What is AB5?

New bills and laws are passed frequently that affect the inner workings of businesses, and small businesses in particular. One such law is California’s AB5 (California Assembly Bill 5) and is commonly referred to as the “gig worker bill.” Because the law is only in place in place in California, you may be thinking this article doesn’t apply to you, but think again: other states often follow the example of adopting refined business statutes, and the rules of AB5 could soon be finding its way into your state legislature. 

Of course, you may be wondering what AB5 is and what it entails. This law—which came into effect in California as of January 2020—makes it a legal requirement to now classify independent contractors as employees. There are a few exceptions, which will be explained, but the majority of people previously classified as independent contractors for a company now need to be considered official employees of the company. 

AB5 is important to understand, as it can create financial and personal liability for those not aware or those that ignore the law. 

Why is AB5 necessary? 

There are a few reasons AB5 was passed, a major one being tax efficiency. Previously, independent contractors were responsible for keeping track of their income and how much to pay in taxes instead of getting an employee W2 that makes filing taxes much simpler. The state sought to make the lives and business practices of independent contractors easier by passing AB5 and allowing them to receive a W2 from the business they provide services for.

Another important reason AB5 was passed is because independent contractors were missing out on the same benefits as official employees, including health insurance, paid sick or family leave, and more. Additionally, the rising prominence of the “gig economy” (work done in the form of task fulfillment) has prompted legislators to seek extra protection for gig workers. This has particularly impacted popular apps such as Uber and Lyft, who were previously able to dodge paying the usual costs of official employees. 

What are the AB5 exemptions?

AB5 includes a useful way to determine what independent contractors do not need to be classified as employees. It is known as the ABC test. 

The new law requires you to classify independent contractors as employees unlessall three of the following criteria are met, in which case they may remain considered independent contractors: 

A. The individual is free from the control and direction of the company in performing work, both practically and in the contractual agreement between the parties.

B. The individual performs work outside of the usual course of the company’s business.

C. The individual is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.

Many agree that the third stipulation (C) is the most relevant and important to recognize, although each stipulation needs to be addressed. An easy way to think of rule C is: does the worker have their own business, and do they offer services to any other businesses besides yours? If so, they are almost definitely an independent contractor. 

Hopefully, this article has helped simplify AB5 as a law, and you will be able to apply knowledge of who is exempt to better your business.

The US has been making a transition into a postindustrial society for some time now, in which creative service-based goods (as opposed to material goods) are the driving force of the economy. As waves of technological innovation continue to flood the marketplace each year, industries have had to turn to a new brand of financial expert for ideas. This expert, known as the “postmodern CFO,” must be capable of overseeing the transitional effects of post-industrialization.

The new skills postmodern CFOs have, or in other words, the ones CFOs must soon expect, include:

1. The ability to create business models that reflect market trends. This requires business and marketing expertise, and incorporates analytical skills.

2. The ability to attend to core financial responsibilities while also recognizing and reacting to customer/client feedback, as well as social trends.

3. With the influence that politics and media now have on modern economics, CFOs must have the ability to foresee the influence of external trends on business and finance.

Correct capital planning and sourcing can improve returns. Your sense of capital allocation will improve, having a clear company goal (investing or otherwise) in mind. Remembering a few simple things about effective capital allocation will allow you to overcome any plateaus in business growth.

The importance of having a well-defined investment strategy cannot be understated. If there are any problems with the company’s current investing practices, the problem should be rooted out at the source to prevent further complications. If the strategy does not incorporate most of the following elements for highly effective capital allocation, then a new strategy should be adopted:

1. A priority on investments. Having a defined marker for value. Define what exactly your company values and act accordingly.

2. A clear focus on where the company wants to compete.

3. An ownership mindset. This mindset keeps the company in mind.

Although human involvement remains a key factor in business development, recent studies may indicate that technology is--and always will be--the future of most industries. 56% of businesses have some established form of artificial intelligence (AI) that has increased productivity and allowed companies to cut back on expenses and resource their funds into more valuable growth opportunities.

Of course, it shouldn’t be assumed that technology is trying to replace anyone. In the professional world, technology should be thought of as a tool that’s there for business owners themselves to own and control. The evolution of technology, especially in the past decade, has expanded the field of business exponentially. Valuable labor costs have the potential to be refocused within one’s own business while productivity and returns are doubled. All of this is being achieved through AI.

The most informed CFOs should be well aware of the impact AI has on various fields of business. Besides its clear influence on any manufacturing-industry, AI itself is a promising market that serious business owners are not overlooking. Nearly 33% of major business owners are expected to invest between $500,000 and $5 million by this time next year.

AI’s strongest role is that of automation. Companies are often surprised by the number of tedious tasks that can be performed by AI, saving both time and money. The return of investment alone from investing in AI is enough to make investing a serious consideration. Keep in mind that the future of most jobs involves not how well conditions can be improved in existing circumstances, but how well the workplace will adapt to brand-new circumstances.

A good business model and a good marketing plan go hand in hand. They compliment each other like peanut butter and jelly--they may be fine on their own, but they taste much better together. Well-developed social media marketing in particular is a staple of modern business success. Whether you are new or seasoned in the marketing game, remembering the following marketing rules will allow you to reach your company’s goals successfully:

1. Not even the best marketing can improve a bad product or service.

Although experts have confirmed the fact that successful marketing ultimately contributes the largest amount of success to a business, it is common sense that people won’t want your business if it isn’t quality. Apple Inc. has arguably the most elegant marketing campaign of most businesses, but one can see how the effect of their marketing strategy would lose its touch if they technology wasn’t genuinely good.

Drawing people to your business is only the first step--drawing them back is the second and equally important step, and it all depends on their experience. Keep in mind that word-of-mouth remains one the biggest factors in a business’s success. Also keep in mind that higher quality products/services provide the freedom to increase prices, and depending on the success of your marketing campaign, substantially more profits.

2. People can sense authenticity and respond positively to it.

Any company people can trust is going to fare far better than a company they feel like they can’t. Even companies that offer better prices will probably do worse than competitors who appear more authentic and therefore more trustworthy. Honesty is a huge component of trustworthiness. If the consumers smell a fish in the water, it is time to re-evaluate.

Marketing is an opportunity to let your company’s voice be heard, and that voice should be real. This may be easier for small businesses, as they tend to come across as more caring, but one must remember large corporations have hearts as well. After all, they too started off as small businesses, and companies have roots. Business size does not have to be an indicator of ethics. Regardless, emphasizing the fact that your business is run by real people who are in it for more than the money will always attract more people to your cause.

3. Keep open ears--remember to listen and respond to consumers.

Have you ever been to a store where the employees treated you dismissively, or struggled to communicate with salty customer service reps? Odds are you did your business elsewhere from then on. As a customer (or client), there is nothing worse than feeling unimportant and unvalued. The saying “the customer is always right” has a definite amount of truth behind it. Whether or not the customer is a quote-on-quote “ideal” customer is not necessarily relevant--every last customer is of value to your business. You may consider employing marketing strategies that seek to respond to common customer concerns and re-establish any lost faith. For example, if consumers are concerned about the potential dangers of your product, post something or create an ad that clarifies it is safe or emphasizes the importance of safe use.

Additionally, anticipating what the customer might want or like ahead of time and giving it to them is a win-win solution. Ask yourself what your consumers would be pleased by--a new innovative product, perhaps, or even something as simple as having direct communication with the communication. The communication can be quite light-hearted. Have some fun with it! Make people know that you care about them and want to develop positive relations.

4. Look beyond the data.

If your company is trying to target a certain audience, and all your social media posts and ads clearly reflect this incentive, it is going to come across as selective. Nobody likes reading droll posts that only someone in the industry would understand, or sitting through a commercial that has nothing to do with them. Although they can’t technically be described as marketing, those annoying commercial run by lawyers targeting the few amount of people who might be able to take part in a class-action lawsuit are a perfect example of exactly what not to do when marketing; indeed, if you could list everything wrong with those commercials (such as impersonality and boringness) and create something that was the complete opposite, you would be well on the road to success.

Companies that appear to only care about drawing in certain people--regardless or not of whether they actually do--are not favorable. Even if your company is selling cat food, you should try to find a way to make the marketing accessible and open to dog owners, should they choose to get a cat. Appealing to everyone may be impossible but something as simple as throwing in the line “for pet lovers everywhere” could make all the difference. Otherwise, they have no reason to pay attention and will forget about you completely, when instead they may recall you later on and bring in business. As the experts teach, just one really effective ad can stay in someone’s subconscious and bubble up again when the time comes.

5. Make media content widely accessible.

This is a fairly simple concept but quite possibly the most crucial of all. When people have a need that your company can fulfill, it should be easy for them to find you. This means having a prevalent website that is connected to a variety of social media accounts, which are likewise all linked together. By strengthening the connections between different platforms--whether it be Facebook, Google, Youtube, email, television, etc.--you increase brand-name recognition, and therefore, success.