New Year Tax Changes Taking Effect

The final passage of the new tax act in late 2017 revised tax treatment of certain employee benefits as well as wage withholding.  Some are impacting employees right away – particularly via late January paychecks.  Below is information on several tax-related items impacting employees and businesses now.

In mid-January, the IRS released the new tax tables, but not a new withholding form. As the IRS February 15, 2018 deadline approaches for the revised withholding to be followed, most of our clients’ payroll providers have already implemented the new formulas behind-the-scenes.  The result has been higher net paychecks, which will be cause for some to celebrate and others will ask questions as to why their net pay increased.  Many individuals who have also heard about reductions in tax-deductible levels of items like property tax may be interested in visiting a tax professional to plan ahead, while others will wait until they see how their 2018 tax year is impacted by the changes when they file in 2019.

Still to come is a 2018 version of the W4 Federal Tax Withholding form, which is not expected to be released for another month or two.  Until then, employers have been instructed to continue to use the 2017 version for new hires or any current employees.  The IRS has said the new W4 will be designed so that it will not require everyone to complete a new one.  HRIS and payroll system providers will likely need to revise their software so that it presents the new form – and its choices – accordingly.

The Federal Supplemental tax withholding rate – which is commonly applied to bonuses, commissions, and more – went from 25% to 22%, meaning increased take-home pay for employees receiving certain types of compensation.

Employers who provided a bicycle commuter benefit were faced with a quick decision in the first weeks of the year, as this benefit suddenly became taxable and subject to payroll taxes and income tax withholding. Some employers will continue to provide the money as a taxable benefit to encourage biking to work, while others ceased this benefit offering.

The tax bill offers a federal tax credit for employers who provide paid family leave and medical leave to their employees and have a written policy to do so.  For employers providing at least a 50% wage continuation for at least 2 weeks of a qualifying leave, the credit will be between 12.5% and 25% (depending on how much paid leave the employer provides).   There are some caveats and limits that are causing employers to wait and see how this program will impact their leave benefit decisions.  The “paid time off” must not be via use of employee benefits such as sick time, vacation or PTO.  It does not apply with respect to paid leave already mandated under state or local law.  It would only be applied to workers who earn below $72,000 per year, and the employer must provide the paid leave to part-time employees as well as full-time employees who have worked at the organization for at least a year.  Many employers will not see this credit as a compelling incentive to begin providing paid leave if they weren’t already doing so or planning to.  Those who do provide paid leave will want to review their policies and consider if they might be able to benefit from this credit, which is scheduled to end in 2019.

One common fringe benefit now impacted is related to moving expenses.  The act suspends the business deduction and exclusion from taxable income of employer-paid moving expenses, except for active duty members of the armed forces.  Job-related moving expenses paid by the employee are also now taxable.

Amy Kelemen, SPHR – Director of Professional Services & Senior HR Consultant

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

Netflix Updates Famous Culture Manifesto

Netflix’s current organizational culture philosophy was first created by the company’s former Chief Talent Officer, Patty McCord, and published as a PowerPoint in 2009. Since then, it has been viewed online over 16 million times and praised by Facebook COO, Sheryl Sandberg, as “the most important document ever to come out of the Valley.” Last year, Netflix CEO Reed Hastings announced that Netflix revised and updated the document “seeking to clarify the many points on which people have had questions.”

The revised document, also known as the “freedom & responsibility” slide deck, has been converted from a 120—slide PowerPoint to 10 pages of standard text.  According to Hastings, the revised document “reflects the emphasis we put on global thinking and inclusiveness and maintains our joy of working with stunning colleagues.” It still contains many of the same principles that made the original deck so influential including Netflix’s commitment to employee excellence as expressed through behaviors like judgment, curiosity, courage, passion, and innovation.  Here are five key insights culled by Janko Roettgers of Variety Magazine:

Netflix is Not a Silicon Valley playground

Netflix’s office may be close to other tech giants like Google, Facebook, and Yahoo, as well as countless other start-ups, but the company couldn’t be more different in the way it’s thinking about perks and campus culture. There are no giant slides at Netflix’s office, no spontaneous ultimate frisbee tournaments and no Burning Man tributes. From the corporate culture document:

“Our version of the great workplace is not comprised of sushi lunches, great gyms, big offices, or frequent parties. Our version of the great workplace is a dream team in pursuit of ambitious common goals, for which we spend heavily.”

In other words: Netflix may be a bit boring, but it aims to treat its employees like grown-ups.

Netflix Doesn’t Want Any Bros

At a time when sexism and other ruthless behavior in the tech industry is in the headlines, Netflix is repeating its long-standing commitment to not hire jerks: “On a dream team, there are no ‘brilliant jerks.’ The cost to teamwork is just too high. Our view is that brilliant people are also capable of decent human interactions, and we insist upon that.”

The company’s corporate culture principles also received a significant update to include a commitment to diversity and inclusion, asking current and potential employees to be “curious about how our different backgrounds affect us at work, rather than pretending they don’t affect us.”

Netflix Only Keeps the Best

Netflix has long pushed managers only to keep their best employees. The company’s culture document puts it this way:

“We focus on managers’ judgment through the ‘keeper test’ for each of their people: if one of the members of the team was thinking of leaving for another firm, would the manager try hard to keep them from leaving? Those that do not pass the keeper test (i.e. their manager would not fight to keep them) are promptly and respectfully given a generous severance package.”

Of course, this also means that Netflix is a high-pressure environment. The document acknowledges that it gives seasoned employees some leeway — everyone will have a slump some time. But there always seems to be a sense that your job could come to an end sooner rather than later. So, get along, but don’t get too attached. Netflix is not your family. As the document puts it:

“We model ourselves on being a team, not a family. A family is about unconditional love, despite your siblings’ unusual behavior. A dream team is about pushing yourself to be the best teammate you can be, caring intensely about your teammates, and knowing that you may not be on the team forever.”

Netflix Doesn’t Limit Expenses or Vacation Time

One of the most famous tidbits about Netflix’s corporate culture is that the company doesn’t limit vacation time, instead leaving it to each employee to take as much time as they need, but also asking them to put in extra hours when necessary. “Frankly, we intermix work and personal time quite a bit, doing email at odd hours, taking off weekday afternoons for kids’ games, etc.”

In this updated document, Netflix emphasizes that the same goes for paid parental leave: “New parents are encouraged to take whatever time they feel is right in the first year, which they generally aren’t sure of until a few months after the baby arrives.”

The company also doesn’t keep any policies on reimbursed expenses, instead appealing to employees to be reasonable. The same goes for the dress code: “We also don’t have a clothing policy, but no one has come to work naked; you don’t need policies for everything.”

Netflix Is a Bit Weird

Netflix’s corporate document makes it clear that the company is still a bit of an oddball, even with a hundred million-plus customers worldwide. Not all-out-crazy, but in that slightly nerdy, laugh at your own jokes kind of way that makes the CEO wear tacky Christmas sweaters while commenting on the latest quarterly earnings in front of a camera.

Overall, McCord states that Netflix learned that if the company asked people to rely on logic and common sense instead of on formal policies, most of the time it would get better results, and at lower cost.   McCord says, “If you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard to not hire those people, and we let them go if it turned out we’d made a hiring mistake.”

Ironically, McCord was asked to leave Netflix in 2012.  The culture she was responsible for architecting led to her amicable departure. While the culture she created still drives prosperity at Netflix, McCord is now a successful consultant advising start-ups and entrepreneurs. She is the author of Powerful: Building a Culture of Freedom and Responsibility (Silicon Guild, 2018).

Malcolm Whyte, SPHR – Vice President of HR Services

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services