Bing Tracking

Payroll Blog

Payroll Training, Tips, and News

  • What Is a Workweek?

    posted by Kaylee Riley
    Newest Article
  • Do You Offer Health Insurance? Here’s What You Need to Know Now

    The new Healthcare Reform laws have passed, and there are many provisions that employers will need to be aware of.  However, the majority of these changes don’t happen for a couple of years.  Here’s a quick summary of what you need to be aware of now to prepare for existing or upcoming changes in your company sponsored health insurance plan.

    1) Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA)

    The interim final rules were issued back in February, before Healthcare Reform was passed.  The new rules apply to plans with 50 or more employees with health plans that choose to offer mental health and substance use disorder benefits, and plan years beginning on or after July 1, 2010.  The original Mental Health Parity Act of 1996 only required that aggregate annual or lifetime limits for mental health treatments be equal to general medical or surgical benefit limits.  These new rules take it further by requiring health plans to treat mental health and substance treatments the same as general medical benefits in the way of financial requirements (meaning deductibles, coinsurance, out-of-pocket costs, annual and lifetime limits, etc.) and treatment limits (number and duration of treatments, out-of-network coverage, etc.) not just overall lifetime limits.  Plan sponsors should review their plan to confirm that these expanded requirements are met. Click here for more information.

    2) Michelle’s Law and Other State Dependent Coverage Mandates

    Michelle’s Law was passed in late 2008 by President Bush and took effect in late 2009.  This law extends health coverage to full time college students who lose their full time student status because of the need to take a medical leave of absence.  The new healthcare reform laws regarding dependent children build upon this, and therefore Michelle’s Law in and of itself could become obsolete in most health care plans.  However, it could still apply to ERISA Retiree Plans and standalone plans not subject to healthcare reform such as dental or vision.  Several states have also increased the age that dependent children remain eligible for coverage under their parents’ policy.  Here is a chart that shows each state’s rules about dependent coverage.

    3) Excise Tax for Health Plan Noncompliance

    Beginning January 1, 2010, the IRS began requiring employers to self-report any violations of various federal group health plan laws such as COBRA, HIPAA, MHPAEA (see #1), Michelle’s Law (see #2), GINA, among others.  The IRS will impose an excise tax on those violations that were not corrected.  Even if the violations are corrected and no tax is due, all violations are reported on IRS Form 8928. For more information, see Instructions for Form 8928.

    4) Healthcare Reform “First Round of Changes”

    If your group health plan was in effect as of March 23, 2010, your plan is considered to be “grandfathered” and therefore not all of the new law requirements apply to these plans.  Here are some key provisions that do apply to grandfathered plans effective for plan years beginning after September 23, 2010:

    • Pre-existing conditions for children. Elimination of pre-existing condition exclusions from group health plans for children under age 19.
    • Dependent coverage (before Jan. 1, 2014) Requirement that group health plans provide coverage for adult dependent children up to age 26, even if they are married, only if the child is not eligible to enroll in other employer-provided coverage (other than in a grandfathered plan).  After 1/1/14, dependent coverage up to age 26 will be required to be offered, even if the child is eligible to enroll in other employer provided coverage.
    • Elimination of coverage rescissions. Rescission refers to the practice of canceling coverage after someone has submitted medical claims. Rescission would still be permitted if an individual committed fraud or made an intentional misrepresentation of a material fact.
    • Coverage limits. Group health plans are required to eliminate lifetime maximum limits on coverage of essential benefits and the elimination of certain annual limits. It should be noted that group health plans will continue to be able to place limits on the amount covered for certain medical procedures.

    Other Changes Effective January 1, 2011:

    • FSA/HRA/HSA and Over-The-Counter drug expenses. Expenses will only be reimbursed for drugs for which a physician writes a prescription, and insulin.
    • HSA Penalty Increase. The tax penalty for using an HSA for non-approved expenses will increase from 10% to 20%.
    • W-2 Reporting for 2011.  Employers will be required to report the aggregate cost of health insurance for each employee on Form W-2.  So come January 2012, the W-2’s for 2011 will need to show this amount.

    Many more changes will follow in future years, and in the meantime, employers need to communicate with their benefits broker and providers to ensure that their plans are designed and communicated in accordance with these new laws. Also, be aware that offering health coverage through the Affordable Care Act could qualify your small business for a health insurance tax credit.

    The Owner’s Compensation: How Much Is Enough?

    What is reasonable owner’s compensation? The IRS says it’s what an owner/employee should be paid. This concept can be somewhat elusive since there is no hard set of rules. It’s based on the facts and circumstances of each individual case. However it is an important question, especially for S Corp owners, as this is an area of audit concern for the IRS. Since most people want to pay as little in taxes as possible, the owner’s motivation may not drive him to the right decision in determining his own compensation.

    For more information, read the article What Is Compensation?

    If you are looking for an affordable way to pay compensation to your employees, take a moment and check out our web based online payroll.

    Minnesota Terminates Income Tax Reciprocity With Wisconsin

    Minnesota has terminated the tax reciprocity agreement between their state and the state of Wisconsin. This was due to Wisconsin taking approximately 17 months to submit payments to Minnesota. The state needs to receive the payments in a more timely manner to help balance their budget. The two states tried to reach an agreement on a new payment schedule but was unsuccessful. On January 1, 2010, Minnesota officially terminated the agreement.

    The Minnesota website provides very helpful instructions for both individuals and employers.These instructions will help you determine what withholding certificate your employee needs to complete, what taxes need to be withheld, and how the income taxes should be filed.

    NOTE:  If you are a Minnesota employer and you will no longer have any Wisconsin tax liability, you will need to inactivate your Wisconsin withholding account.

    This agreement was originally put into place back in 1968.  I’m sure there are a lot of employers who need to make necessary changes to their employee’s withholding states.  This can be a painful process, but the sooner you update your files, the better.  The longer you wait, the more corrections you may need to make since it was effective the beginning of this year.

    If you have any questions, you can contact:

    Minnesota Individual Income Tax

    Call:  (651)296-3781 or 1-800-652-9094

    TTY:   711 for Minnesota Relay

    Email: indinctax@state.mn.us

    Minnesota Withholding Tax

    Call:  (651) 282-9999 or 1-800-657-3594

    TTY:  711 for Minnesota Relay

    Email:  withholding.tax@state.mn.us

    Wisconsin Individual Income Tax

    Call: (608) 266-2776

    Email:  income@revenue.wi.gov

    Wisconsin Withholding Tax

    Call: (608) 266-2772

    Email:  sales10@revenue.wi.gov

    401(k) Discrimination Tests — Did Your Plan Pass? Part 1

    If your 401(k) plan runs on a calendar year, now is the time of year you will receive the results from your discrimination testing from the 2009 plan year. Plans must be tested by March 15th.

    Plan testing is required each year in order to make sure your 401(k) plan is in compliance with IRS regulations and to maintain its qualified, tax advantaged status. The IRS allows employees to get a tax benefit by not having to pay taxes on contributions or the earnings from contributions until they withdraw the money. However, in order to get this tax break, the IRS wants to make sure that highly paid employees are not getting a better tax break than everyone else. In other words, Uncle Sam puts a limit on how much tax can be deferred until later.

    The tests themselves are rather complex (the IRS wouldn’t have it any other way!) and there are many different tests depending on your plan. If you have a Safe Harbor or SIMPLE 401(k) plan, your plan automatically meets some of these tests, which I’ll cover in a future article.

    Two of the tests we plan sponsors tend to pay the most attention to are the ADP and ACP tests.

    Actual Deferral Percentage (ADP) Test- compares the amount contributed by employees between two eligible groups: Highly Paid and Non-Highly Paid. The IRS defines Highly Paid employee as someone who is either a 5% owner of the company, or made at least $110K in 2009 (limit subject to change). The Highly Paid group’s average contribution cannot be substantially more than the Non-Highly Paid group average.

    Actual Contribution Percentage (ACP) Test – same principle as above, but it compares the average percent contributed by the employer for each eligible person between the Highly Paid and Non-Highly Paid employees.

    What happens if the ADP or ACP test fails?

    If it is determined that your Highly Paid employees have contributed significantly more than the Non-Highly Paid group, money from the plan will need to be refunded to certain employees. The method to correct the test failure is also too complex for this article, but in short, those who contributed the most money to the plan are first in line to receive a refund. The kicker is that the employee must then claim the refunded money as taxable income the following year.

    If you are concerned about failing the tests, you as a plan sponsor have some options to ensure these two tests pass. You can limit the percentage that your Highly Paid group contributes, or you can give a Safe Harbor contribution.

    401(k) Discrimination Tests — Did Your Plan Pass? Part 2

    In my last article, I discussed some of the 401(k) types , and the discrimination tests run on traditional 401(k) plans to ensure highly paid employees aren’t getting more of a tax break than then non-highly paid group.  The IRS requires that 401(k) plans be tested every year.

    Here is a brief, over-simplified explanation of some of the other 401(k) discrimination tests:

    Minimum Coverage Test — The test requires that the percentage of Non-Highly Paid employees who benefit from the plan is equal to 70% or more of the percentage of Highly Paid who benefit under the plan.  In other words, the IRS does not want a disproportionate number of Highly Paid employees to be eligible for benefits under the plan.

    Catch-Up Contributions — Any participant 50 years or older can make additional contributions to their 401(k) account.  The maximum additional amount for 2010 is $5500.  The plan is tested to make sure that no one exceeded the catch-up contribution limit.

    Maximum Annual Additions — The IRS sets a limit on the total amount of money that can be contributed from employees and the employer for the year.  The maximum amount for 2010 is $49,000 or 100% of compensation, whichever is less.  The plan is tested to make sure that no one exceeded this limit.

    Top Heavy Test — A top heavy plan happens when the balances favor Key Employees too heavily.  The IRS defines Key Employees as either of the following:

    • Owners of the company (at least 5%)
    • Officers of the company with compensation of at least $160,000

    The plan is tested annually to make sure that the account balances of the Key Employees are not more than 60% of the total plan balance.  If this is the case, the company has to pay all Non-Key Employees a minimum contribution to their accounts, which is generally 3% of their compensation.

    Safe Harbor and SIMPLE Plans — No Testing Hassles

    Safe Harbor Plans

    Before each plan year begins, a company can decide to give a “Safe Harbor” contribution to eligible employees for the next year.  A Safe Harbor plan automatically passes the discrimination tests.  The company contributes a certain minimum amount to the employees’ accounts.  The employer has two options for giving safe harbor contributions:

    1.  The employer can choose to make a contribution only to those employees who are deferring their own money. The employer contributes 4% of the employees’ compensation.
    2. The employer can also choose to make a contribution to all eligible employees, regardless of whether the employees defer their own pay.  In this case, the employer contributes 3% of the employees’ compensation.

    The IRS has specific requirements about notices that need to be given to the employees if the employer chooses to give a safe harbor contribution.

    The main advantage of a Safe Harbor plan is that the ADP, ACP, and Top Heavy tests are automatically satisfied.  There isn’t the risk of Highly Paid employees receiving a taxable refund from the plan.  One possible negative consideration of a Safe Harbor plan is that it can be more expensive for the company, as the company is obligated to give a contribution for that year.  The Safe Harbor contributions become vested immediately, meaning the employee can take the employer contribution with them without having to satisfy a length of service if they leave employment with your company.

    SIMPLE 401(k) Plan

    A SIMPLE (Savings Incentive Plan for Employers) 401(k) plan is similar to a Safe Harbor plan, in that the employer is required to make a contribution that is immediately vested, and is not subject to the annual discrimination tests.  However, this plan is only available for employers with 100 or fewer employees who made at least $5000 in the previous year, and this plan cannot be combined with any other employer savings plans.  A SIMPLE plan also has lower annual deferral and catch-up contribution limits, so not as much money can be contributed in a SIMPLE plan compared with a traditional or Safe Harbor plan.

    Performance Evaluations Made Easy

    When performance evaluation time comes around, no one is happy. Employees are burdened with filling out detailed and tedious essay questions about the execution of their duties and goals.  Managers are then taxed with having to read these (often) long-winded summaries. It’s time consuming, exhausting, and usually puts everyone involved on edge.

    I have been conducting performance evaluations at my company for 20 years. During that time, I’ve created (and recreated) an “easy to use” Performance Evaluation System, for both my employees and the managers reviewing them.

    [RELATED ARTICLE: Do Salary Increases Cause an Entitlement Mindset?]

    Based on a point system, my employees are able to grade themselves on their job performance. Instead of filling out long essay questions, the employee can rate how they think they did in a specific area (like time management, quantity of work done, reliability, etc.). I also give them the option to expand on their self-issued grades with a “Comments” area at the end of each section.

    Below each question is an area where the manager can offer their grade (after the evaluations have been submitted), which you can review with each employee when you meet with them.

    One part of the evaluation does ask the employee to answer 11 quick questions, and the employee can be as brief or as detailed as they’d like in their responses.

    This particular evaluation system has saved my company a lot of time and energy.  It helps me understand my employees’ perspective of their jobs, and it reduces everyone’s stress.

    Do You Offer Health Insurance? Here’s What You Need to Know Now

    The new Healthcare Reform laws have passed, and there are many provisions that employers will need to be aware of.  However, the majority of these changes don’t happen for a couple of years.  Here’s a quick summary of what you need to be aware of now to prepare for existing or upcoming changes in your company sponsored health insurance plan.

    1) Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA)

    The interim final rules were issued back in February, before Healthcare Reform was passed.  The new rules apply to plans with 50 or more employees with health plans that choose to offer mental health and substance use disorder benefits, and plan years beginning on or after July 1, 2010.  The original Mental Health Parity Act of 1996 only required that aggregate annual or lifetime limits for mental health treatments be equal to general medical or surgical benefit limits.  These new rules take it further by requiring health plans to treat mental health and substance treatments the same as general medical benefits in the way of financial requirements (meaning deductibles, coinsurance, out-of-pocket costs, annual and lifetime limits, etc.) and treatment limits (number and duration of treatments, out-of-network coverage, etc.) not just overall lifetime limits.  Plan sponsors should review their plan to confirm that these expanded requirements are met. Click here for more information.

    2) Michelle’s Law and Other State Dependent Coverage Mandates

    Michelle’s Law was passed in late 2008 by President Bush and took effect in late 2009.  This law extends health coverage to full time college students who lose their full time student status because of the need to take a medical leave of absence.  The new healthcare reform laws regarding dependent children build upon this, and therefore Michelle’s Law in and of itself could become obsolete in most health care plans.  However, it could still apply to ERISA Retiree Plans and standalone plans not subject to healthcare reform such as dental or vision.  Several states have also increased the age that dependent children remain eligible for coverage under their parents’ policy.  Here is a chart that shows each state’s rules about dependent coverage.

    3) Excise Tax for Health Plan Noncompliance

    Beginning January 1, 2010, the IRS began requiring employers to self-report any violations of various federal group health plan laws such as COBRA, HIPAA, MHPAEA (see #1), Michelle’s Law (see #2), GINA, among others.  The IRS will impose an excise tax on those violations that were not corrected.  Even if the violations are corrected and no tax is due, all violations are reported on IRS Form 8928. For more information, see Instructions for Form 8928.

    4) Healthcare Reform “First Round of Changes”

    If your group health plan was in effect as of March 23, 2010, your plan is considered to be “grandfathered” and therefore not all of the new law requirements apply to these plans.  Here are some key provisions that do apply to grandfathered plans effective for plan years beginning after September 23, 2010:

    • Pre-existing conditions for children. Elimination of pre-existing condition exclusions from group health plans for children under age 19.
    • Dependent coverage (before Jan. 1, 2014) Requirement that group health plans provide coverage for adult dependent children up to age 26, even if they are married, only if the child is not eligible to enroll in other employer-provided coverage (other than in a grandfathered plan).  After 1/1/14, dependent coverage up to age 26 will be required to be offered, even if the child is eligible to enroll in other employer provided coverage.
    • Elimination of coverage rescissions. Rescission refers to the practice of canceling coverage after someone has submitted medical claims. Rescission would still be permitted if an individual committed fraud or made an intentional misrepresentation of a material fact.
    • Coverage limits. Group health plans are required to eliminate lifetime maximum limits on coverage of essential benefits and the elimination of certain annual limits. It should be noted that group health plans will continue to be able to place limits on the amount covered for certain medical procedures.

    Other Changes Effective January 1, 2011:

    • FSA/HRA/HSA and Over-The-Counter drug expenses. Expenses will only be reimbursed for drugs for which a physician writes a prescription, and insulin.
    • HSA Penalty Increase. The tax penalty for using an HSA for non-approved expenses will increase from 10% to 20%.
    • W-2 Reporting for 2011.  Employers will be required to report the aggregate cost of health insurance for each employee on Form W-2.  So come January 2012, the W-2’s for 2011 will need to show this amount.

    Many more changes will follow in future years, and in the meantime, employers need to communicate with their benefits broker and providers to ensure that their plans are designed and communicated in accordance with these new laws. Also, be aware that offering health coverage through the Affordable Care Act could qualify your small business for a health insurance tax credit.

    The Owner’s Compensation: How Much Is Enough?

    What is reasonable owner’s compensation? The IRS says it’s what an owner/employee should be paid. This concept can be somewhat elusive since there is no hard set of rules. It’s based on the facts and circumstances of each individual case. However it is an important question, especially for S Corp owners, as this is an area of audit concern for the IRS. Since most people want to pay as little in taxes as possible, the owner’s motivation may not drive him to the right decision in determining his own compensation.

    For more information, read the article What Is Compensation?

    If you are looking for an affordable way to pay compensation to your employees, take a moment and check out our web based online payroll.

    Minnesota Terminates Income Tax Reciprocity With Wisconsin

    Minnesota has terminated the tax reciprocity agreement between their state and the state of Wisconsin. This was due to Wisconsin taking approximately 17 months to submit payments to Minnesota. The state needs to receive the payments in a more timely manner to help balance their budget. The two states tried to reach an agreement on a new payment schedule but was unsuccessful. On January 1, 2010, Minnesota officially terminated the agreement.

    The Minnesota website provides very helpful instructions for both individuals and employers.These instructions will help you determine what withholding certificate your employee needs to complete, what taxes need to be withheld, and how the income taxes should be filed.

    NOTE:  If you are a Minnesota employer and you will no longer have any Wisconsin tax liability, you will need to inactivate your Wisconsin withholding account.

    This agreement was originally put into place back in 1968.  I’m sure there are a lot of employers who need to make necessary changes to their employee’s withholding states.  This can be a painful process, but the sooner you update your files, the better.  The longer you wait, the more corrections you may need to make since it was effective the beginning of this year.

    If you have any questions, you can contact:

    Minnesota Individual Income Tax

    Call:  (651)296-3781 or 1-800-652-9094

    TTY:   711 for Minnesota Relay

    Email: indinctax@state.mn.us

    Minnesota Withholding Tax

    Call:  (651) 282-9999 or 1-800-657-3594

    TTY:  711 for Minnesota Relay

    Email:  withholding.tax@state.mn.us

    Wisconsin Individual Income Tax

    Call: (608) 266-2776

    Email:  income@revenue.wi.gov

    Wisconsin Withholding Tax

    Call: (608) 266-2772

    Email:  sales10@revenue.wi.gov

    401(k) Discrimination Tests — Did Your Plan Pass? Part 1

    If your 401(k) plan runs on a calendar year, now is the time of year you will receive the results from your discrimination testing from the 2009 plan year. Plans must be tested by March 15th.

    Plan testing is required each year in order to make sure your 401(k) plan is in compliance with IRS regulations and to maintain its qualified, tax advantaged status. The IRS allows employees to get a tax benefit by not having to pay taxes on contributions or the earnings from contributions until they withdraw the money. However, in order to get this tax break, the IRS wants to make sure that highly paid employees are not getting a better tax break than everyone else. In other words, Uncle Sam puts a limit on how much tax can be deferred until later.

    The tests themselves are rather complex (the IRS wouldn’t have it any other way!) and there are many different tests depending on your plan. If you have a Safe Harbor or SIMPLE 401(k) plan, your plan automatically meets some of these tests, which I’ll cover in a future article.

    Two of the tests we plan sponsors tend to pay the most attention to are the ADP and ACP tests.

    Actual Deferral Percentage (ADP) Test- compares the amount contributed by employees between two eligible groups: Highly Paid and Non-Highly Paid. The IRS defines Highly Paid employee as someone who is either a 5% owner of the company, or made at least $110K in 2009 (limit subject to change). The Highly Paid group’s average contribution cannot be substantially more than the Non-Highly Paid group average.

    Actual Contribution Percentage (ACP) Test – same principle as above, but it compares the average percent contributed by the employer for each eligible person between the Highly Paid and Non-Highly Paid employees.

    What happens if the ADP or ACP test fails?

    If it is determined that your Highly Paid employees have contributed significantly more than the Non-Highly Paid group, money from the plan will need to be refunded to certain employees. The method to correct the test failure is also too complex for this article, but in short, those who contributed the most money to the plan are first in line to receive a refund. The kicker is that the employee must then claim the refunded money as taxable income the following year.

    If you are concerned about failing the tests, you as a plan sponsor have some options to ensure these two tests pass. You can limit the percentage that your Highly Paid group contributes, or you can give a Safe Harbor contribution.

    401(k) Discrimination Tests — Did Your Plan Pass? Part 2

    In my last article, I discussed some of the 401(k) types , and the discrimination tests run on traditional 401(k) plans to ensure highly paid employees aren’t getting more of a tax break than then non-highly paid group.  The IRS requires that 401(k) plans be tested every year.

    Here is a brief, over-simplified explanation of some of the other 401(k) discrimination tests:

    Minimum Coverage Test — The test requires that the percentage of Non-Highly Paid employees who benefit from the plan is equal to 70% or more of the percentage of Highly Paid who benefit under the plan.  In other words, the IRS does not want a disproportionate number of Highly Paid employees to be eligible for benefits under the plan.

    Catch-Up Contributions — Any participant 50 years or older can make additional contributions to their 401(k) account.  The maximum additional amount for 2010 is $5500.  The plan is tested to make sure that no one exceeded the catch-up contribution limit.

    Maximum Annual Additions — The IRS sets a limit on the total amount of money that can be contributed from employees and the employer for the year.  The maximum amount for 2010 is $49,000 or 100% of compensation, whichever is less.  The plan is tested to make sure that no one exceeded this limit.

    Top Heavy Test — A top heavy plan happens when the balances favor Key Employees too heavily.  The IRS defines Key Employees as either of the following:

    • Owners of the company (at least 5%)
    • Officers of the company with compensation of at least $160,000

    The plan is tested annually to make sure that the account balances of the Key Employees are not more than 60% of the total plan balance.  If this is the case, the company has to pay all Non-Key Employees a minimum contribution to their accounts, which is generally 3% of their compensation.

    Safe Harbor and SIMPLE Plans — No Testing Hassles

    Safe Harbor Plans

    Before each plan year begins, a company can decide to give a “Safe Harbor” contribution to eligible employees for the next year.  A Safe Harbor plan automatically passes the discrimination tests.  The company contributes a certain minimum amount to the employees’ accounts.  The employer has two options for giving safe harbor contributions:

    1.  The employer can choose to make a contribution only to those employees who are deferring their own money. The employer contributes 4% of the employees’ compensation.
    2. The employer can also choose to make a contribution to all eligible employees, regardless of whether the employees defer their own pay.  In this case, the employer contributes 3% of the employees’ compensation.

    The IRS has specific requirements about notices that need to be given to the employees if the employer chooses to give a safe harbor contribution.

    The main advantage of a Safe Harbor plan is that the ADP, ACP, and Top Heavy tests are automatically satisfied.  There isn’t the risk of Highly Paid employees receiving a taxable refund from the plan.  One possible negative consideration of a Safe Harbor plan is that it can be more expensive for the company, as the company is obligated to give a contribution for that year.  The Safe Harbor contributions become vested immediately, meaning the employee can take the employer contribution with them without having to satisfy a length of service if they leave employment with your company.

    SIMPLE 401(k) Plan

    A SIMPLE (Savings Incentive Plan for Employers) 401(k) plan is similar to a Safe Harbor plan, in that the employer is required to make a contribution that is immediately vested, and is not subject to the annual discrimination tests.  However, this plan is only available for employers with 100 or fewer employees who made at least $5000 in the previous year, and this plan cannot be combined with any other employer savings plans.  A SIMPLE plan also has lower annual deferral and catch-up contribution limits, so not as much money can be contributed in a SIMPLE plan compared with a traditional or Safe Harbor plan.

    Performance Evaluations Made Easy

    When performance evaluation time comes around, no one is happy. Employees are burdened with filling out detailed and tedious essay questions about the execution of their duties and goals.  Managers are then taxed with having to read these (often) long-winded summaries. It’s time consuming, exhausting, and usually puts everyone involved on edge.

    I have been conducting performance evaluations at my company for 20 years. During that time, I’ve created (and recreated) an “easy to use” Performance Evaluation System, for both my employees and the managers reviewing them.

    [RELATED ARTICLE: Do Salary Increases Cause an Entitlement Mindset?]

    Based on a point system, my employees are able to grade themselves on their job performance. Instead of filling out long essay questions, the employee can rate how they think they did in a specific area (like time management, quantity of work done, reliability, etc.). I also give them the option to expand on their self-issued grades with a “Comments” area at the end of each section.

    Below each question is an area where the manager can offer their grade (after the evaluations have been submitted), which you can review with each employee when you meet with them.

    One part of the evaluation does ask the employee to answer 11 quick questions, and the employee can be as brief or as detailed as they’d like in their responses.

    This particular evaluation system has saved my company a lot of time and energy.  It helps me understand my employees’ perspective of their jobs, and it reduces everyone’s stress.

    Send this to friend