Author Segal LLP

Get to the Meat in Job Interviews

After a while, interviewing job applicants gets to be routine and you may fall into the trap of asking the wrong questions.

When that happens, you may not be getting the information you need. For example, how often have you asked

 Judging a Book by Its Cover

lores_interview_sign_nhA supervisor walks into a room and notices a male applicant in clean, professional-looking clothes. But he’s wearing dirty athletic shoes. The supervisor is tempted to go through the motions of the job interview, although he’s already rejected the prospect mentally because of his shoes. That’s reacting subjectively to a gut feeling.

But suppose the supervisor conducts a vigorous interview and discovers the applicant is smart, articulate and has handled many difficult situations with ease. The supervisor decides to hire the man and tells him the dress code requires clean dress shoes. That’s interviewing and hiring with controlled subjectivity.

 Develop Good Habits

   Don’t lose good prospects because of interviewing habits. Train staff members on interviewing techniques. As part of the sessions:

  • Have employees role-play as applicants, with interviewers asking them test questions and learning from reactions.
  • Identify questions that provide real, specific, job-related and experience-related information.
  • Prepare a list of the best questions for all supervisors to use in interviews.

these typical questions?

  • “What do you want to be doing five years from now?”
  • “How would you handle a situation where an another employee needed to be disciplined?”
  • “What do you consider to be your strengths and weaknesses?”

There is only one way to describe these questions: Useless.

The reason discussing these issues is a waste of time is that it’s far too easy for candidates to tell you what you want to hear.

The better way is to ask for specifics, emphasizing what applicants have done rather than what they intend to do. If you ask theoretical questions, you’ll get theoretical answers. So, let’s reshape the three earlier questions:

  • “What do you want to be doing five years from now? And give me examples of achievements from your past work history that will help you achieve your goals.”
  • “Give me a specific time when you had to discipline or reprimand an employee and whether or not it worked. What effect did the action have on the employee? And what effect did it have on you as the supervisor?”
  • “What would your three most recent supervisors tell us about your work-related strengths and weaknesses?”

Phrasing the questions this way offers two benefits:

1. The applicant is likely to give a truthful answer because he or she believes you will check the answer with former supervisors.

2. You might be able to verify the truthfulness of the answer when you check references with the former supervisors.

Often, applicants give more information than they intended. Or, they stammer trying to reply because they don’t have enough practical experience – despite listing years of practical application on their resumes.

The goal in asking job interview questions is “controlled subjectivity.” You can’t freeze out all emotions and gut feelings, but you can control the questions and the direction of the interview. Your ultimate aim is to get as much information that can be objectively analyzed and verified.

Quash Bullying at Your Company

thmb_sales_mouse_trap_finger_catch_caught_danger_amPersonal harassment in the workplace is continuing to garner attention.

Although there is no federal law banning bullying, employers still risk legal liability if they don’t actively prohibit the behaviour. A number of factors point to this conclusion, including:

When Constructive Isn’t Positive

Several court rulings have upheld claims of constructive dismissal when an employee quit because of personal harassment by co-workers.

The theory behind the rulings is that bullying in the workplace represents an employer’s breach of the implied contractual obligation to provide employeeswith civility, respect and dignity. That breach, in turn, allows the employee to consider that he or she has effectively been dismissed.

In Shah v. Xerox Canada Ltd.,for example, the Ontario Court of Appeal rejected the argument that to prove constructive dismissal, an employee must prove the employer breached a specific fundamental term of the employment contract. A specific breach may be necessary in some cases, the court ruled, but not when a pattern of bullying has been established.

Unfair treatment and bullying also can overturn a justifiable cause for dismissal. In Paitich v. Clarke Institute of Psychiatry, the Ontario Court of Appeal upheld a constructive dismissal ruling in the case of an employee who had been fired for writing insubordinate memos to management. The trial judge ruled that bullying that occurred before the memos and management’s failure to address the problem was tantamount to constructive dismissal.

When certain conditions are met, courts have ruled that an employer’s conduct constitutes intentional infliction of mental distress or nervous shock. In Prinzo v. Baycrest Centre for Geriatric Care, the Ontario Court of Appeal upheld damages of $15,000 for nervous shock suffered by an employee.

And in Zorn-Smith v. Bank of Montreal, the trial judge awarded $15,000 in mental distress damages to a fired bank employee, ruling that the employer’s “callous disregard” set the preconditions for intentional infliction of mental suffering. Those preconditions were: flagrant or outrageous conduct calculated to produce harm that results in a visible and provable illness.

  • Successful lawsuits filed against employers (see right hand box);
  • Quebec’s Labour Standards Act, which prohibits psychological harassment;
  • Ontario’s Occupational Health and Safety Act, which requires all employers to protect their employees from the risk of violence. The law’s definition of violence includes threats that give employees reasonable grounds to believe they are at risk of physical injury;
  • Saskatchewan’s Occupational Health and Safety (Harassment Prevention) Amendment Act, which prohibits psychological harassment, and
  • Alberta’s Occupational Health and Safety Code bans workplace violence, which is broadly defined as any act in which a person is abused, threatened, or intimidated.
  • The country’s Criminal Code includes offences that can be applied to bullying or cyber bullying, including criminal harassment, intimidation, threats and identity fraud. However there is nothing that explicitly mentions bullying or cyber bullying.

Canadian human rights legislation, of course, prohibits workplace harassment based on protected characteristics such as age, race, gender, sexual preference or disability. But bullying is different because it may not involve harassment on protected grounds.

Personal harassment also shouldn’t be confused with the differences of opinion or ordinary conflicts that arise in the workplace. Instead, bullying is behaviour that a reasonable person would consider humiliating, intimidating, undermining or threatening.

According to one study by the Workplace Bullying and Trauma Institute, one in six employees experience destructive bullying. The North American not-for-profit group also found that half of workplace bullies are women who target other women 84 per cent of the time. Male bullies target women 69 per cent of the time.

According to the Canada Safety Council, more than 80 per cent of bullies are managers or people in power and some of those are serial bullies who take aim at one employee until that person quits and then target another.

In some instances, bullies perceive their positions are threatened and work to eliminate the competition.

Don’t underestimate the financial costs of bullying. Personal harassment creates an unhealthy environment and can result in increased:

  • Absenteeism;
  • Turnover and recruitment costs (according to some experts, bullies push out more than 75 per cent of their victims);
  •  Stress and related health consequences;
  • Costs for Employee Assistance Programs (EAPs); and
  • Safety risks.

Add to that decreased productivity, motivation and morale, as well as reduced customer service and customer confidence, and it’s easy to see how the costs can add up.

Bullying can also expose a business to grievances, lawsuits and damages because employees are increasingly suing on grounds that by tolerating or not actively banning the behaviour, an employer has violated a staff member’s fundamental right to be protected from physical and mental risks at work.

So, to protect your employees as well as help reduce your company’s legal exposure, you may want to consider including anti-bullying measures in your written employment policy handbook. To be effective, your company’s anti-bullying policy should:

1. Apply to everyone, including management, clients, independent contractors and others who deal with your company.

2. Clearly define and provide examples of what constitutes unacceptable behaviour.

3. State your company’s commitment to preventing workplace bullying and the consequences for violating the policy.

4. Encourage employees to report incidents of bullying and outline a confidential process for reporting them.

5. Assure that no reprisals will be made against reporting employees.

6. Outline the procedures for investigating and resolving complaints.

In addition, your company should:

  • Train personnel to recognize bullying.
  • Take measures to ensure that managers and supervisors treat complaints seriously and deal with them promptly.
  • Provide impartial third party help to resolve situations, if necessary.

Insidious Forms of Behaviour

Bullying can take many forms. Some are obvious such as verbal abuse, threats, taunting and intimidation. Others are less up front and can include:

  • Spreading malicious rumours.
  • Making false allegations in company documents.
  • Undermining a person’s work by, for example, providing the wrong information or withholding information.
  • Constantly changing guidelines and expectations.
  • Taking away responsibilities and making a person feel useless.
  • Blocking applications for leave, training or promotion.
  • Assigning unreasonable duties.
  • Constantly and persistently criticizing work.

It’s not always easy to distinguish bullying from strong management or constructive criticism. In some cases, what appears to be bullying may be a personality clash. Be sure your policy takes the various forms of bullying into account and protects managers and supervisors, as well as employees.

NEW TAX RULES EFFECTING PRIVATE CORPORATIONS

On July 18, 2017, the Liberal government and the Department of Finance issued draft legislation which significantly alters the tax planning available for private corporations. The following is a brief summary of each of the proposed new rules. We strongly suggest you consult your Segal advisor to discuss how these rules affect you and your business.

Income Splitting

It has been common tax practice to set up a structure whereby a trust owns shares in an operating company with both minor and adult beneficiaries. Alternatively, family members owned shares directly in the operating company. In the past, dividends could be paid to the adult family members who would pay tax at their graduated tax rate. For those adult family members who earned no other income, such as a student, the tax owing could be low on those dividends.

The new legislation proposes to tax those dividends at the highest tax rate. As well, the new rules propose to tax other kinds of income paid to related adult family members. There is relief if the adult family member contributes to the corporation by way of capital or involvement. CRA will have discretion to determine if the amounts paid to the related adult family member are reasonable in the circumstances. These rules are effective in 2018.

Multiplication of the Capital Gains Exemption

In the structure noted above, if a trust owns shares in an operating company, it is possible that a capital gain realized by the trust could be allocated to the beneficiaries and the beneficiaries could claim the capital gains exemption. The new rules would eliminate the ability for a trust to have a capital gain subject to the exemption. Moreover, any gain on a share owned by a trust would not be eligible for the capital gains exemption. This would also apply where family members acquired shares for a nominal amount without the use of a trust. If shares were owned by a minor, and the shares were ultimately disposed when that individual became an adult, the gain that would have accrued while the individual was a minor could not be sheltered by the capital gains exemption. The capital gains exemption will not be available to family members who are subject to the income splitting rules noted above.

There is a rule that will allow for trusts and family members to make an election to crystallize the capital gains exemption in 2018. However, this crystallization will only be available to adult beneficiaries and adult family member shareholders. These rules are effective in 2018.

Conversion of Dividend Income to Capital Gains

There is a significant difference in the tax rate of a dividend (39.34 or 45.30%) and capital gains (26.76%). Historically, with tax planning, one could convert what otherwise might have been a dividend into a capital gain. The new rules propose to convert the capital gains realized between non-arm’s length parties into a deemed dividend. This would mean that the tax-free portion of the capital gain would not be added to the capital dividend account. Moreover, it appears that there would not be an increase of the cost base of the shares that were received as consideration which could possibly result in double taxation.

There are also new rules that propose treating payments out of the capital dividend account as a taxable dividend where the capital dividend account was created by transactions whose goal was to reduce the personal income tax of the shareholder.

These rules could also affect post-mortem planning. These rules are effective for transactions and amounts paid or payable after July 18, 2017.

Making Investments in an Operating Company

While still in the public consultation phase, the government has proposed to increase the tax burden on an active corporation investing surplus funds. Those investments would no longer enjoy preferential tax treatment and access to the refundable tax regime and capital dividends. The government appears to be concerned that an active company subject to low tax rates would have significantly more to invest than if the funds were paid to the individual shareholder and all taxes were paid.

This issue gets complicated in terms of tracking which investments are from surplus funds and what the actual income related to those surplus funds are. The government has asked for input on how to apply their proposals.

Summary

These proposals are significant on their own and collectively will change the tax planning landscape for all privately held businesses and their shareholders. Every situation where a trust owns shares in a private corporation must now be evaluated to determine what the best tax planning is on a go forward basis.

Please contact your Segal advisor as soon as possible so that planning can start now.

Segal LLP | Tax Advisory

Dealing with a Layoff or Forced Retirement

lores_hr_cost_cutting_fired_terminated_envelope_job_employment_words_amIt doesn’t matter whether you’re employed in the private or public sector – companies and government agencies equally struggle to boos the bottom line and stay within tight budget constraints.

Those efforts can sometimes result in downsizing. With little notice in many cases, employees are presented with severance packages or incentives to retire early.

If that unfortunate scenario occurs, you may not be in the state of mind, or have sufficient knowledge, to properly evaluate the offer. Downsizing packages often involve decisions that go beyond severance pay, including benefit replacement and pension considerations. A qualified financial planner can help you assess the package and consider the following issues:

Family finances. Income uncertainty can be a challenge, especially if you’re facing post-secondary education costs for children and other major ongoing expenses, such as a mortgage. The impact on your spouse, especially if he or she is still working, should also be addressed.

Tax planning. Your package may include a significant lump sum, which means you need a strategy to minimize taxes. For example, you might review your RRSP contribution limits and consider using the “retiring allowance” to defer much of the income tax as possible. Or some of the money could be applied to your spouse’s RRSP. In some cases, an employer may agree to make payments over two years. Proper planning in this area is essential, as some of these tax-planning opportunities are only available during the year of severance.

Spending habits. Compile a budget to track monthly expenses. A budget also helps you make changes to your spending patterns. You may decide to impose some restrictions and consolidate debts to reduce interest costs.

Pension choices. This can be one of the most critical financial choices. You should fully understand pension options, because the decision is permanent. If you plan to draw on your pension, determine whether a single or joint life pension is needed, as well as whether you want a guarantee on future income.

If you’re not at pension age yet, you may elect to have a deferred pension or take a “commuted value” out of the plan to rollover to your own locked-in RRSP.

Group benefit replacement. Determine if any employee benefits will continue. You may have to add to your budget premiums for health, dental, life and critical illness insurance to replace lost benefits. An assessment of whether to “self-insure” some of the costs or pay premiums to an insurance company to cover the potential risk needs to be completed. You may be able to apply to become a dependant under your spouse’s group insurance plan. Some coverage, such as disability insurance, will be discontinued because you’re no longer employed.

Income and asset review. By calculating your assets and potential sources of income, you can determine any shortfall in your budget. Income from your spouse or partner may help defray expenses. Consider all assets and sources, such as RRSPs, savings, and Canada Pension and Old Age Security. Review investments. Your risk tolerance has probably changed as a result of your unemployed status.

By using the services of a qualified financial professional, you can get the most out of your severance or early retirement package. Call our firm for help developing a realistic plan that reflects your personal situation and allows you to get on with life.

Tee Off for Success

thmb_orange_golf_ball_dimple_MB

A Smart Venue for Business

Golf has its detractors but one thing is clear: The game is a valuable way for companies to bring in revenue.

“Eighteen holes of match or medal play will teach you more about your foe than will 18 years of dealing with him across a desk.”

— Sportswriter Grantland Rice

Scoring an Eagle

Golf can drive home some lucrative business. Here are some of the ways executives believe the sport helps:

It’s a good way to establish close business relationships and make new business contacts.

  • The way people play golf is similar to how they conduct business.
  • Golf demonstrates levels of competitiveness and motivation and provides time to get to know a person’s character. A person who cheats on the golf course would probably cheat in business. Similarly, a bad temper on the course probably means a bad temper in the office.
  • Some of the biggest deals involve time on the golf course and most are closed a few days after a round of golf.
  • The time spent immediately after a round eating and socializing (the “19th hole”) is a key part of doing business.
  • On the course, the back nine is the best time to bring up business.

Many executives believe golf is an essential business tool and that behaviour on the golf course indicates behaviour in business. But strategic golf isn’t the same as recreational golf. Courting business on the course means keeping your business purpose in mind and focusing on your customers. You need to shift effortlessly between business and the sport.

Golf can be expensive but it’s widely viewed as a profitable investment. According to some estimates, Canadian businesses bring in more than $1,500 in business revenue for every dollar spent on strategic golfing. That may explain why the golf course outscores the hockey arena as a venue for business. (It comes in second place just below restaurants.)

But, like any other business investment, you want to maximize the return in terms of the amount of money and time spent.

To help with that goal, here are seven rules to help keep the game above par when playing with business associates:

1. Assess your corporate goals. Prepare for the day as you would for any business or board meeting. Think about what you want to accomplish, whether it’s to network, lay the foundation for new business, or strengthen a customer relationship.

2. Know the game. New golfers should have played at least five rounds of golf and have a few lessons before attempting to play business golf. If you score higher than average, let the rest of the group know in advance to save yourself some embarrassment.

3. Stay professional and polite. As a representative of your company, show professionalism in the way you play and adhere to dress codes. If in doubt, call the club to get the policy. Never wear jeans or tee shirts.

Obviously, don’t criticize how others are playing, don’t give advice unless asked, and don’t brag about your performance. In addition, don’t lose your temper, swear, or show rudeness. People who cheat at golf are often seen as likely to cheat in business.

And forget the cell phone. Many courses ban them and even if they don’t, turn yours off. A sure way to lose a sale is to have your cell phone ring or play a song just as your prospective customer is taking aim at a putt that’s going to win the round. Checking your e-mail messages on your PDA? That’s considered rude on the course.

4. Find the right mix. Put together a foursome with similar golfing abilities and temperaments. Ask if they prefer mornings or late-afternoon tee times. Introduce everyone so they feel at ease and consider providing a short advance bio of the players.

5. Let the client bring up business. Tolerance levels for business chat on the course varies widely, so follow the lead of fellow players. Don’t put business ahead of relationship building. Formal business discussions will follow on another day. If the conversation turns to business, keep it light and brief.

6. Don’t forget the 19th Hole.  After the round is over, make sure to allow time for some food, drinks and socializing. This is the time to talk business. Mix the discussions with talk about how the game went. Focus on the highlights, not the bad shots. If the game went badly, this is also a good time to smooth things over.

7. Follow through. After the round, make a phone call or arrange a visit and, hopefully, secure a signed contract. Otherwise, you haven’t finished the game or maximized your investment.

If you really hate golf, don’t bother with it. Pretending you’re having a great time when you’re miserable probably won’t work. The time and mental investment involved in golf is too great and the return will likely be too small. There are other ways to entertain prospects that everyone will enjoy.