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Your source for business and chamber news in the Greater Kingston Area April 29, 2013

Vol. 2 NO. 4

Planning an exit strategy and paving the way for the next generation By Lindsey Foster

Michael Tenenhouse took over A-One Clothing Store Ltd. in downtown Kingston when he was 25. The landmark independent clothing and footwear store was owned by his parents and before that, Michael’s grandparents on his mother’s side opened A-One in 1938. Succession planning has been critical to the three generations. Michael’s children are still young so his plan is ever-

Brian is Senior Principal at Collins Barrow Chartered Accountants. Brian received his Bachelor of Commerce (Honours) from Queen’s University. Brian has extensive experience in providing assurance services, income tax, management consulting and business advisory services to a wide variety of private and not-for-profit organizations as well as the agricultural sector. Brian works very closely with small and medium sized businesses and owner managers as their primary business advisor.

evolving. “It’s not a fun process but you have to make a plan,” says Tenenhouse. “You need to be educated about the options and what makes sense, financially and emotionally. You need to take steps to ease the burden on your family so if anything happens to you, everything is laid out for them to follow.” The Tenenhouse family is unique, according to a survey by the Canadian Federation of Independent Business or CFIB. Its Passing on the Business to the Next Generation survey results completed last fall revealed that only 9 per cent of current owners of small and medium sized enterprises (SMEs) have a formal written plan. While 40 percent have an informal plan, 51 per cent have no plan at all. Succession planning is not easy; it can be time-consuming and expensive but it’s critical to the success of any business now and in the future. Business owners need to look beyond their day-to-day operations and create an exit strategy. “Succession planning is essentially formalizing your business structure,” explains Brian Hogan, Principal at Collins Barrow in Kingston. “No one wants to work forever so it’s important to continue to build the business in order to sell it at some point. This asset should not only generate a living for you now but when the time comes for you to leave, you can get a return on that investment. It’s important to seek out an accountant or lawyer to provide a business road map to help steer you in a direction that you may not have considered.” Hogan adds that many owners don’t appreciate the true value of their business; they assume that no one would ever want it or that no one but them could ever run it so they make plans to shut it down and walk away. That lack of understanding can be detrimental to individual business owners and the economy as a whole. As the baby boomer generation ap-

proaches retirement age, a massive turnover – estimated at about one-trillion-dollars – is expected over the next decade. More than half of employed Canadians work for SMEs, which in turn make up nearly half of the country’s economy. “This is a big concern in Kingston where we may have a strong government base that shelters us somewhat from economic downturns but our business community is shrinking,” says Hogan. “Businesses that are surviving are the ones that have been around for a long time. If they close down, there are not a lot of new start-ups so there are fewer opportunities for the next generation who want to stay in Kingston.” While succession planning may sound logical, why don’t more business owners finalize their plans? According to the Passing on the Business to the Next Generation survey, more than half of SME owners believe it’s too early – they consider themselves to be too young or their business is too new. Nearly onethird of respondents stated they have no time to deal with the issue. “When you start your own business, the last thing on your mind is ending it,” says Brian. “In the first 3 to 5 years, you know whether the business will succeed. That’s when you need to look at growing the business to make a living now and then sell it in the future. It’s also important that your business structure allows you to adapt to changing times and to have resources, such as employees who are able to provide input, new ideas, and fresh thinking.” Succession planning involves financial, tax, insurance and legal considerations. It can involve family members or key employees who are prepared to take over. Professional advisors – objective 3rd parties - can help work through the myriad of potential issues and help owners develop a plan that better positions the company and individuals for the future.

A-One Clothing “This is something that people don’t want to think about but when you know exactly what will happen, it’s a huge weight off your back,” says Tenenhouse. “Make a plan and deal

with it. Whatever it takes, make your decisions. It’s not easy to go to family member and say we need to do this. It has to be done though otherwise it will be difficult in the end.”

Reasons for Not Having a Business Succession Plan (%) 16

13

12

5

21 52 29

52% Too early to plan for Too early to plan for transition / succession transition / succession No time to deal with the issuethe issue 29% No time to deal with 21% Can’t find adequate Can't find adequate advice / tools to start advice / tools to start It's too complex 16% It’s too complex Don't want to think about leaving 13% Don’t want to think about leaving Other 12% Other Conflict with family members / employees 5% Conflict with family members / employees

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A message from the Chair Donna Woodbury

Success as an entrepreneur or business owner is often based on one’s ability to effectively juggle multiple areas of responsibility, from the technical execution of the business offering (product or service) itself, through to all the administrative tasks like finance and HR. And even for those working in larger businesses where their individual role gets to be more focused and specialized within one area of the business, the pace and volume of business still often leads to the feeling of

being overwhelmed. It can be very easy in business to be so focused on the immediate demands on your time and brain power, that you become almost insulated from what is happening “out there”, outside of your business and the direct work you do in it that particular day. But in a time when business can change so quickly – customers’ tastes, options for sourcing materials, and availability of talent – you have to ensure that you regularly set aside time to scan the environment, and digest what it means for your business.

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People in business essentially need to become magnets for information, to help ensure they are as aware as they need to be of the ever-changing marketplace. You need to train yourself to listen – to customers, to suppliers, to colleagues and staff, to hear what they are saying about trends, warning signs, concerns and opportunities. You need to plug in to social media and online information, as well as traditional media, and be aware of the important things happening around you each day. But not only do you need to gather, but you need to analyze, contemplate and react. Having information in and of itself doesn’t do much good if you don’t set aside the time to contemplate what it means for your

business, or your customers or competitors. You need to devote time to that type of dedicated thought and consideration, as difficult as that can be in the midst of the chaotic and hectic days and weeks that make up most of your business life. Accountability and peer support can help with that. Setting up informal groups or roundtables where some of your friends or colleagues in business can safely discuss their concerns, bat around ideas and discuss collectively what some of the information you’ve gathered means for you and for them, can have immense benefit for all those involved. Involving key employees and getting them involved at a strategic level is always a healthy business practice. Whether done with a peer

group, on your own or with your team inside your business, the opportunity to digest and consider the information you gather is critical. It is definitely not easy to do. This type of data gathering and strategic thinking is easy to push aside in order to deal with the urgency of the day. But I would encourage you to try and schedule the time. Be aware. Gather information. Then make sure you take time to think about what it means for your business, and react. I’m confident that the time you devote to such activity will prove itself worth the effort, and you and your business will enjoy the positive benefits that result. Best wishes for a successful and fulfilling next month in business!

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Technology

Small businesses are the leading destination for attackers

“Sophisticated Break and enter tool” No longer do you have to worry about someone physically breaking into your building and taking off with your inventory, products or ideas. It turns out it’s far easier for people to break in through your internet connection. In a recent Symantec Security report, businesses with fewer than 250 employees are the most likely group to be targeted by hackers who are looking to steal data or finances. This target market accounted for 31% of all reported attacks. Traditionally, small business owners have assumed that internet attackers were not targeting them because there were much larger and more visible targets on the internet. While this has been true in the past, larger organisations have been steadily improving their defenses against outside attacks to ensure their data remains secure. The result is that hackers are now attacking smaller organizations where security is nonexistent, or has not been configured. This target group is far larger which means that chances of successfully gaining access to sensitive data are far greater. Client contact information, intellectual property, financial data; all can be stolen or used in so-

cial engineering scams that can effectively access bank information, enable the transfer of funds, breach other organisations using stolen login information, engineer identity theft, and more. Like larger organisations, small businesses rely upon technology to help them in their business process. The difference between the two organisations is that larger companies have dedicated IT staff that are trained to help keep their data secure, where small business owners usually either rely upon their “go to” person for IT support, or do it themselves. Attackers know this and also know that one of the easiest ways of gaining access to networks is by trying the manufacturers default access settings. For example, one of the most overlooked security areas in a network is a wireless access point. Without secure authentication to the network, anyone within range of the access point now knows your network exists and can hack away until they get access. If you configure a wireless access point, use the highest available encryption method and a complex password. While local networks need to be secured against attackers, end users also need to be vigilant against so-

By Shawn Whalen

My favourite apps are the ones that allow you to put your office in your pocket. Being able to access your email, contacts and calendar is great, but being able to access your desktop computer screen and remote files means you can do anything from anywhere. There are two excellent applications that I use: Citrix Receiver (http://receiver.citrix.com/) and TeamViewer (http://www.teamviewer.com/). Because my company uses Citrix, I use Receiver for work; but I use TeamViewer to access my home computer (free for non-commercial use/purchase for business use). With these applications, I can actually see the screen of my office or home computers on my smartphone or tablet and have access to the files stored there. Which means I can open documents, run remote programs, email files, access company intranet, etc. from anywhere with cellular coverage or wi-fi. Both apps work great on my iPhone 4 (iOS) and on my Samsung Galaxy Tab 10.1 (Android) devices. Now, you may be wondering just how efficient it would be to try and put together a Powerpoint presentation by remotely accessing your office computer on your iPhone: not very. But the ability to do it, if you had no other option, could potentially save the day. I’ve been able to access files and put proposals together when I was out of the office and even out of the country - with no laptop nearby Shawn Whalen 98.3 FLY FM / 98.9 THE DRIVE, Bell Media Kingston

cial media phishing or email scams which hackers are able to create based on information they have stolen from you or from anyone in your address book. They use information gained from hacked networks or computers to impersonate a trusted company or individual and trick you into providing sensitive information to them through email or online sources. Some of these phishing or email attacks are very sophisticated and appear to be genuine so the safest way to proceed is to treat every email with caution and if you’re not sure, call the sender if possible. If you cannot, just delete the email, and whatever you do, never click on a link in a suspicious email; you may download malware that will monitor your every keystroke and send your private or corporate information to hackers for their financial gains, or will open up your firewall so they can gain access to your network. Make sure you have a trusted IT advisor or resource you can rely on to keep your network secure and profitable. Jeff Hewitt is an IT Consultant at OnServe, whose primary goal is to help clients make the right decisions concerning their IT investments.

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By Jeff Hewitt

Favourite Apps

Kingston Business Today - Monday, April 29, 2013 3


By: Jennifer Baker

We all have one and some of us have a few of them. Scribbled on pads of paper in our home and office, the checklist keeps us focused and on track. With all distractions available on Facebook, it is important to remain focused on the task at-hand. This is a simple checklist of four considerations to improve your business’ Facebook Page: Cover Photo – The Cover Photo is the large horizontal image at the top of the Facebook Page. Previously Facebook had an exhaustive list of rules listed on their Terms of Service; however, this list of regulations has recently been changed. According to their Terms of Service the only requirement is that cover photos “may not include images

with more than 20% text.” This is your opportunity to get creative with your Cover Photo and to include a compelling “call to action!” Profile Picture – The Profile Picture is the image that appears whenever a Page creates or comments on a post. It is recommended that the image be properly sized and either: (1) a company logo, or (2) a professional photo. About Section – This section, which is located below the Facebook Profile Picture, allows Pages to educate users about their business’ products and services. Depending on the business category selected, different types of information will appear in the About Section, including mission statement, website, hours, price range, public transit, and location. Featured Pages – Facebook Pages can “Like” other Facebook Pages and feature them in a box in the right-hand column of their Page. While only 5 pages can be featured at a time, Page Admins have the ability choose which Pages will appear. This is a great opportunity to showcase your business’ partners, suppliers, customers, and distributors. Completing these four simple steps will help to improve your business’ Facebook Page. Jennifer offers social media training seminars, one-on-one personalized training, and corporate group training.   Jennifer Baker Consulting is located in Kingston and is a proud member of the Greater Kingston Chamber of Commerce.

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News from the Canadian Chamber of Commerce

Federal Budget Synopsis - Ottawa moves to confront skills challenge The measures announced in the 2013 federal budget are a significant step forward in the federal government’s attack on Canada’s skills challenge. The Canadian Chamber of Commerce welcomes a more activist approach by all Canada’s governments to confront a growing problem. “The skills problem leads our Top Ten list of critical barriers to Canada’s competitiveness,” says Perrin Beatty, President and CEO of the Canadian Chamber of Commerce. “It’s showing up all across the country, in every industry. We are pleased to see the government is moving to confront it, and to include business directly in the solutions.” Mr. Beatty said the Canadian Chamber has long believed training programs should be designed and run by those closest to the workforce. “We believe in the leadership role of the provinces

and territories, which these measures respect, but we’re pleased to see business and educators will now have a central role as well. Of course, small and medium-sized businesses have specific challenges when it comes to training their employees and we are pleased the government recognizes that.” “Mr. Flaherty reiterated the government’s commitment to erasing the federal deficit by 2015. We think that’s going to be tough, but it’s essential. Much of our recent economic success is tied to our reputation as a prudent country which follows through on its fiscal plans.” The Chamber President also expressed strong support for new federal measures to improve training and education for Aboriginal peoples. “Although these are very modest measures, they are a step in the right direction. Most Aboriginal peoples are young. They represent a huge potential workforce, but we have to support them more. Funding for Aboriginal education at all levels has lagged for many years, and education results have, too. It’s not hard to see the con-

nection.” Finally, Mr. Beatty expressed disappointment with the Budget’s plan for research and innovation funding. “Last year Ottawa made a $770 million reduction to the incentives available for research in Canada. We urged the government to have a dialogue with the leading research corporations in Canada, to make sure the replacement model met their needs. Reviewing the budget, many of Canada’s most important innovators will be disappointed. It will be hard for those companies to maintain their commitments to research in Canada when other jurisdictions are more supportive.” The Canadian Chamber of Commerce is the vital connection between business and the federal government. It helps shape public policy and decision-making to the benefit of businesses, communities and families across Canada with a network of over 420 chambers of commerce and boards of trade, representing 192,000 businesses of all sizes in all sectors of the economy and in all regions. For additional Canadian Chamber of Commerce advocacy and activities, please visit their website: www.chamber.ca

News from the Ontario Chamber of Commerce (OCC) OCC Impacts Federal Budget In December 2012, the Ontario Chamber of Commerce published A Federal Agenda for Ontario and undertook a campaign for change in key federal policy areas. We are pleased to announce some important successes: FedDev Ontario’s (the federal government’s regional economic development program for Southern Ontario) mandate has been extended. FedDev Ontario will receive $920 million in additional funding over five years, starting in 2014. The federal government extended the accelerated capital cost allowance for new investment in machinery and equipment in the manufacturing sector to a tune of $1.4 billion. Training is set to become more responsive to employer needs. The devil is in the details and much more work needs to be done to

ensure a better training deal for Ontario’s employers and workers. But, we are cautiously optimistic. The federal government also announced in January the appointment of a Minister Responsible for Ring of Fire (a key ask we made in A Federal Agenda for Ontario). All are evidence of a new, more rigorous federal focus on Ontario’s economy. There is still much work to do, however. Our members have told us loud and clear that Ontario needs a better Employment Insurance system and that the $12 billion gap between what Ontarians pay and get back from the federal government is unacceptable. We are pleased at the progress and thankful to the Chamber Network for its tireless efforts. For additional Ontario Chamber of Commerce advocacy and activities, please visit their website: www.occ.on.ca

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news

Increased business at Shopper’s Home Health Care Shopper’s Home Health Care provides health care products and services to people across the country. With 65 stores, Shopper’s Home Health Care is the largest health care products provider in Ontario. Jeff Kennedy, the Store Manager at the Princess Street site, recalls the issues he had been having in the CPAP category of his business. CPAP, which stands for Continuous Positive Airway Pressure, is an effective method of treating sleep apnea which involves the use of CPAP machines and personal masks. “Because the business was growing so much (over 30% growth each year) we just couldn’t get back in to the files to follow up with people who were eligible for new machines, new masks, etc.” “I said ‘I need to get a person, I have 3000 database files here at the store and I need somebody to go back through them because there’s all kinds of opportunity for us to build our business.’” Through the programs at KEYS Job Centre, Chanchal was connected to Jeff. Her experience and education in making database templates and business administration made her an ideal candidate for the job. “I talked to her about what I wanted and she added her two cents to it and we put together a template to go through all these files. I think we increased the business [revenue] about $150,000 just by going through those files, which is quite a bit. From that point there she actually created her job.”

“She understood exactly what I wanted and then she made it better.” The position that Chanchal now fills did not exist within the company before she arrived. “It started off as a 3 month contract which turned into a part time position. The executives of our company came down and, of course, I said ‘look what Chanchal has done,’ and they said ‘wow!’ The next thing you know, we’ve got her into a full time position. And from there she’s expanded into other areas.” Chanchal’s new database system has been so successful that Shopper’s Home Health Care decided to start using it in 15 other stores in the Greater Toronto Area. Chanchal can also speak a variety of languages, including Hindi, Punjabi and Guajarati. As Kingston’s multicultural population increases, language skills like Chanchal’s are becoming more and more useful. “That’s how we build our business,” says Jeff. “You have to have the people that can properly communicate.” “One thing about Chanchal is that once she knew that she was coming on board, she went to the computer and she looked up everything she could find about Shopper’s Home Health Care and she started reading about our company and then she started looking for opportunities. She demonstrated that she wasn’t just coming in for the job, she actually cared about the company.” “I was new to health care,” says

Chanchal. “But I have a tendency to ask many questions, so I learned everything.” When Chanchal first arrived in Canada, she lived in Brampton, but had difficulties in finding employment. “It was really hard to get a job there, I just struggled so much. For whatever reason, I couldn’t get a job there.” Moving to Kingston to look for work, Chanchal enrolled in a KEYS program to prepare her for the Canadian job market and make the connections she needed to succeed. “Some people have the impression in their mind that this is a small town with less opportunity, ‘let’s go to a bigger city like Toronto or Vancouver’, but I think Kingston has more and more to do, lots of opportunities. All you need to do is connect with people.” Chanchal is very grateful that Shopper’s and Jeff gave her the opportunity to prove herself. “According to my experience, not many employers give a chance to immigrants for whatever reason, I don’t know. But Shopper’s accepted me for my skills and hard work. I really want to thank Jeff and Iris and everybody else in KEYS for encouraging and supporting me.” Having accustomed herself to the new working environment, Chanchal really feels that she is now an integral part of a great team. “I’ve made really good friends here. This is now my home, my second family. The work environment is extremely good and

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Jeff Kennedy (Store Manager) and Chanchal Khurana. that’s why I’m not going anywhere but Kingston and Shopper’s.” For Jeff, the decision to take on Chanchal was obvious. “Whoever’s got the best qualifications to bring to the table is who I hire. […] Right from day one, the staff opened their arms to her, invited her to their homes. She’s just a lovable person. You come in the morning and she greets you with a smile.” He even sees Chanchal helping to set up databases for other Shopper’s locations and train their employees in the future. “We’ve got a really good thing going here with Chanchal and hope-

fully it continues for years and years and years. The future is very bright for her here.” “As they say, there’s a place for everybody. There’s a lid for every pot. We happened to be the pot and she happened to be the lid.” A strong supporter and active participant with KEYS, Jeff recognizes the value of finding the right people first hand. Jeff feels that, for employers, agencies like KEYS can offer a competitive advantage in the hiring process. “If they’re not using KEYS or any of these employment agencies then they’re missing out.”

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sustainability

Green, Clean Technology

At first glance, Burt’s Greenhouses in Odessa looks much like any other greenhouse operation, with multiple structures and, in the winter months, stakes poking up through the snow from the multitude of outdoor gardens. Proof that Burt’s Greenhouses is more than it appears to be resides in a separate structure on the property, demonstrative of the innovative nature of proprietor Brian Burt’s business. Since 2006, Burt has been heating his greenhouses with biomass instead of using heat derived from fossil fuels. He burns “waste wood” wood collected from furniture manufacturers, old skids from construction sites and similar sources – which would otherwise likely end up in landfills. Brian and engineer Alex English wanted to take this even further, and began working on a system that would produce biochar. This has been the focus of a collaborative project with two Queen’s University researchers that began last year, with the help of funding from the Federal Economic Development Agency for Southern Ontario’s (FedDev Ontario) Applied Research and Commercialization (ARC) Initiative to Queen’s University, and one of eleven ARC projects led by the university in 2012-2013. Biochar is a fine-grained, high-

ly-porous charcoal that displays many unique beneficial properties when added to soil. These properties can vary depending on feedstock and process conditions. The greenhouse heating structure on site in Odessa houses a large open area where the feedstock is sifted onto a chain grate and slowly fed into the stoker in another room. The heat in the boiler is slowly raised and, instead of burning the fuel to ash, what comes out of the other end is biochar. The potential agronomic benefits to using biochar include improving water utilization, breaking up heavy soils, decreasing fertilizer run-off, providing refuge for beneficial fungi and bacteria and inducing resistance in plants to certain diseases and insects. Other benefits include the ability to sequester carbon due to its resistance to breaking down in the soil and the use of biochar in the remediation of brownfields by reducing the bio-availability of contaminants. Although Burt’s Greenhouses began the process of biochar production prior to the inception of the FedDev Ontario-funded project, this is the first opportunity that the company has had to sample what is going on inside the boiler. Alex English, Yu Wang, Brian Burt, Allison Rutter and Dr. Darko Matovic Sampling became possible by using a water-cooled gas sampling and temperature probe designed by the Department of Mechanical & The approach, based on best pracDr. Darko Matovic, a professor in Materials Engineering at Queen’s. tices in combustion diagnostics,

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sustainability

Green, Clean Technology

Continued from pg. 7 gives new insights into complex processes that happen deep inside the biochar-making zone, and is able to map the changes in chemistry and temperature following the biomass conversion into biochar. The group has also been doing field trials to evaluate the effectiveness of different biochars to improve soil quality and increase plant yield, and are testing the biochar and soils for contaminants, both prior to and after use in the field. Initial tests have demonstrated the capacity of biochar to reduce or eliminate the potential adverse effects of these contaminants. “I don’t think that any of this (the testing and analysis) would have been possible without the funding from FedDev Ontario, because analysis costs a lot of money,” said Dr. Allison Rutter, Director of the Analytical Services Unit (ASU) at Queen’s University, who is the other principal researcher at Queen’s working on the FedDev-

funded project. The results that the project team is achieving are impressive. The approach produces higher temperature biochar, which has very good adsorption qualities and good porosity, critical characteristics for its beneficial effects. In addition, the process uses a boiler that has many safeguards and an abundance of reaction space, according to Dr. Matovic, “where all of the nasty stuff is being burnt out in a secondary combustion zone, so the emissions outside are well controlled and way below all of the emission limits.” Besides the obvious benefit environmentally, “It is a dual-purpose unit where nothing is wasted. It produces heat to heat the greenhouses, while it produces biochar. In its normal regime, it runs just like an ordinary biomass powered boiler. This is an excellent example of using an existing piece of equipment for multiple purposes.” Indeed, that is what Brian Burt hopes to be able to do in the future.

With the construction of a large water tank as a heat storage device, he could better balance the load and make switching to the biochar production regime easier. This project has laid the groundwork for a continued collaborative relationship between Burt’s Greenhouses and the research community at Queen’s and The Royal Military College (RMC). The group which includes Dr. Barbara Zeeb at RMC, Dr. Rutter and Dr. Matovic, has just been awarded a Collaborative Research and Development Grant to work with Burt’s and other industrial partners. This NSERC grant will allow the project team to further advance the use of biochar to immobilize residual soil contaminants and remediate brownfields. The research team has also expanded to include

Yu Wang, a graduate student from McGill University, who is working with Dr. Matovic on instrumentation and measurements to optimize biochar production. “The partnership with Burt’s Greenhouses is an excellent example of how government support can serve as a catalyst to fuse researcher expertise and university resources with the unique experience of industry,” says Dr. Steven Liss, Vice-Principal (Research) at Queen’s. “This partnership is leading to novel research and innovation, which has the potential to impact our environment in a very

positive way.” “They [Brian Burt and Alex English] are very innovative people – the amount of ingenuity in building this system, which is their own creation, is amazing,” says Dr. Matovic, “and we will definitely continue to work with them.” To learn more about the Applied Research and Commercialization Initiative, please visit www.FedDevOntario.gc.ca. To learn more about collaborating with researchers at Queen’s University, visit www.queensu.ca/ industry.

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LED lights an opportunity for business incentives By Jared MacKay

On Tuesday April 9, 2013 the City of Kingston and Utilities Kingston officially launched a project to replace all 10,000 of the streetlights in Kingston with LED equivalents. In total, the efficient new fixtures will save more than 50% of the energy required to light city streets and are associated with several other benefits including reduced light pollution and less maintenance. Utilities Kingston is proud to both lead this project and - through Kingston Hydro - to help the City obtain more than $250 thousand dollars in funding. These same incentives are available to Kingston Hydro business customers who want to use LEDs inside or outside their businesses. The newest generation of LED lights are perfect for outdoor illumination for a number of reasons. They use significantly less energy to create the same amount of light or lumens, saving you money every time they turn on. They are also nearly maintenance free, with significantly longer lifetimes than standard high pressure sodium (HPS) or metal halide lights. Because you have to change them less often, you’ll save on your maintenance costs. While an HPS parking lot light might begin to dim or burn out within three to five years, LED lights should last between 15 and 20 years without having to be replaced or serviced. Another advantage of LED lights is how they render colour. To see an example, take a drive on Sir John A MacDonald Blvd., between Princess St. and Highway 401. Most streetlights give off an amber or yellow light, but LEDs render a light that is much whiter and more natural looking. Although the actual amount of illumination remains constant, objects have a much higher visibility under the LEDs because colours are rendered more accurately. If your business has any lights that are on 24

hours a day or overnight, consider replacing them with LEDs. With generous incentives from Kingston Hydro and the SaveONenergy RETROFIT program, the energy savings and reduced maintenance costs will see your investment paid back quickly. These lights are ideal to light parking lots or building exteriors, and are also available in attractive pot or recessed styles. For more information about the incentives available from the Kingston Hydro RETROFIT program to fund lighting upgrades, contact Jared MacKay, Conservation Advisor at 613-546-1181 extension 2509 or email jmackay@utilitieskingston.com.

Sustainable Kingston Welcomes the Business Section to our Community! Kingston is a city that is a vital, dynamic and sustainable economic centre where research, innovation, investment, and business enterprises thrive together and where a variety of people want to visit, live, work, and do business. Developing an economy depends on building many relationships and partnerships with businesses, industry leaders, educational institutions, not-for-profit organizations, and the community at large. Our economy relies upon, and is built upon, a strong cultural, social, and environmental foundation. The Economic Pillar is focused on the attraction of new businesses and people to Kingston. This is critical to the city’s growth and sustainability and assists us in building a strong and vibrant local community. The retention of talented people in the public, private, and non-profit sectors in Kingston are fundamental to achieving this. Existing businesses and the jobs they create, are critical components of a strong, sustainable economy. The intention of Sustainable Kingston is to educate, motivate and support partner organizations and citizens in establishing, implementing and achieving their sustainability goals in support of community sustainability in Kingston.

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Finances

Paying taxes is not a bad thing By John Evans

Tax season is without question one of the least favourite times of year for business owners but paying taxes far outweighs any other ‘not-having-fun-anymore’ moments. While owing money to Canada Revenue Agency is a dreaded reality most face, paying taxes is not necessarily a bad thing. Once past the start-up or incubation stage, where results and taxes may be low or non-existent, earning income and paying taxes become signs of a company’s strength and well-being. The greater your income the higher the taxes will be but the elevated status will also help when it ever comes time to grow or sell the company, or secure whatever future financing is required. Zero income equals zero benefits. That said, paying too much tax and pay-

ing too early are not ideal business tax strategies. Meeting once a year with your tax preparer, armed with a bag full of receipts, isn’t helping your business. Your accountant is not there to only make taxes go away. It’s important to minimize taxes by taking advantage of every possible deduction. As well, the goal is to have your money working for you for as long as possible. There’s no sense in the government having and using your money for free when it’s not necessary. Every business should implement tax strategies based on current financial results and well-founded future expectations. Strategies based on a planning process, rather than a history reporting process, mean your accountant should be directly involved midway through your business year, not during tax season.

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Finances

U.S. Tax Treatment of Certain Canadian Tax Deferred Accounts By: Matt MacEwen

While many US citizens living in Canada have recently become aware of their requirement to file annual US individual income tax returns, some US taxpayers may not be aware of the specific filing requirements in regard to certain registered investment plans held in Canada. Registered Retirement Savings Plans/Registered Retirement Income Funds Accounts held by US citizens, such as Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF), require specific reporting with the Internal Revenue Service (IRS) in order for them to receive tax-deferred status in the US. RRSPs and RRIFs are not tax-deferred under the US Internal Revenue Code (IRC), and thus the income generated inside these accounts is technically taxable income for US tax purposes. It is only through an election in the Canada-US Income Tax Convention (the Treaty) that these accounts are able to receive tax-deferred status in the US. To make the election pursuant to Article XVIII(7) of the Treaty, IRS Form 8891 – US Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans must be filed for each year the account is held. A separate Form 8891 must be filed for each RRSP or RRIF account. The form requires certain infor-

mation regarding the accounts, including the account number and the balance held in the account at the end of the tax year. Form 8891 is to be filed with the US individual income tax return. By not filing this form, the accounts become taxable and any income generated inside the account must be reported as income on the US individual income tax return, even if no monies are withdrawn from the account. This can lead to US tax owing depending on the amount of income being generated inside these accounts. Under new IRS Streamlined Filing Compliance Procedures, US citizens residing in Canada who have failed to file these forms are able to use the procedures to become compliant, even if they have previously filed their US individual income tax returns. For more information regarding the new IRS Streamlined Procedures, please refer to our November 2012 US Tax Alert. Registered Education Savings Plan Another type of registered account commonly held by US citizens living in Canada is the Registered Education Savings Plan (RESP). In Canada, this account allows money deposited for a child’s post-secondary education to grow on a tax-deferred basis, with the income ultimately taxed in the child’s hands upon withdrawal. There are also Government of Canada grants that match contributions to this plan, with certain limitations. Un-

fortunately, unlike RRSPs and RRIFs, the RESP is not granted the same tax-deferral election under the Treaty, and thus the income earned inside the RESP is taxable to the subscriber (i.e.: the parent) on their US return in the year the income is earned. It is important to note that any grant received from the Government of Canada in the RESP is considered income, and is taxable in the US in the year received. This issue can lead to double taxation as the income in the RESP is taxed in the hands of the subscriber for US purposes, and taxed again for Canadian purposes in the hands of the child when the income is withdrawn from the RESP, usually several years later. In addition to these negative consequences, the IRS considers RESPs to be foreign trusts, which requires trust returns to be filed on an annual basis in the US. These trust returns are Forms 3520 and 3520-A. There can be significant penalties for failure to file the required forms. Form 3520 is due at the same time as the tax return of the subscriber, including extensions, while Form 3520-A is due on March 15. An extension is available for the 3520-A filing. Summary It is important to recognize that the US tax rules may treat certain items differently than they are treated under Canadian tax rules. The examples presented above show the complexity in reporting Canadian tax deferred accounts for US tax purposes. Finally, it is

Why acquire an existing business? Submitted by: Lisa Ilan

(FBAR) and IRS Form 8938 – Statement of Specified Foreign Financial Assets, if the respective filing thresholds for these two forms are met.

Matt MacEwen, CPA, CA, CPA (Colorado) is a Manager in the Kingston office of Collins Barrow SEO LLP. Matt has extensive experience in providing Canadian and U.S. income tax compliance and planning services to individuals and private organizations operating in a variety of industries. Matt earned his CA designation in 2008 and his US CPA in 2012.

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Growing your business internally can be a high-risk strategy in a fast-moving business world. That’s why many entrepreneurs choose instead to acquire an existing firm. “This approach eliminates many of the headaches involved in getting a start-up off the ground, such as developing products, hiring the right people and building a sound customer base. It also gives entrepreneurs a jump on the start-up phase — a time when many new businesses fail,” says Lisa Ilan, Senior Manager, BDC Kingston. Often, it’s the only feasible way to break into a particular field, such as tourism or manufacturing, since start-up costs in these sectors can be prohibitive. There are distinct benefits when you buy a business that is already up and running. However, you may also be acquiring someone else’s problems. Here are some other key points to consider. Here are some tips: Stay in the area you know Don’t fall into the trap of buying a particular business because it seems like a sure thing. Pick an industry you know intimately and look for a business in that industry that is for sale. Then evaluate it carefully. “Due diligence” is one of the most important aspects of a business acquisition. Think carefully about whether the business falls within the scope of your business plan and area of expertise. Look for the right fit Evaluate your skills, interests and experience. It’s much more difficult to succeed in a business you don’t like or in which you have no background. The business you buy has to mesh with what you do well, and with your personal and business philosophy. Choose familiar territory to reduce the risk of failure. Evaluate the risks Determine through research whether this type of business has a solid chance of turning a profit. Certain types of businesses are riskier, more vulnerable to competition or prone to financial failure than others. None of this means you should automatically avoid such businesses. However, they do require an especially careful evaluation of the risks involved. Look for synergy If your goal is to acquire a firm to add to an existing business, you will need synergy in key areas. Its products or services should be related or complementary to what your existing business already sells, and marketing and

sales methods should likewise be in harmony. Production and delivery methods should also be similar, and the merger or acquisition should result in improved cash flow with which to fuel additional business projects. You need assurance that you will have the full cooperation of the new firm’s staff as they will be key to a successful integration of the two businesses. Look at the firm’s identity Every business has an image that has been built over time. Think carefully before you acquire a business with a tarnished image, as such perceptions can be hard to turn around. Conversely, a good reputation can be a critical asset. An Internet search can allow you to see what people are saying about the company. These opinions may not be representative but should still be taken into account. Ask yourself why the company is up for sale, and ask about its reputation and that of its current owner. Consider the company’s culture You may meet resistance if you buy an established company with its own business culture, management style and relationships with vendors and partners, and then change the way things are done. It’s worth asking whether the seller has good relationships with employees and managers, and assessing the business culture, management style and the quality of work done by its employees. Evaluate the costs Financial records may not always reflect reality. You need to ensure that the price is in line with market conditions. Without due diligence, you can end up paying too much and be left burdened with unnecessary debt. Hidden problems, such as losses, declining revenues or changes in the marketplace, may make the business less viable than it initially appears. If leases for facilities or equipment are about to expire, for example, price hikes may be in the offing. Determine whether the equipment is part of the sale. If so, what condition is it in and what is it worth? Is the building for sale as well? If it is rented, can you take over the lease, and under what conditions? Once you’ve begun your due diligence, don’t limit yourself to examining operations and facilities or going through financial statements. You also need to investigate the parts of the business that you can’t see physically by talking to employees and suppliers. Evaluating the business’s true worth, considering all tax implications and effectively negotiating the sale are also important steps. Lisa Ilan is Senior Manager of BDC.

very important to note that all of the accounts discussed in this article must be disclosed on Form TD F 90-22.1-Report of Foreign Bank and Financial Accounts

Kingston Business Today - Monday, April 29, 2013 11


Finances

Lessons in Debt Control – Consolidate to Save

You and your business deserve expert attention.

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five, or six balls in the air at the same time? Of course, adding an element of danger to the routine is always fun - I’m rather partial to the flaming torch and chain saw jugglers who show up at Kingston’s Buskers Rendezvous every summer (July 11th to 14th this year, by the way). Of course, it’s essential that they be perched atop a two-storey unicycle in order to really ramp up the thrills. Yes, there’s nothing quite like the prospect of seeing someone risk life and limb(s) to attract an appreciative crowd. While not nearly as spectacular to watch, many Canadians are nevertheless conducting their own personal high-wire juggling By Lorne Matthews-Glasspoole routine every day - not with balls or torches, mind you - but with five, or six, or more types Have you ever noticed how a talented of debt. This scary juggling routine often injuggler can make it look so easy to keep four, cludes a mortgage, personal line of credit, and multiple highinterest credit cards, each of which require Lorne Matthews-Glasspoole a regular monthly payment. Keeping all Consultant those ‘debt torches’ in the air probably lorne.matthewsglasspoole@investorsgroup.com isn’t easy, is certainly Successful business owners like you have distinct never fun, and can be (613) 384-8973 ext. 350 needs. As a financial professional running my own very expensive. And practice, I work in your independent world every day there’s no hat being and understand your situation. passed around at the end of this routine! Call to us today to find out how The Plan™ can help If you are currentyou prepare for the future. ly juggling your own debt, a more efficient way to manage your time and money (not to mention dial down your financial ™Trademarks owned by IGM Financial Inc. and licensed to its subsidiary corporations. Investors Group Financial Services Inc. stress) could be arMP1368 (10/2007)

rived at through a simple solution. You’ve likely heard the term, it’s debt consolidation – and here’s why it may be the solution you seek. Through debt consolidation, you can effectively reduce the interest costs for car payments, education loans, lines of credit, or any other high-interest, high-cost loans (such as credit cards) by consolidating them within a single loan with a lower interest rate. Then, you choose how to pay it off with an option suited to you. For instance, you may elect to continue paying your total ‘preconsolidation’ payment amount, and by doing so you’ll be putting extra money toward the principal repayment and eliminating the total debt much faster. Alternatively, you may opt to stick with paying the new reduced regular payment required by your lower-interest consolidated loan, resulting in the freeing up of additional cash flow which can be used to reach your other financial life goals. When it comes to structuring personal debt, keeping things simple is usually better, and less expensive. Here are a few ‘simple’ suggestions for managing debt which you can discuss with your professional advisor: 1) Consolidate through a home equity loan that offers a much lower interest rate than most other types of loans - especially credit cards which can apply interest rates of up to 28% on outstanding balances. 2) Keep consolidated loan amortization to a reasonable timeframe – aim for repayment within five years if possible. 3) Don’t automatically assume that a line of credit is a good thing. While it can provide a high degree of borrowing flexibility, a line of credit can spell trouble for those who have trouble sticking to a bud-

and have too dollars left at the end of end to the juggling act through debt conYou andget, your the month to apply against debt. A personal solidation can be an important part of any loan or a refinanced mortgage might be a debt management plan. Speak with your betterdeserve option because both require a defined professional advisor about setting up the business principal repayment, and not just interest- plan that works best for you, and about how payments. to create a longer term financial plan to help expertonlyattention. 4) Control your debt by cutting up your you achieve all your life goals. various consumer credit cards – all except for the one that you keep only for emergencies. 5) If you are using a debt counseling company, be sure the company is reputable and focused on your best interests. Juggling debt is not fun, and bringing an

This column, written and published by Investors Group Financial Services Inc, and Investors Group Securities Inc., presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances.

Successful business owners like you have Business Dress distinct needs, especially when it comes to Elder Abuse Prevention investment planning for life after you hand from Formal to Casual over the reins. As a financial professional from Jack Victor of Canada running my own practice, I work in your You and your business deserve Lorne Matthews-Glasspoole Help those who are victims of abuse and ensure independent world every day and understand expert attention. that the issues affecting seniors are understood Consultant your situation and unique needs. by politicians, community leaders, and the public.

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Yet another Reason for Employers to Use Employment Contracts Employment quiz: When an employer terminates an employeeâ&#x20AC;&#x2122;s employment, how long must the employer continue to provide benefits, including long-term disability (LTD) benefits? This question assumes the employee is 55-years-old and has worked with the employer for 24 years. His compensation package includes benefits, especially LTD benefits. After the employer restructures, the employee is redundant. The employer terminates the employment. There is no written employment contract. The correct answer is: The employer is not required to provide any further benefits. The employer is required to provide benefits for a further eight weeks. The employer is required to continue to provide LTD benefits for a much longer period.

There are a few common misconceptions among employers. These are: Misconception #1: if the employer is encountering financial difficulties requiring it to restructure, the employer doesnâ&#x20AC;&#x2122;t need to provide notice to terminate. Misconception #2: the length of notice to terminate employment is determined by the Employment Standards Act. Misconception #3: the employer may change the benefits package at its pleasure. On the contrary, as a matter of law: Employers must provide â&#x20AC;&#x153;reasonableâ&#x20AC;? notice or pay in lieu of notice in order to terminate employment. The period of notice provided under the Employment Standards Act is the minimum notice; â&#x20AC;&#x153;reasonable noticeâ&#x20AC;? is determined by the common law and is rarely certain and typically longer. Benefits, along with all compensation, must continue during the notice period. Employers may limit the period of â&#x20AC;&#x153;reasonable noticeâ&#x20AC;? and the length of time they are required to provide benefits through the use of a properly drafted employment contract.

PHARMACY

Despite the employerâ&#x20AC;&#x2122;s duty to continue benefits, insurance companies typically refuse to provide disability coverage for any period beyond the notice period under the Employment Standards Act. Without special arrangements, this leaves dismissed employees without LTD coverage during much of the notice. For one unfortunate employer, these issues converged into a perfect storm. The case is Brito v. Canac Kitchens. In this case, from where the facts informing the quiz was taken, the terminated employee became disabled during the notice period. Because the employer had neither arranged for continued LTD coverage, nor limited its liability by having the employee sign a properly drafted employment contract, the employee sued. The Ontario Court of Appeal required the employer to pay the employee the LTD he would have received, for 10 years, among other things. This employer had to pay the employee over $200,000, as well as legal costs. The employer could have avoided most of this liability by having the employment subject to a properly drafted employment contract. That contract could have limited

HOME DECOR

LTD coverage to the minimum notice pe- with an employment contract, consult riod under the Employment Standards a human resources professional. Act, as opposed to the longer notice period under common law. Connie Carrillo is a Certified Human Resources Professional, operatNow, back to the quiz. By now, you ing as HR on Target. You can visit know the correct answer is c. Connie at her website, www.hrontarThose of you who understand that get.com , email her at carrillo25@ employers can protect themselves hrontarget.com or phone Connie at with a properly drafted employment (613) 389-3265. She is also a memcontract win bonus points. Doing so ber of Professional Expert Advisors can limit the employerâ&#x20AC;&#x2122;s liability. Kingston (â&#x20AC;&#x153;PEAKâ&#x20AC;?) www.peakteam. I recommend that all employers ad- ca/. dress these issues immediately upon hank you for years of hiring, through a well drafted contract. For existing supporT ingsTon area employees, employers can also contain liability with employment contracts, but it involves additional issues requiring profesPhone 613-542-0820 â&#x20AC;˘ Fax 613-548-8616 sional expertise.   If you need help

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Kingston Business Today - Monday, April 29, 2013 13


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Invoices unsent are invoices unpaid A Homeownerâ&#x20AC;&#x2122;s Tale: Slow-To-Bill This winter, I needed a skilled-trades outfit to perform a small but essential fix in my home. I called Company X, my go-to folks for this type of work. Company X sent a pair of capable technicians, who provided quick, efficient service. Company X knows its business, no question. But as someone who thinks about receivables for a living, I was surprised that my wife wasnâ&#x20AC;&#x2122;t asked to provide a cheque or credit card authorization before the workers left the premises. Instead of securing on-site payment, Company X was willing to acquire a â&#x20AC;&#x153;receivableâ&#x20AC;? and send me an invoice for a $300 job. Itâ&#x20AC;&#x2122;s a supplierâ&#x20AC;&#x2122;s choice to either take payment upon provision of service or invoice later with the customary credit terms. If I were running the business, Iâ&#x20AC;&#x2122;d opt for the former, particularly for small, unquoted jobs like mine. â&#x20AC;&#x153;More cash quickerâ&#x20AC;? is never a bad business motto, especially since suppliers derive no cash benefit from carrying a host of â&#x20AC;&#x153;minnowâ&#x20AC;? invoices. Managing receivables is an expense. Providing credit is never cost-free. Still, not every service business wants its employees taking on-site payments. Company owners may feel itâ&#x20AC;&#x2122;s outside their job-descriptions. Or they hope that providing credit on small jobs will prove a competitive advantage over other suppliers that require full on-site coverage. Is this customer relations â&#x20AC;&#x153;bounceâ&#x20AC;? real or imagined? Who knows! Credit â&#x20AC;&#x201C; and who gets it â&#x20AC;&#x201C; is always a delicate, iffy subject. Being a cooperative customer, I honoured Company Xâ&#x20AC;&#x2122;s way of doing things. I waited dutifully for my invoice. And then I waited some more. After a month, I started to get antsy, so I phoned and left a message with the weekend receptionist. I gave my address, the date of service and said I hadnâ&#x20AC;&#x2122;t received the bill. I asked for a callback. Didnâ&#x20AC;&#x2122;t happen. Three business days later, I phoned again and spoke with the office manager. She admitted that sheâ&#x20AC;&#x2122;d been too busy with other pressing business

tasks to create timely billings but sheâ&#x20AC;&#x2122;d prioritize mine because Iâ&#x20AC;&#x2122;d taken the time to call. By weekâ&#x20AC;&#x2122;s end, Canada Post delivered the invoice. I had the payment in the mail the very same day. Case closed. Remedy: Invoice Sooner Than Later An invoice is a supplierâ&#x20AC;&#x2122;s strategic prompt to secure payment from a customer â&#x20AC;&#x201C; a customer whoâ&#x20AC;&#x2122;s already had the benefit of the supplierâ&#x20AC;&#x2122;s goods or services. What does the supplier have? At best, a contractual promise-to-pay. Whereâ&#x20AC;&#x2122;s that payment? Warehoused in the customerâ&#x20AC;&#x2122;s bank account â&#x20AC;&#x201C; for now. Suppliers invoice customers so they can do what customers are supposed to do: wait for the invoice to show up and pay in-full in accordance with the terms of credit. Until an invoice is dispatched and received, thereâ&#x20AC;&#x2122;s no hope of payment. Incomplete, the sale lingers on the supplierâ&#x20AC;&#x2122;s expense side in the form of the uncompensated costs of the inventory (eg. parts) and the labour already supplied. The vendor â&#x20AC;&#x153;carriesâ&#x20AC;? the sale. When an invoice is M.I.A., thereâ&#x20AC;&#x2122;s a big roadblock on Cash Highway. Itâ&#x20AC;&#x2122;s in the interests of the Company Xs of this world to get their billings out the door asap. A busy company will be pedalto-the-metal 24/7; its operational â&#x20AC;&#x153;skinâ&#x20AC;? may be stretched to the limit, creating various procedural deadzones. These firms are fighting fires hourly and forced to prioritize their focus. Things get triaged. Sometimes HR pulls the short straw; sometimes itâ&#x20AC;&#x2122;s health and safety. All too often, itâ&#x20AC;&#x2122;s invoicing. There are never enough hours in the business day Above: Julie Brown, John Molloy (Parteq Innovations), Richard Vanderwal (Hydroclave to do everything, and the low-status billing process Systems) and Bill Welychka seems innocuous enough to sideline for a few days â&#x20AC;&#x201C; days that turn rapidly into weeks! Whatâ&#x20AC;&#x2122;s the takeaway? Money doesnâ&#x20AC;&#x2122;t grow on trees; it grows on invoices. When operating a receivables-based enterprise, cash-recovery is vital. Itâ&#x20AC;&#x2122;s the indispensable lifeline, so anything that can be done to promote speedy cash-recovery should be done. And chief among the do-ables? Timely invoices â&#x20AC;&#x201C; because a day without billing is like a day without sunshine! â&#x20AC;&#x153;Stu Woolley provides receivables management and coaching via Effective Receivables. Stuâ&#x20AC;&#x2122;s DIY-receivables book WHEREâ&#x20AC;&#x2122;S MY CASH?! is on the business shelves at Kingstonâ&#x20AC;&#x2122;s Chapters and Indigo bookstores.â&#x20AC;?

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COMING EVENTS “Off-shore Networking” Mixer Thursday, May 23, 5-7pm

Chamber Workshops Location: Innovation Park

Host: Kingston 1000 Islands Cruises, Island Star Sponsor: Adecco Employment Services Enjoy a cruise on the Island Star and build valuable business connections in a unique setting. We set sail at 5:30pm, and then feel free to join us on the patio at the Holiday Inn Kingston Waterfront after the cruise. Door prizes and more! Exhibitor spaces available ($125 plus HST).

We are pleased to offer several workshops over May and June, across such business aspects as HR, Finance and Sales & Marketing. Visit the events listing on our website to learn more about the specific seminars. We have seminars which are designed to provide value to each stage of business development – start-up, growth stage and mature businesses – so we encourage you to look for those that match where you’re at in your business, and register today!

Business Hall of Fame Inductee Breakfast Tuesday, June 11, 7:30 am – 9 am (registration 7 am)

Community Builders: Peter Splinter, Chamber Classic Golf Tournament! Spots Walter Fenlon still available for the morning flight, so conTables or individual tickets available for tact the Chamber to register soon! purchase, contact events@kingstonchamber.ca. Connect: The Business Expo

Host: Days Inn, Kingston Banquet and Conference Centre Sponsor: Bell Join us as we celebrate some of Kingston’s true business leaders and visionaries! In partnership with KEDCO, we are pleased to induct the 2013 group of honourees: Visionaries: John Molloy, Lily Inglis Enabler: Kathy Wood Mentors: Shai Dubey, Peter Swan

24th Chamber Classic Golf Tournament Thursday, June 20, 2013

(Formerly the “Mega-Mixer”) Thursday, September 26, 2-7 pm

Host: K-Rock Centre Presenting Sponsor: PrintFusion Join us for the region’s largest businessTee off times: 7:30am and 1pm to-business networking event! Establish Host: Colonade Golf Club new contacts and build upon your existing Presenting Sponsor: Thomson Jemmett relationships with close to 1,000 other motiVogelzang Enjoy a great day of golf with prizes, vated local business people. Exhibit spaces food, networking and more at the 24th still available.

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legal

Ask an employment lawyer: Fixed-Term Contracts cific end date. Such contracts are commonly used where the work is seasonal (such as for recreational programming), where an employee is hired to fill in for another employee on a leave (such as a maternity leave) or where there is a discreet project to be done (such as a software update and implementation). Many charitable and public sector organizations also use fixed-term contracts in order to protect against liability in the event that funding is not renewed. What are some of the advantages of a fixed-term contract? By: Andrea Risk

In our legal practice we often receive questions related to fixed-term contracts. It might therefore be helpful to briefly discuss this type of employment relationship and its advantages and disadvantages. What is a fixed-term contract? A fixed-term contract is a contract that has a specific start date and a spe-

There are several advantages to using fixed-term contracts. The most attractive advantage for many businesses is that the employment relationship is terminated at the end of the term with no advance notice or pay in lieu of notice being required. This would not be the case if the employee had been hired for an indefinite term (also referred to as a “permanent” employee). The Employment Standards Act contains an exemption whereby employees on fixed-term contracts with a duration of one year or

EMPLOYERS

less are not entitled to advance notice or pay in lieu. Similarly, the common law (i.e., court-made law) recognizes there is no requirement to provide reasonable notice of a termination (or pay in lieu) where the contract itself stipulates the end of the relationship. Other reasons for using fixed-term contracts include the ability to negotiate different terms than may exist for other employees, the need to hire specialized skills for a specific task and the opportunity to “test drive” employees before hiring them as permanent staff.

expectations and intent of both parties. Where there is ambiguity, the court will give the benefit of the doubt to the employee and will often find the employment to be permanent in nature. If an employer retains an employee beyond the end date of a fixed-term contract, and neither requires the employee to sign a new contract nor imposes other terms, then the employee will likely be seen by the courts as a permanent employee. The fixed-term nature of the relationship will have come to an end and a different, permanent relationship will have been created.

What are some of the disadvantagSimilarly, if an employee is retained es? on a series of fixed-term contracts then the nature of the employment, and the The case law is clear that a fixed-term expectation of the parties, may evolve. contract is created only by unequivocal In recognition of this, courts in these and explicit language. Because fixed- circumstances will often find that the term contracts allow employers to avoid employment is permanent and the emsome of the obligations that would oth- ployee is owed reasonable notice (or erwise have existed had the employee pay in lieu) of the employment combeen a permanent employee, the courts ing to an end. will scrutinize the contract carefully to ensure that it accurately represents the Questions also arise about the abil-

ity to terminate a fixed-term contract early. If the contract is silent about early termination, then the employer may be required to pay out the balance of the contractual term. While it was unclear whether an employee in such a situation would be required to mitigate his or her losses by searching for alternative employment, a 2012 decision of the Ontario Court of Appeal now seems to strongly suggest that no such duty would automatically apply in the absence of contractual language. Fixed-term contracts are useful tools for businesses to use when structuring their workforce to best meet the needs of clients, customers and stakeholders. As with any contract, however, careful drafting and clarity of expectations on both sides are critical. Andrea Risk is a lawyer with Cunningham Sawn, and practices in the area of labour and employment law. She can be reached at 613 546 8090 or arisk@cswan.com.

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Kingston Business Today - Monday, April 29, 2013 15


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