#1 Change your habitat. Change your habits.

Our habitats are shared with others but our habits are uniquely a manifestation of our past habitats. The habits you have today are simply a reflection of the choices you made in your past habitats. Your habitats may change over time which can alter or impact your daily habits. There is a direct link between your habitat and your habits. An external force presses on you every day, your habitat. It molds you into the person you are today. A boulder in a mountain river is fixed. The force of the water that has already passed over it has shaped it into the boulder it is today. A boulder’s character is revealed because of its environment. Your character is revealed by your environment. Your habitat is not permanently stuck in a river. A boulder is fixed in a river unless a mighty force removes it from that environment. Today your habitat is a mighty force that shapes your current habits. Change your habitat change your habits.

 

What is a habitat?

Habitat is defined as, a place that is natural for the life and growth of an organism. (1)

This definition has two key elements that you should reflect on, life and growth. Both of these elements are intertwined but should be looked at independently.

Life is more than just work, sleep, and nutrients. Your life comes from the natural environment around you. A contrasting view of habitats would be the difference between an inner city kindergarten student and a kindergarten student living in a rural farm town. The natural life for these two kindergarten students is vastly different. Both students have a single parent home where mom works hard to support the family. Both single moms work in a business office and both earn $45,000 a year. The natural life for each of these kindergarten students is vastly different. 

The inner city family has a life near poverty due to high rent and the high cost of fresh healthy foods. The mother strives to provide a stable home where education goes beyond school hours and extra curricular learning is strictly enforced. A home where respect for elders and the community is demanded so that the child has a better life. We have heard parents state that they want a better life for their children. Many parents desire a better life for their children where education and good habits lead to success. This mother is creating a habitat where good habits can form which lead to success. 

The rural family has an average life. The family has lower rent and there is plenty of fresh fruits and vegetables. The local school provides the education and the mom feels that her kids are getting a good education. This mom relies on the school life to educate, train, and give direction to her child. At home, there are video games, endless TV, and plenty of junk food. The life of this home focuses on external forces to drive education and learning. While habits of TV and junk food are made at home. The life for this rural family is fine for this mom. This life appears to be “ok”. Yet habits are being formed because the parent allows the child to watch endless TV and video games. The parent believes their child will be “ok”.  They will get the same education the parent got at the local school.  The parent is fine allowing their child to watch TV, eat rubbish, and play tons of video games because that is what kids do. Your life is what you create based on your past habitats.

Growth comes from life and is physical, mental, and spiritual. A flower will die if the basic elements of life are removed. A flower will grow when given the elements of life such as the sun, water, and proper nutrients. Your habitat may support the basic elements of life such as a job, food, clothing, shelter, and education. However, does your habitat encourage growth? Growth goes beyond the basics of life. Most children in America have the basics of life. They have food, clothing, shelter, and education. The environment in which those basic elements of life are given will determine if the child will grow beyond their habitat. When a flower grows it stretches and strains as it naturally grows. Growth beyond the basics of life requires a habitat that instills habits that will propel a child into adulthood with the tools necessary to live better lives.

 

What are habits?

Your first thought may be directed towards bad habits.

A habit is an acquired behavior pattern regularly followed until it has become almost involuntary.  (2)

Your habits have three key pieces that will be explored in-depth. Habits are acquired. Habits have regular patterns. Habits are involuntary.

Your habits have been acquired. You have downloaded your habits through your habitat. Yes, your environment influences the habits you have today. A past habitat leads to today’s habits. We will dive into how changing your habitat will change your habits. Our environment at home, school, work, city, state, and country drives our habits. Starbucks has become a habit for millions of Americans. A daily latte sipped in the Starbucks habitat lounge of caffeinated bliss is an acquired habitat. Children are not programmed to love a soy skinny vanilla latte. Believe me, soy and skinny is not natural. It takes a habit to love that mandatory five dollar specialized coffee drink every morning. Our habits are acquired by our habitats.

Your habits are regular patterns. As I just described, in order to acquire the habit. Your habitat must allow you to form a regular pattern. Starbucks knows that they must become part of your daily pattern.  That is why they place a Starbucks on both sides of the interstate exit. So, if you get off eastbound or westbound your regular pattern will be established and you will buy that habitual Starbucks drink. Our habitats are designed. We allow and accept our habitats to be designed in a way that supports our habits. Our habits become regular patterns which lead to our habits becoming involuntary.

Your habits have become involuntary. That morning commute is involuntary. You drive in an involuntary manner by choosing the far right lane, the middle lane, or the far left lane. Think about it, you do not think about your morning commute. You are ordering that soy skinny vanilla latte without thinking. Our habitats are strategically developed in order to make our habits involuntary. When things become involuntary what happens? For some, our worlds become chaos! That is why you hate Monday mornings. You’ve spent two days in a completely different habitat. Monday starts by you getting back into a new habitat that drives the habit of driving to work, stopping at Starbucks, and then going to work. By Tuesday your habitat is set for the next four days and the habits become involuntary.

Your habitats produce your habits. Our habits are acquired from our environment. Those strategically placed influences within your habitat are placed there so you form a habit. Your habitat influences you into a regular pattern. Patterns are repeated until they become involuntary decisions. We get to the point that our habitats become so normal because the repetition of our habits has become involuntary.

Think about your habitats and the habits that you have formed. You need to break down the habitats that are supporting those self-destroying habits. Your habits are completely different than your wife, husband, sibling, co-workers, and neighbors. You may all live in similar habitats. But your habitat is slightly different than every person you know. Every person in this world lives in their own habitat. All of our habitats overlap but each of our habitats produces within us habits that are good and bad. Control your habitat control your habits.

(1) “habitat”. Dictionary.com Unabridged. Random House, Inc. 24 Aug. 2017. <Dictionary.com http://www.dictionary.com/browse/habitat>.

(2) “habit”. Dictionary.com Unabridged. Random House, Inc. 25 Aug. 2017. <Dictionary.com http://www.dictionary.com/browse/habit>.

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Employee versus a contractor (2 key factors)

Employee Defined

An employee is anyone who completes a service that the employer directly controls two key elements, what is completed and how the work is completed. Colby is a fishing guide. Colby’s boss is Jake. Jake owns The Fishing Adventures LLC. Jake directs Colby to take clients on daily guided fishing adventures down the snake river. Colby is instructed when and where to meet the clients, and what time the fishing adventure ends. Colby does not find new fishing clients nor does he market his fishing guide services. Colby works directly for Jake who drums up new fishing clients, directs Colby on where to begin and end the fishing adventure. When Colby receives tips from clients Jake processes those tips on Colby’s bi-monthly paycheck. In the off season, Colby works around the store and helps get out the annual company catalog. Jake also provides Colby with health insurance and a 401k match program. Colby is an employee of The Fishing Adventures LLC.

Where is the water muddy?

Colby is a seasonal employee of Jakes. Colby owns his own fishing tackle, gear, and boat. Colby fishes many rivers in Wyoming and Idaho and determines which river is best to fish. Colby has a contract with Jake’s company along with three other local fishing adventure companies in the area. Jake does supply Colby with daily fishing clients but does not direct Colby on what river to fish nor how to fish that river with the clients. Colby does not have a contract with the client to fish. Jake, the owner has the fishing contract and contracts with Colby to execute the fishing adventure. Is Colby independent or does his income solely rest on Jake providing him with daily fishing adventures? If Colby has contracts with several local fishing outfitters and he chooses which one to work for and on which day, then Colby would be an independent contractor. However, if Colby is contracted only with Jake’s company he may be seen as an employee.

Determining if an individual performing services for your business qualify as an employee or an independent contractor depends on how you control what work is completed and how you control the actual work to be completed.

 

Common Law Employee

Earlier we reviewed what an employee was. Under common-law rules, an employer has an employment relationship when the employer controls how the work will be done and what work will be done. Colby has free reign to put his fishing boat into the river where he deems best and to help the clients catch the best fish possible based upon his opinion and free reign. Great, so in order determine if Colby is an independent contractor or an employee you must first dig in and examine the business structure. The area between employee and an independent contractor can sometimes be gray that is why you must know what is at stake. Ask yourself, what degree of independence and control do you give to the individual performing work for your business?

What is at stake?

Taxes. Taxes. Taxes. That is what is at stake. Let’s look at Colby who is an employee. His boss Jake will need to pay the employer’s share of FICA on all earnings. FICA is 7.65% and is made up of Social Security (6.2%) and Medicare (1.45%). If Colby earns $50,000 a year, his employer Jake is responsible for an additional $3,825 in FICA payroll taxes. If Colby is classified as an independent contractor then Colby is responsible for his own taxes which results in Jake keeping that $3,825.

Remember the Federal government funds its day-to-day operations from payroll taxes. When the Feds wait for their money until Colby pays his taxes in April of the following year they are losing billions of dollars in daily operating cash flow. We have all heard the big court cases with technology companies classifying their workers as contractors and the fight that follows with the Federal government. It is all about cash flow for the business and cash flow for the Federal government.

Here at the Professional Pay Group, we escrow your payroll taxes so that the funds are immediately available when your quarterly payroll taxes are due. Don’t spend your payroll withholdings or the Feds will be after you. Interested in our payroll services or have compensation related questions? Reach out to us anytime using the form below.

Independent Contractor

In our employee and employee common law sections above, we reviewed how an employee performs services for their boss (employer) and how they are legally an employee. How are they defined as an employee? Because the employee is told what job is to be done and how the job is to be completed.

Colby was a fishing guide and worked for Jake’s company The Fishing Adventures LLC. Jake owned the boat, controlled who Colby took out fishing, told him which river to fish, and what time to start and stop the fishing adventure. Jake had complete control of each fishing adventure and Colby was the employee who had free reign while out on the river but all other aspects of the fishing adventure were controlled by his boss Jake.

In this post, we will look at what could make Colby an independent contractor. I use the word “could make” on purpose, because each business must reflect on control and independence. Let’s dive in!

Colby is an independent contractor. He owns his boat and his fishing gear. Colby works when he wishes and contracts his personal fishing guide services to several local fishing guide outfitters. One of these outfitters is Jake’s company The Fishing Adventures LLC. Colby is an expert fisherman, not a marketer. He relies on his expertise as a local fisherman and his personal relationships with several outfitters to bring him daily fishing guide clients. Colby tells Jake a week in advance which days he is available to guide clients for The Fishing Adventures LLC. Colby also relays to Jake which days he is working other jobs. By other jobs, Colby means that he is already scheduled to do fishing guide services for other local outfitters. Jake reviews his calendar to check which clients are coming in next and Jake then contracts with Colby to take a group out for a 2-day fishing adventure next Thursday and Friday. Colby checks his schedule, negotiates a final price with Jake to render the adventure services, and then contacts the clients to arrange the fishing trip details.

Colby is in complete control of who he works for when he works, and which river to fish. Colby continues to check the fishing reports from the DNR (Department of Natural Resources) and then decides to take these clients down the Snake River in Wyoming due to the number of Rainbow trout being caught. He coordinates with the client what time they would like to start and tells them where to meet him on that Thursday morning. Colby is in complete control and is independent. Colby is an independent contractor.

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Employee Equity Calculator

Employee Equity Calculator

When weighing pay equity for an employee group it is often imperative to rank your employees by compensation. There are many ways to calculate pay equity within your organization. The method we will review today uses two quick formulas to allow you to draw some quick conclusions about pay equity within a group of employees. There are many additional factors to pay equity that I’m not addressing in this post. This allows you to quickly begin building a pay equity model.

Percentile Model | Rank Formula

The model we are reviewing today, I call the percentile model. Out of all of our employees who is the closest to the 20th percentile mark? Or, whose compensation is higher than 80% of the remaining employees? The first formula to deploy is the rank formula. A very simple formula, =rank(compensation amount, to all other compensation amounts & return the rank).

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Data Points Percentile Formula

This formula is used to calculate which employee’s compensation is at the 20 percentile mark. To calculate you need to use the formula p(n+1). Where p = .20 and n = number of employee records. I usually roundup so I have an exact number, therefore my formula “looks up” the exact employee.

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Percentile of Employee Compensation

I then use the result of the p(n+1) percentile formula to run a vlookup to reveal which employee is at the 20 percentile point. This employee has a salary higher than 80% of all other employees. You can now begin to add additional identifying factors such as age, race, and sex to begin to build a better profile of each employee at pivotal percentile points.

I’m happy to send you this google sheet. E-mail me at david@gaus.systems for further information.

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These formulas can be used for other career averages within the compensation world! Have fun. Download Excel File >>> Percentile of Employee Compensation.  Need assistance? Call me at 419-721-5000 or email to david@gaus.systems.

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