Del Chatterson Marco Della Rocca Terry Fitzpatrick

Michael Hiles& Associates Inc.

Michael Hiles Steve Kraml Brett Maclean Chris Murray

Vince Santaguida

Margot E. Uson

Morrie Weinberg

Robin Whitrod, CA

Morrie Weinberg & Associates

Inc.SORELLA, LAHAIE

Avocats

Simon Lahaie

Learn more about our members at: www.psnetwork.ca

Strategies for Success in Challenging Times

by

Morrie Weinberg

Michael Hiles

Robin Whitrod

THE NEW YORKER, Feb.9, 2009

Morrie Weinberg and Associates Inc.

Business Consultants specializing in:Government Financial Assistance, 1% Training Tax & Pay Equity Compliance,Business Process Re-engineering,ERP software selection and implementation.

GOVERNMENT CAN HELP !

Federal & Provincial Government Grants

Quebec 1% Training Tax Compliance

SR & ED Tax Credits

Quebec Design Tax Credits

Federal & ProvincialGovernment Grants

Federal & Provincial Government GRANTS !

Economic Development Canada

Emploi-Quebec

MDEIE

Investissement Quebec

Federal & Provincial Government GRANTS

MOST COMMONLY SUPPORTED PROJECTS: Training (needs analysis and execution) Technology Improvement (soft costs) Operational Improvement (consulting, analysis) Market Development (new initiatives) Human Resource Management (analysis,

coaching) Hiring (specialized positions, visible minorities).

Federal & Provincial Government GRANTS

MOST IMPORTANT CONSIDERATIONS:

1. What “exceptional” activity are you planning?

2. What is the projected amount of your investment?

3. What is the timing of your investment?

4. How will this investment impact your company?

5. How many people do you employ at present?.

Federal & Provincial Government GRANTS

TYPICAL FINANCIAL SUPPORT:

1. 40-75% of eligible consulting expenditures

2. Up to 100% of eligible training expenditures

3. Up to 10% on major “capital investments” of

$300,000 or more.

Quebec 1% Training Tax Compliance

Quebec 1% Training Tax Compliance

IMPORTANT CONSIDERATIONS:1. There are numerous forms of eligible training

expenditures

2. Each type of training expenditure is calculated differently and requires specific documentation and evidence

3. Excess training may be carried forward indefinitely and used in future years to offset training shortfalls

4. Unnecessary payments are recoverable for up to 4 years.

Quebec 1% Training Tax Compliance

THE ULTIMATE GOALS ARE TO:

1. Ensure you capture and properly document every

eligible dollar of training investment every year

2. Show continuity in training philosophy

3. Ensure that your historic training declarations are

properly supported and documented and that you do

not have any unknown financial exposure

4. Ensure recovery of any training taxes paid

unnecessarily.

Morrie Weinberg and Associates Inc.

THANK YOU.THANK YOU.

Questions?Questions?

A. Michael Hiles& Associates Inc.

Advising clients on their

Compensation and Total Rewards programs.

Your compensation policy carries the loudest message about what you want your employees to do.

It is also your single biggest expense.

It deserves your attention.

Compensation Strategies for Tough Times

Today’s Agenda• The Competition – intentions, evolution• Compensation Administration

– Sharpening the pencil

• Variable Pay– Keeping control– Non-traditional ideas

• Beyond the numbers

• Intentions (May 2008)

2.9% to 3.9% (inflation + 1.5% to 2.0%)

• Varies by region, industry

• Intentions (December 2008)

2.4% to 3.1% (inflation + 0% to 0.6%)• Inflation (Consumer Price Index)

Total CPI: 2.0% / Core CPI: 2.4%Source: WorldatWork, Mercer, Conference Board, Bank of Canada

November

Cutting Back in 2009

What are Companies Planning?Is your company planning on changing its projected

2009 salary increase budget due to the current economic conditions?

No, we have no plans to change our 2009 budget 40.10% 281Yes, we will decrease our 2009 budget 33.20% 233Too soon to tell 24.50% 172Yes, we will increase our 2009 budget 2.10% 15

Total = 701

Latest information: Trend continues towards salary freeze

Getting This Right Is Important• Cutting Back Too Much:

– Become uncompetitive• Tougher to higher/retain strategic employees• Employees have long memories

• Cutting Back Too Little:– Positions you too high in the market

• Very difficult to recover – Salary costs are too high for too long.

Performance Appraisals

0%

10%

20%

30%

40%

50%

60%

TopAboveAverageBelowAwful

Tough Times

"Normal" Times

Performance AppraisalsPerformance Distribution

"Normal" Times Performance Tough Times

15% Top 5%45% Above 25%35% Average 60%5% Below 5%0% Awful 5%

Apply Adjustments Carefully

* Average performance produces a COLA adjustment

*

Annual Salary AdjustmentsNormal Performance Tough Times

5.0% Top 6.5%4.0% Above 3.2%3.2% Average 2.4%2.0% Below 0.0%0.0% Awful 0.0%

Combining The Two• Using the illustrations:

– Savings of 1.205% of payroll

• Requires planning– Include honest communications– Collective agreement.

Variable Pay - Creativity• Look at bonuses:

• Balance employee incentive with Company ROI

• Make bonuses self-funding

• Set objectives carefully

• Make sure objectives are achieved

• Replace base pay increases by one-time bonuses.

Variable Pay - Creativity• Annual salary adjustment Profit Sharing

– Share the wealth, share the pain

Profit SharingProfit Result Profit Sharing Bonus

105% 4.00%102% 3.25%

100% (Target) 3%95% 2.20%90% 1%<90% 0%

Total Rewards – Beyond Pay• Goal – retain best employees

• Identify key positions, staff

• Foster partnership environment

• Look for development opportunities

• Creative downsizing• Selective 3-4 day weeks (better than bye-bye)

• Maybe an opportunity…

Communicate, Communicate, Communicate!• Tell everyone that:

• The economy is affecting the company

• Pay will reflect company performance

• Bonuses, increases etc. are NOT an entitlement

• Goal - fairness in a tough economy

• Working for the good of all stakeholders.

So, More Than Ever…

• Manage your compensation effectively.

A. Michael Hiles Associates Inc.

THANK YOU.THANK YOU.Questions?Questions?

Offering accounting and financial advisory services to a wide range of small and

medium sized businesses.

TAX STRATEGIES INTOUGH TIMES:

Changes to owner/manager compensation

The new Tax Free Savings Account

Highlights of the most recent Federal Budget

SALARY Comparison

COMPANY Profitable Loss

Salary $ 100,000 $ 100,000

Employer DAS 10% 10,000 10,000

Company Tax Savings 19% (20,900) 0

$ 89,100 $ 110,000

PROFITABLE VS. LOSS COMPANY

INDIVIDUAL

Salary $ 100,000 $ 100,000

Personal Taxes (33,220) (33,220)

QPP & QPIP (2,300) (2,300)

NET TO OWNER $ 64,480 $ 64,480

DIVIDEND Comparison

COMPANY Profitable Loss Loss

Profit $ 110,000 $ 89,100 $ 110,000

Company Taxes 19% (20,900) 0 0

Dividend $ 89,100 $ 89,100 $ 110,000

PROFITABLE VS. LOSS COMPANY

INDIVIDUAL

Dividend $ 89,100 $ 89,100 $ 110,000

Personal Taxes (16,958) (16,958) (24,414)

Health Services Fund (1,000) (1,000) (1,000)

NET TO OWNER $ 71,142 $ 71,142 $ 84,586

Annual contribution limit of $5,000 for 2009, indexed post 2009.

Only for “individuals 18 years or older”.

Unused room for any one year carries forward.

Withdrawals regenerate room.

…continued

TAX FREE SAVINGS ACCOUNTKEY HIGHLIGHTS

Income/capital gains never taxed.

Great for interest and capital gains; lousy for capital losses. Good for dividends when income is above $75,000 and great for seniors who have their OAS payments clawed back.

No attribution if funded by spouse.

…continued

TAX FREE SAVINGS ACCOUNTKEY HIGHLIGHTS

Upon death a TFSA transferred from 1 spouse to another maintains its tax-free status but no additional contributions can be made for the deceased spouse.

Emigrants can keep a TFSA but cannot make future contributions. Therefore top it up before you go and move to Bermuda…

TAX FREE SAVINGS ACCOUNTKEY HIGHLIGHTS

Example

YEAR AGE CONTRIBUTIONEARNINGS

@ 5%VALUE

2009 40 $ 5,000 $ 250

$

5,250

2014 45 5,520 1,783 37,438

2019 50 6,095 3,891 81,719

2024 55 6,729 6,751 141,766

2029 60 7,430 10,586 222,302

2034 65 8,203 15,685 329,395

…TOTAL $ 168,355 $ 161,040

$

329,395

TAX FREE SAVINGS ACCOUNT

Small Business Limit ↑ $500,000 from $400,000 starting 2009

100% write-off of computers and software purchased to January 31, 2010

Mandatory electronic filing of corporate taxes starting 2010 if Revenues > $1 million

FEDERAL BUDGET HIGHLIGHTSBUSINESS

Basic exemption increased to $10,320 from $10,100 ($9,600 in 2008)

Bottom bracket widened by 7.5% to $40,726

Home renovation credit at 15% of costs over $1,000 to a maximum credit of $1,350 (i.e. $9,000 x 15%)

First time home buyer credit of $750

FEDERAL BUDGET HIGHLIGHTSPERSONAL

THANK YOU.THANK YOU.Questions?Questions?

Merci et Bonne Journée

Del Chatterson Marco Della Rocca Terry Fitzpatrick

Michael Hiles& Associates Inc.

Michael Hiles Steve Kraml Brett Maclean Chris Murray

Vince Santaguida

Margot E. Uson

Morrie WeinbergRobin Whitrod, CA

Morrie Weinberg & Associates

Inc.

Learn more about our members at: www.psnetwork.ca

SORELLA, LAHAIE Avocats

Simon Lahaie