you sell a temporary pass or membership to an EU citizen; you may be held accountable for complying with the GDPR rules.  These include provisions on encryption of data, tighter definitions of consent, and a broader view of what constitutes personal data.  It even codifies a “right to be forgotten” so individuals can ask a business to delete their data. 

While there are still many questions surrounding this new law and its application for US businesses, it is certainly worth a place on this list and your radar for early this year.  As with most regulations, failure to comply carries massive penalties.

The most important thing to remember is that the climate is ever-changing when you own a business.  Having a solid back-office team in place and having access to expects is vitally important.  When the stakes are so high, there is no room for guessing.  Have a safe and prosperous 2018!

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Santa's Naughty List, Fitness Business Edition

Twas the night before Christmas, and all through the gym,

Memberships weren’t selling, and margins were thin.

Year-end deadlines were looming in the cold winter air,

In hopes that miracle revenue soon would appear.

You know the old poem.  And hopefully, the above scenario doesn’t apply to you.  Perhaps you are swimming in the black and 2017 has been a banner year.  Or maybe you’re hoping 2018 will be your year.  Whatever your scenario, we’d be remiss if we didn’t provide you with an annual list for contemplation.  After all, we’re fast approaching the month of months for lists, goals, and positive change.  While we can still hear sleigh bells, let’s close out 2017 with one final, holiday-themed, post.  Here are is our list of five things that will land you on Santa’s naughty list.

Not Paying Your Taxes or Paying Them Late

This one seems like a no-brainer, but you’d be surprised how often we’ve had to intervene to assist an owner in resolving taxes that haven’t been filed or paid.  Most of the time the misstep isn’t willful, but the state and federal governments aren’t very forgiving of even the most innocent of mistakes.  Late payment penalties and interest really rack up!  For example, say you file your federal business taxes three months after the April 15th deadline.  Your penalty would be five percent of the unpaid taxes for each month or part of a month your tax return is late.  If your gym owed taxes of $30,000, your fine would be $4,500!  Remember, each state also has their naughty list fines.

The worst idea for solving for a cash shortage is to delay paying the IRS the employees’ withholding amounts from payroll.  Unfortunately, we’ve seen this before after taking over the back-office for a business.  They were never able to get ahead of the sins of their past and ended up closing their business.  What’s worse than shutting your doors?  Dealing with the IRS for the foreseeable future.  This is a big no-no that can cost an owner their personal assets and often carries criminal sanctions. 

Employee Misclassification, Independent Contractors

We get it; the urge to pay out wages via the much loved and regularly abused 1099 is real.  After all, you save on employer taxes, and there are no pesky state and federal quarterly reports to file.  Heck, you don’t even need to use payroll software!  But 99% of the time this is a great way to find yourself on the wrong side of the IRS and state.  Very, very rarely are you ever legally justified in paying your team anything other than W2 wages.  See our previous article on this.  The fines are stiff and criminal charges can apply.

Employee Misclassification, Exempt vs. Non-Exempt

The guidelines on who may be compensated via salary and not track time are fairly ironclad.  Be careful here, or you’ll find yourself faced with the gift of a wage claim lawsuit.  It’s the gift that keeps on giving (hire a lawyer) and giving (rack up a healthy legal bill) and giving (pay out a huge settlement or judgment).  Read more on employee classification here.

Incurring a Ton of Debt with the Hope of Future Revenue

The tried and true advice to never to count your eggs before they hatch is timeless financial wisdom.

So is the exercise of prudence when it comes to credit cards and lines of credit. While using credit cards responsibly is a normal business practice, it also exposes you to the risk of deep debt if mismanaged.

Because credit cards are so convenient to use, many new business owners fail to see that they're compounding their expenses and incurring interest charges every time they leverage their credit line and don't pay off the full balance each month.  See more big money mistakes like this here.

Trying to Do It All

The greatest mistake business owners make is believing they can do it all by themselves. While you can do almost everything, you end up doing almost everything poorly. Just like any other person, you likely have one or two natural talents. As an entrepreneur, it is your job to identify those talents and focus on them to your fullest. Surround yourself with people who are strong where your talents are weakest. Great companies are built on the foundation of exploiting a few strengths, not on trying to be masters of everything. 

 

Need some help?  What’s on your help wish list this holiday season? Now is the time to make a change for 2018.  GYM HQ can take many necessary, but very time-consuming tasks off your hands next year.  Imagine having payroll, accounting (from all your financial reports to payables), business registrations, HR documentation and compliance, member issue resolution and late membership dues management all taken care of by your new back-office, GYM HQ!  We can be here for all of that and much more—like making sure you don’t make any of the mistakes on this list!  Visit our site today to learn more!

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GYM HQ Gives Thanks

As we move into the holiday season, we find ourselves at a natural place for contemplation.  Thanksgiving asks us to look at our lives and find things for which we’re thankful.  Christmas and Hannukah gather friends and family, allowing us to bask in their company and the cheer of the season.  Right behind that is New Years.  We consider what the new year will bring.  Who will we be?  What can we do better? 

Our careers and businesses play such a role in our lives that surely, they must be mentioned when we’re rattling off our gratitude list or setting goals for next year! I came across the following on Inc.com from 2015.  In it, Janine Popick, CMO for Dasheroo and founder of VerticalResponse, shares five things to be thankful for this holiday season in your business.

If you're running a business you know there are ups and downs - the good, bad and the ugly. Things can be great, and things can be tough, but when it all comes down to it you've got to ask yourself: are you happier running your own business than working for someone else?

If the answer is yes, it's that time of the year to look on the bright side of things and give thanks. There are those out there that aren't as fortunate as you, so it's a good time to reflect on the things that matter, the things that make your business the success it is today.

What's simple? Shoot an email to those that helped put you where you are.

1.    You are alive and kicking - Thank a higher power.

2.    Your business is doing well - Thank your employees.

3.    You've got some great partnerships - Thank your partners. Thank you, Inc.

4.    You've got money in the bank - Thank your investors for believing in you.

5.    You've got revenue coming in your door - Thank your customers.

This year at GYM HQ, our list looks pretty similar to the one above.  It’s been a fun and very busy twelve months! We’ve brought on some great new team members and have watched our veterans develop and take on new roles.   We’ve helped over a thousand business owners run their clubs and studios.  I’d venture that we’ve freed up nearly a million hours of time for owners and managers by tackling necessary, but unpopular, tasks such as reaching out to past due members (almost 180K members to be precise), processing payrolls (so many payrolls), paying vendors, navigating tricky HR challenges (someone make these employees stop texting!), generating financial statements, calming angry members, fixing agreement issues, reviewing KPIs, and tackling business registrations (in almost all 50 states)—just to name a few!  Because of this, these owners were able to focus on why they opened their businesses in the first place, selling membership, changing lives, and growing ($).   We’re honored, with each and every task we accomplish, that they’ve put their trust in us! 

We have big plans for 2018, and we look forward to continuing to support the best in the industry!  With that closing sentiment, we’re off to prepare for tomorrow’s GYM HQ #teamsgiving.  What are you thankful for this year?

 

Need help with payroll, accounting, member services, operations or HR?  Tired of handling it by yourself?  Wondering how you were suddenly expected to manage your own mini corporate office?  We can help.  Give us a shout!  info@gymhq.club or 404-921-2269

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ACA Reporting Requirements for 2018

If you’re like many business owners, your attention span and patience for understanding the current Affordable Care Act (ACA) requirements wore thin long ago.  Will it be repealed? Replaced? What changes will we see? What are you required to do under the current legislation?  The only thing that may seem clear at this point is that nothing is clear!  Meanwhile, the IRS has announced that it is still moving forward with ACA reporting on the 2017 tax year with the 2018 deadlines. During the first week of October 2017, they published final forms and instructions to help employers prepare for reporting on health coverage they offered to their employees in the 2017 year. While Congress hurls daggers back and forth across the aisles, we’re here to arm you with the latest guidelines and reporting requirements so you may prepare for year-end 2017. 

ACA Reporting Deadlines for 2018

FORM 1095-C and FORM 1095-B

Due to employees Wednesday, January 31, 2018

Employers are responsible for furnishing their employees with either Form 1095-C or Form 1095-B by Wednesday, January 31, 2018. Employers are still responsible for filing copies with the IRS by Wednesday, February 28, 2018, if filing by paper or Monday, April 2, 2018, if filing electronically (same as Form 1094-C or Form 1094-B). 

Which do you file?

Companies providing minimum essential coverage to an individual during 2017 must file an information return reporting the coverage. If an employer had at least 50 full-time employees, including full-time equivalent employees (FTEs) on average, the employer is considered an Applicable Large Employer (ALE), is subject to the Employer Shared Responsibility Provisions of the ACA, and is required to file Form 1095-C.  Employers with fewer than 50 FTEs are not subject to the shared responsibility provisions.  If no minimum essential coverage was provided to employees, no reporting is required.  If coverage was provided, Form 1095-B should be filed.

These forms help employees complete their individual tax returns by providing important information regarding their health coverage for the previous calendar year. On Line 61 of individual tax returns, employees must show whether they or their family members had minimum essential coverage.

Employers should report the following:

  • Proof of Minimum Essential Coverage (MEC)
  • Employee ID number
  • Social security numbers of the employee and his/her dependents (not spouse)

FORM 1094-C and FORM 1094-B

Due to the IRS via paper: Wednesday, February 28, 2018

Due to the IRS electronically: April 2, 2018

This form functions as “proof” that Applicable Large Employers (ALEs) provided the coverage they were required to under the Employer Shared Responsibility Mandate. It also functions as the cover sheet used to transmit forms 1095-C or 1095-B to the IRS.

ALEs with more than 250 full-time equivalent employees (FTEs) are required to file electronically.  Those with fewer than 250 may file on paper or electronically.

Employers with less than 50 FTEs who voluntarily provided minimum essential coverage and therefore filed Form 1095-B for all covered employees, should also file Form 1094-B.

FORM 8809 (Extension Request)

Employers who expect to miss the stated deadlines should file for an extension.  To apply for an extension, submit FORM 8809 on or before the due date. 

PENALTIES

Failure to file complete and accurate Form 1094-C or Form 1094-B by the form deadline will result in penalties equal to $250 per form, not to exceed $3 million per year. Failure to file and furnish correct information on Form 1095-C or Form 1095-B could result in a $500 per form penalty for employers.

Since the required reports are somewhat time-consuming to complete manually, consider outsourcing the process to a 3rd party.  GYM HQ utilizes Paychex as our preferred payroll platform for our clients.  They offer ACA reporting as an add-on service.  This is a great way to ensure that reports are accurate and timely.  If you’re preparing the filings in-house, start preparing now. 

  • Ensure you understand how to complete all the required forms.  Instructions can be found on the IRS website.
  • Start determining the reporting you’ll need to pull from your payroll software and benefits website in order to complete the required forms.  Sometimes this involves building out custom reporting. 
  •  Determine if you qualify as an Applicable Large Employer (ALE). See our guide on this.

 

  • Start communications with your staff on what they should expect.  Three primary messages to convey are: what form they’ll receive (Form 1095-C or 1095-B), why they should care (information is needed to file their taxes), and when they should expect to receive this form (by January 31st).
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ACA Requirements: Are You Considered a Large Employer?

As you gear up for year-end and all the important reporting requirement hoops through which you’ll need to jump, now is the perfect time to start getting prepared for compliance in 2018!  Time spent preparing now will make year-end 2018 a breeze. In the meantime, we still have 2017 to consider. Over the next several weeks, we’ll post helpful articles to aid you in the process.  First up, the Affordable Care Act. One of the biggest reporting and compliance demands comes courtesy of the ACA.  As we head into year two of the full reporting requirements, one of the first items you’ll need to determine is if your business qualifies as an Applicable Large Employer (ALE).  Two of the ACA provisions apply only to ALEs:

  • The Employer Shared Responsibility Provisions; and
  • The employer information reporting provisions for offers of minimum essential coverage (MEC).

Your determination as an ALE happens yearly and depends on the average size of your workforce during the prior year.  If you had fewer than 50 full-time employees, including full-time equivalent employees (FTEs), on average, during 2016, you wouldn’t be considered a ALE for the 2017. If you had more than 50 full-time employees, including full-time equivalent employees (FTEs), on average, during 2016, you would be considered a ALE for 2017 and be subject to the Employer Shared Responsibility Provisions and the employer information reporting provision. 

To determine your workforce size for 2016, add your total number of full-time employees (30+ hours per week on average or at least 130 hours for the calendar month) for each month of 2016 to the total number of FTEs for each calendar month of 2016.  Divide this total by 12.  If you were only in business for part of 2016, use those months during the calculation and divide by the total number of months you were in business.

An FTE is a combination of part-time employees who, in combination, are equivalent to a full-time employee. To determine your number of FTEs for a month, combine the number of hours for all non-full-time employees for the month but do not include more than 120 hours per employee. Divide the total by 120.  The resulting number is your FTE count.  It should be noted that FTEs are only relevant in determining if you’re an ALE.  If you’re determined to be an ALE, you DO NOT need to offer MEC to part-time employees. 

Example 1 – Employer is Not an ALE

  • Company X has 40 full-time employees for each calendar month during 2016.
  • Company X also has 15 part-time employees for each calendar month during 2016 each of whom have 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 900 [15 x 60 = 900].
  • Dividing the combined hours of service of the part-time employees by 120 equals 7.5 [900 / 120 = 7.5]. This number, 7.5, represents the number of Company X’s full-time equivalent employees for each month during 2016.
  • Employer X adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
  • Employer X adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 90 [7.5 x 12 = 90].
  • Employer X adds those two numbers together and divides the total by 12, which equals 47.5 [(480 + 90 = 570)/12 = 47.5].
  • Because the result is not a whole number, it is rounded to the next lowest whole number, so 47 is the result.
  • So, although Company X has 55 employees in total [40 full-time and 15 part-time] for each month of 2016, it has 47 full-time employees (including full-time equivalent employees) for purposes of ALE determination.
  • Because 47 is less than 50, Company X is not an ALE for 2017.

Example 2 – Employer is an ALE

  • Company Y has 40 full-time employees for each calendar month during 2016.
  • Company Y also has 20 part-time employees for each calendar month during 2016, each of whom has 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 1,200 [20 x 60 = 1,200].
  • Dividing the combined hours of service of the part-time employees by 120 equals 10 [1,200 / 120 = 10]. This number, 10, represents the number of Company Y’s full-time equivalent employees for each month during 2016.
  • Employer Y adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
  • Employer Y adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 120 [10 x 12 = 120].
  • Employer Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
  • So, although Company Y only has 40 full-time employees, it is an ALE for 2017 due to the hours of service of its full-time equivalent employees.

Employer Aggregation Rules

You should also be mindful of the Employer Aggregation Rules.  If your company is part of a larger organization or a collective of companies with common ownership and/or functioning under the same management, then the combined number of full-time employees and FTEs for the group are considered when determining ALE status.

New Employers

If you’re a new employer and weren’t in business on any day in 2016, you should use the 2017 calendar year to determine if you’re an ALE.  Consider if you reasonably expect to employ or actually have employed at least 50 full-time employees or FTEs.

Failure to Provide Coverage

What if you qualify as an ALE but fail to offer any MEC to at least 95% of full-time employees? 

If you fail to offer MEC to at least 95% of your full-time employees (and their dependents) and at least one full-time employee receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace, you will be required to pay a shared responsibility penalty.  This payment is equal to $2,000 for each full-time employee, with the first 30 employees excluded from the calculation.  This calculation is based on ALL full-time employees (minus 30), including full-time employees who have MEC under your offered plan.  Example: You employ 62 full-time employees.  One employee receives the premium tax credit when purchasing coverage.  Your fine would be 62 total employees- the first 30= 32 employees for which the penalty applies.  32 x  $2000= $64,000. 

If you do offer MEC to at least 95% of your full-time employees (and their dependents), you may still be liable for the second type of employer shared responsibility payment if at least one full-time employee receives the premium tax credit for purchasing coverage through the Marketplace.  This penalty is equal to $3,000 but only for each full-time employee who receives the premium tax credit.

Minimum Essential Coverage

A plan meets the standards for minimum value if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.  Since you likely do not know the household income of your employees, you can rely on affordability safe harbors. These are Form W-2 wages, an employee’s rate of pay, or the federal poverty line.  If you have questions concerning if the coverage you offer meets the MEC standards, consult your insurance broker.

Tax Credits for Small Employers

If you have fewer than 25 full-time employees, including FTEs, you may be eligible for a Small Business Health Care Tax Credit to cover the cost of providing non-mandatory coverage.  Learn more here

Reporting Requirements

All ALEs are required to file Forms 1095-C and 1094-C.  Employers who are not ALEs but chose to provide MEC to full-time employees are required to file Forms 1095-B and 1094-B.  Reporting requirements and deadlines will be discussed in detail in our next article.

 

Interest in learning more about how GYM HQ can help keep you compliant and take some work off of your plate?  Contact us today: info@gymhq.club or 404-921-2269.

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Seven Musts for a Healthy Draft

The monthly draft is the lifeblood of most fitness businesses.  You put in the work to grow your member base and achieve your business model’s goal for recurring revenue.  When you finally attain it, you breathe a little easier.  The draft is there like a big blanket—keeping your business warm and cozy during the coldest nights.  Or, as is generally the case in fitness, the slower sales months of summer.  Something so precious to your business should always be top of mind.  You should nurture it with new sales (obvious), mind your cancellations (still obvious), and ensure you have a good system in place to pick up missed monthly payments (totally obvious, right).  That last piece is where we’ll focus today.  Because, while obvious, chasing past due payments is something that frequently falls by the wayside for many fitness businesses.  Somewhere between driving new sales and running your club, this vital process gets relegated to a task on the front desk staff’s daily task list.  Maybe it gets done, likely it doesn’t. 

A healthy draft requires a systematic approach and constant work.  Our Past Due Communications team here at GYM HQ works with successful ClubReady clients across the country to ensure no member is left behind!  But, if you’re stuck tackling the chore yourself, here are seven key steps to ensuring your hard-earned draft doesn’t slip through the cracks.

An ounce of prevention is worth a pound of cure.

The absolute best way to maintain a healthy draft is to prevent past due payments from ever occurring.  Ensure that good billing information is captured at point of sale.  If your billing system allows for two payment methods (ACH and credit card), obtain both.  Inquire if your system or merchant provider can set you up with an account updater service.  This will help pick up the new card data for many cards (due to changes in card number or expiration date).

Make sure you can reach all your members.

Capture ALL contact information from ALL members at point of saleIn order to clear up a past due balance or update billing information, you must be able to get in touch with the member.  It’s also a great idea to run member rosters from time-to-time and spot check the data.  Is your team filling in real email addresses or na@na.com?  Are they capturing cell numbers?  The more contact points available, the more pathways you have for resolution.

Have a system and schedule for contacts.

How often will you contact your members?  After how many days past due?  For how long?  How will you make contact (email, phone, letter, SMS)?  What will your message be?  In business, everything needs a process and this is no different. To be effective, it should be clearly mapped out and followed consistently. This includes considering which team member(s) is responsible for making the contacts. Dependable, consistent contact provides the best chances of successful resolution.

Trust but verify.

Once you have a system in place, it can’t be “set it and forget it”.  Just like any other task you assign your team, it’s going to require some degree of monitoring and oversight.  How do you know calls are being made?  Insist that your staff notate all contacts on the members’ accounts.  This way you can audit the process anytime you’d like.

More contacts x more ways = more money.

Phone calls are great, but some people respond better to other channels.  Text is a great tool as most of your members always have their cells in hand!  A personalized email explaining the amount due and who to contact to make payment can also be effective.  Make sure your team is utilizing all methods of contact to maximize the impact.

Start early.

Why allow a past due payment to languish for weeks on end?  The longer a balance ages the smaller your chances are at resolving it.  Your process should start outreach within the first few days of the missed payment.  The golden rule in successful billing resolution is contact early and often. 

Consider outsourcing.

Numerous club management software providers offer billing support as an additional service.  This is well worth exploring.  While prices can seem prohibitive at first glance, the amount of draft saved and the missed payments collected generally far outweighs the costs!  Many operators find it challenging to micromanage the process internally.  Staff members aren’t incentivized to succeed and it takes away from new sales.  Outsourcing the process eliminates this headache.  Regardless of who is minding your draft, what’s ultimately important is that these past due accounts are receiving attention.

 

Bonus. Utilize a collections firm for later stage balances.

After 90 to 120 days, the soft approach used by your team or the software/billing company has lost its impact.  Every effective process needs a closed loop.  For past due members, this is determining when to walk away.  There are varying opinions on the use of collections agencies.  Many owners would rather write off the loss than deal with the fallout from heavy handed collectors.  However, the right firm can be effective and help return some of that lost revenue back to your bottom line!  Consider these key factors when selecting an agency:

Skip those who charge a fee when you remove someone from collections.  You should always be able to pull a former member who is causing bad press for your club or who wants to come back into the fold without a fee being associated with it!

Ask your trusted fitness network for references.  The sales guy will always tell you they’re the best.  An owner will be honest about performance and any issues they’ve had with agencies. 

Ensure you can reach an account manager.  Will you have a direct point of contact when you have an urgent question?  Will they be responsive?

It all boils down to people (who’s working the accounts), process (how are they working the accounts), and profit (retain more of that hard-earned revenue).  Want to talk past dues?  Shoot me an email and I’ll be happy to help or connect you to someone else who can!  Tasks others loathe, we love at GYM HQ. 

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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.

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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!