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5 Ways to Incentivise Employees Without Burning a Hole In Your Pocket

August 16, 2016

Small and medium-sized businesses are pitted against the likes of large multinationals in the battle for talent on a daily basis. Indeed, from salary budgets to fancy offices, it appears small businesses are on the losing end when it comes to attracting top talent.

That’s not to say small businesses should concede defeat!

According to the World’s Most Attractive Employers report for 2016 by Universum, today’s employees look beyond salary and monetary benefits when it comes to deciding if a particular job is aligned with his/her career goals and work style:

Source: World’s Most Attractive Employers, Universum (2016)

This means that there are opportunities for small businesses to be creative with offering employee benefits, without having to burn a huge hole in the balance sheet. The following are some popular ways:

1) Offer Employees Share Options

Your earliest team members take on a huge risk when they decide to work for you – they might have given up on alternative job opportunities and/or taken a significant pay cut, and joined your company at a stage where there was perhaps no traction, revenue, or in some cases, a validated product. Most of them do so in exchange for a share in your entrepreneurial dream, and it is not uncommon for founders to reward employees with shares by way of Options.

Employees are often offered this “sweat equity” in the form of an Option to Purchase Shares. First, you will need to put an Employee Stock Option Plan (ESOP) in place (also known as a Share Option Plan). The ESOP sets out qualifying criteria for employees to receive the option, which is comparable to a bonus scheme, when they can “exercise” the option, and what happens if they leave their employment.

With the ESOP in place, you can then have a discretion to give your employees to an Option to Purchase Shares in your company at a set price with an expiry date of, say, 1 October 2017. This means that, at any time before 1 October 2017, the employee can pay the company the offered price and require that the company issue him shares. In other words, the employee effectively buys the shares at a discount, making the Option to Purchase Shares akin to a bonus.

Read more:
Key clauses to watch out for in your ESOP

2) Be better than minimum requirements under the Employment Act

Most employment laws mandate that employers must provide the following types of leave to eligible employees:

  • Adoption leave
  • Annual leave
  • Childcare leave
  • Maternity leave
  • Paternity leave
  • Shared parental leave
  • Sick leave
  • Unpaid infant care leave

As employers, you have the option of offering employment terms and conditions that are more favourable (but not less) towards employees. This means that on top of the minimum for the mandatory leave options listed above, you can additionally offer employees extended breaks, or even birthday leave, marriage leave, and compassionate leave.

All of these should be clearly set out in an Employment Contract or Employee Handbook.

Related reading: Amendments to Employment Act effective 1 April 2016 requires KETs to be set out in Employment Contracts

3) Allow flexible work schedules

Do you require that employees report to work at 9:00am every morning? Do you then just have a team of clock watchers who leave the office at 6:00pm sharp everyday?

Remember this:

Productivity = Output
Output ≠ Time spent

At Dragon Law, we are made up of a diverse team of students, millennials, moms, dads, and travellers… we understand that sometimes you just need to take an afternoon or two off to attend a night class, pick up the kids, go to the bank… and we trust them to do so because we measure productivity by level of output and not by the amount of time spent in the office.

Trust your employee to work from home and he/she may even be able to do more without all the unnecessary distractions from those who pretend to be busy in the office!

If you are sold to the idea of flexible work hours, but are put off by the additional administrative hassle, consider using cloud tools such as Deputy or Zeus that can help you schedule and track employee time and attendance, and improve workplace communication.

Plan your workforce budgets, create employee schedules and notify staff in just one single click with Deputy.

There are even organisations such as the Remote Year that organise year-long remote working programmes and encourage both startups and Fortune 500 companies to get on board with the remote-working philosophy.

Michael Katz said in a memo to his former employees at Interclick before it was acquired by Yahoo, “Treat adults like adults and they will behave like adults. Rules are for children.” Do you trust your employees to have flexible work hours?

4) Beyond work, remember to have fun as a team!

Small businesses have the advantage of being, as the name suggests… small. This is actually the best time to organise team building activities – consider that it will not be long before it becomes too expensive or too much of a logistical nightmare to go on a company trip!

If setting aside a budget for overseas travel is still going to be a problem, consider local providers such as the Mega Adventure. It is not all fun and games; their team building programmes are led by experienced facilitators and promise tangible results:

  • Improved team cohesiveness
  • Heightened leadership skills
  • Developed problem solving ability
  • Enhanced creative thinking
  • Encourage intelligent risk taking

Source: Mega Adventure (see programmes)

5) Consider flexible benefit schemes

Traditional employee benefit schemes provide the usual mix of health insurance packages, like coverage for medical and dental expenses for example. The problem with a “blanket” coverage is that it could be great for some but not for others. Budget spent on unutilised coverage is as good as money gone down the drain. For instance, some employees may already have their own insurance coverage, or are covered under a spouse’s plan, and rather have gym membership as a benefit instead. Companies know this, but find flexible benefit plans too difficult to implement, and hence concede that they can’t please everyone.

Companies like ConneXionsAsia (CXA) have identified this problem and offer a solution that “allows employees to shift their unused insurance dollars to prevention, while helping employers to cap their premium inflation”. With CXA, employees can convert unutilised insurance dollars into “benefit dollars” that can be used to redeem other discounted health, insurance, and wellness services from CXA’s online marketplace, or other company-approved flexible benefits. Additionally, CXA partners with an ecosystem of insurers and a number of high-quality wellness vendors including fitness studios, medical practitioners, health screening organisations and disease prevention associations.

Talent today have plenty of options – similar to how you are learning to adopt a customer-first approach in your sales and marketing efforts; the same employee-first mindset should be adopted when it comes to attracting and retaining the best talent for your company.

 

Start drafting:
Legal documents for rewarding staff

 

What other perks do you offer in your company that your employees absolutely love?

Tell us in the comments below!

#DragonTips (updated weekly!)

August 11, 2016

 

Every Monday, we share a quick tip on our social media platforms, including our Facebook and Twitter pages. Ranging from advice on the type of legal documents you’ll need for running your own business to updates about the latest changes in the relevant laws and regulations, we’ll help you stay on top of things. Don’t worry if you missed it, because we’ve got it all covered for you in this post that will be updated weekly!


What constitutes personal data under the PDPA

The following constitutes personal data under the PDPA:

  1. Full name
  2. NRIC or FIN number
  3. Passport number
  4. Photograph or video image of an individual
  5. Mobile telephone number
  6. Personal email address
  7. Thumbprint
  8. DNA profile
  9. Name and residential address
  10. Name and residential telephone number

Ensure your company does not breach any PDPA regulations:


Obtaining funding from private investors

A popular way to obtain funding for many startups is through private investors. Common ways an Angel Investor or Venture Capitalist may invest in your company include:-

  1. Ordinary Shares
  2. Preferred Shares
  3. Convertible Note
  4. Simple Agreement for Future Equity (SAFE)

Download our free eBook on to learn about the pros and cons of each mode of financing:


Registration of transfer of shares should be accompanied by a Share Certificate

It is a legal requirement in many jurisdictions, including Hong Kong and Singapore, to provide shareholders with a Share Certificates as evidence of their shareholding. No transfer of shares should be registered unless accompanied by the Share Certificate. This provision protects both the shareholders and the company.

Create a Share Certificate online today using our web app:

Learn more about a Share Certificate


Ensure key documents are in place when starting & running your business 

Business owners might not always be aware, but the following are essential legal documents for starting up and running a business:

  • Intellectual Property Assignment Agreement: A contract for an individual or company to transfer the ownership of its trade marks, copyright and any other IP rights to another business or individual
  • Non-Disclosure Agreement (NDA): Also known as a Confidentiality Agreement or Secrecy Agreement, the NDA is a legal contract that creates a confidential relationship between the parties to protect any type of confidential business information
  • Term Sheet: A term sheet is a preliminary document that will include the key terms of an investment in a company, including the agreed-upon valuation of the business, the proposed capitalisation table, the key financial and legal terms, and the rights of the company and the investors.
  • Website Terms of Use: Certain businesses will require a set of rules that inform people of the conditions that apply to them when they use your services or website.
  • Privacy Policy: A privacy policy will inform your customers how this information will be used.

Create more than 100 legally binding contracts using our web app:


How to find out if a VC is right for you

A popular way to obtain funding for many startups is through private investors. Here are some questions you could ask to find out whether the VC is a good fit:-

  • Does the VC have a track record of investing in similar businesses?
  • What expertise do they bring to the table?
  • Can they bring you access to a wider investor network?
  • What is their exit strategy?
  • What level of day-to-day involvement or board representation do they wish to have?

Learn more about fundraising for your start-up:


Key changes to the Employment Act from 1 April 2016

On 1 April 2016, the amendments to the Employment Act of Singapore came into effect. To ensure that their businesses comply with the Employment Act, employers will be required to:

  1. Issue key employment terms (KETs) in writing to employees covered under the Employment Act
  2. Issue itemised payslips to employers covered under the Employment Act
  3. Maintain detailed employment records of employees covered under the Employment Act

Source: Ministry of Manpower Singapore (read more)


Do away with an AGM by passing a resolution (only in Hong Kong)!

In Hong Kong, a company is required to hold the first Annual General Meeting (AGM)  within 18 months from the date of incorporation. Subsequent meetings must be held every calendar year with an interval of no longer than 15 months. Alternatively, a company may pass a resolution to remove the need for an AGM. Resolutions that are typically voted on at an AGM may be passed in written form.

Find out how to do with less AGMs in your Hong Kong company:

Learn more


Remember to hold regular AGMs for your company in Singapore

In Singapore, a company is required to hold the first AGM within 18 months from the date of incorporation. Subsequent meetings must be held every calendar year with an interval of no longer than 15 months. For a private limited company, this must be within 6 months of a company’s financial year-end. For a publicly listed company, this must be within 4 months of a company’s financial year-end.

Find out when you will need to hold an AGM for your company in Singapore:


Attract talent using an Option to Purchase Shares

A start-up is only as good as the talent it attracts. One way to incentivise your employees is to use share options. An Option to Purchase Shares offers employees the option to purchase shares from the company at a pre-determined price. It operates as a type of security that gives the holder the option, but not the obligation, to buy the shares at a particular price. 

Create an Option to Purchase Shares using our web app:


Use a Letter of Intent when negotiating with a supplier

A negotiation may reach a stage where parties are not ready to sign a contract, but they want to have a summary of what has been discussed regarding what the future contract will be like. A Letter of Intent can be useful in this situation.

A Letter of Intent:

  • Summarises what was discussed in a meeting;
  • Mentions how further negotiations shall be conducted; and
  • Sets a deadline for a final agreement to be reached

Use a Letter of Intent when:

  • In early stage negotiations with a supplier;
  • When preparing for a joint venture; or
  • In general scenarios when both sides are bringing something to the table

Create a Letter of Intent using our web app:

Learn more about the Letter of Intent


Get rewarded for productivity with Singapore’s PIC scheme

The Productivity and Innovation Credit Scheme was introduced to encourage productivity and innovation activities in Singapore by providing support to businesses that make investments to improve their productivity.

What criteria must by business fulfil in order to be eligible for the cash payout option under the PIC scheme in Singapore?

  • Have an active business operation in Singapore
  • Incur qualifying expenditure and be entitled to PIC during the basis period of qualifying Year of Assessment
  • Meets the three-local-employee condition
  • Minimum qualifying expenditure for each cash payout option application is $400

Set out a Consultancy Agreement when freelancing in Hong Kong

Also known as a Freelance Agreement or Freelance Contract, a Consultancy Agreement sets out the relationship between your business and an independent consultant or advisor and clarifies what you expect from the consultant. If you are a freelancer looking for work in Hong Kong, be sure you establish a Consultancy Agreement that includes:

  • Pay
  • Hours
  • A confidentiality and intellectual property clause
  • Details on how to end the relationship

Create a Consultancy Agreement using our web app:


For foreigners looking to set up a company in Singapore

A foreigner who wants to set up his own company in Singapore is required to appoint a Resident Director locally. The foreigner can continue to reside outside of Singapore during the set-up. If the foreigner would like to be present in a Singapore during incorporation, he is strongly advised to seek approval from the Ministry of Manpower (MOM) before registration.

 


Advantages of registering a trademark in Hong Kong

Although not compulsory, there are some advantages to registering a trademark for your business in Hong Kong:

  • Deterrent against unauthorised use;  
  • Assists in blocking competitors from similar registration;
  • Simplifies procedural requirements for enforcement;
  • Eases the seizure of infringing goods; and
  • Helps with licensing

Appoint a secretary for your company

According to Section 171 of the Singapore Companies Act, a company is required to appoint a company secretary. Private limited companies need not appoint a professionally qualified secretary. However, a secretary must still be appointed. Public companies must appoint a professionally qualified secretary.

Source: ACRA Singapore (read more)


Apply for the correct visa and work permit depending on whether your latest hire is an independent contractor or employee

Depending on whether your latest hire is an independent or employee, he or she may have certain entitlements, such as medical insurance, annual leave, and housing allowance.

Here are the key differences between a contractor and an employee:

Contractor Employee
Has a client-contractor type of relationship Has an employer-employee relationship
Contractor carries out business on their own account Employee does business for the employer
Not covered by the Employment Act May be covered under the Employment Act
Statutory benefits do not apply Includes terms of employment such as working hours, leave benefits, etc

Source: Ministry of Manpower Singapore (read more) 

Get your HR law questions answered with our FREE eBook: 

Download your free eBook here

Essential Legal Considerations for Online Marketplaces

August 9, 2016

Are you an “online marketplace”? Online marketplaces are all the rage lately, with every startup aiming to be the next unicorn.

Online marketplaces serve as a platform for the buying and selling of a third-party vendor’s goods. In other words, online marketplaces merely facilitate transactions and, most of the time, do not own any goods or services themselves. This means that legal considerations for online marketplaces can differ from that of a regular business.

There are a few fundamental issues you must consider for your online marketplace: (more…)

7 Steps to Shipping Like a Pro

August 2, 2016

The ability to efficiently transport goods, parcels, and/or documents from one point to another is vital towards the success of many businesses today. But international shipping can involve many complications – such as hidden import taxes, VAT, GST, and fees. Is it worthwhile for you or your employees to take hours off to do the initial research and evaluation work?

According to a McKinsey Global Institute report, the average employee spends 1.8 hours every day – that’s 9.3 hours per week – searching and gathering for information.

That’s why we have teamed up with Easyship this week to feature their 7-step guide on how to ship like a pro, saving time and money. Not only that – we want you to get your shipping done right so you can get your package shipped and delivered without any complications.

STEP 1: ESSENTIALS

Before you start shipping, make sure you have the following details confirmed. Don’t skip this step, because it is important to get the basics down from the start.

Determine the ‘category’ of your item – is it a document? Does it contain any batteries? There are hundreds of categorisations of products and it is important to categorise accurately, as this will affect the customs regulations, taxes, and duties.

Next, determine the delivery time that is suitable to you. If you’re having trouble getting and comparing delivery times for multiple couriers at once, use this shipping rate calculator tool.

Finally, confirm the recipient details – you will be surprised how many packages end up undelivered as a result of an error in the recipient’s address. Make sure the contact person’s email and phone number are accurate so that the courier can reach the recipient in case of any delivery problems.

STEP 2: REGULATIONS AND REQUIREMENTS

Research the country-specific regulations for your shipping destination and look up the rules on your item. Certain categories, such as food and nutrition products will be subject to different regulations depending on the country. In order to ship these items, you may need to acquire permits or complete specific forms.

Pro tip: Here’s a quick and easy search tool by UPS that allows you to look up the regulations for all countries: UPS Country Regulations

STEP 3: COMPARE, SELECT AND SHIP

Take time to compare different courier services to find one that suit your needs.

Here are some suggested factors that are important to consider:

  • Shipping cost
  • Quality of tracking
  • Delivery time

In particular, if you are a business owner shipping a package to a customer, your brand reputation should not be at risk due to delivery issues. Be sure to choose a reliable courier!

At this research stage, you should be aware that all major courier services will provide online tools that allow you to get a quote for your shipping. However, you will find that many of these online ‘get a quote’ tools do not include a lot of ‘hidden fees’, for example: fuel surcharge, remote areas charge, taxes and duties, and other surcharges for shipping.

Next, you need to create a shipment through the courier service. Decide if you or your recipient will pay for the tax and duties and the shipping costs. If the recipient will pay for the tax and duties, make sure you inform them of the costs so that there are no surprises!

Resources:

  • Get a quote for shipping with select major couriers here: DHL, UPS, FedEx, TNT
  • Our platform, Easyship, allows you to compare 80+ couriers at once.

 

STEP 4: LABELS AND DOCUMENTS

You’re just about ready to ship! Before you go ahead, carefully fill out and print out all the labels.

Essential documents required include:

  1. Air Waybill
  2. Commercial invoice
  3. Customs declaration form
  4. MSDS document for dangerous goods (including battery declaration)

STEP 5: PACKAGING

Place your item in the right-sized container or envelope. Couriers will compare the dimensional weight and the actual weight to determine the final weight used to charge your shipment. An oversized container will add extra weight and dimension, which will increase your shipping cost.

Tips:

  • When shipping delicate items, be sure to add cushioning and request a ‘Fragile’ sticker from your courier representative
  • Express couriers charge by volumetric weight that takes into consideration the dimensions of the product.
  • Using packaging tape, tape the top and bottom sides of the container using the H taping method

Watch this useful instructional video on how to pack your item.

STEP 6: COURIER HANDOVER

You’re all set to go! Does the courier offer pick-up services? If yes, commit to the time. If you request a pick-up at 8:00am, make sure you already have your item packed, wrapped, and ready to go with all the necessary labels and documents. If not, check the nearest drop-off location and head over during their opening hours with all of your packages, labels and documents.

STEP 7: TRACKING

Be proactive and track your shipment online using the shipment tracking ID provided by the courier. You might also want to send the tracking ID to your recipient so they can also access real-time shipment information.

Tip:

  • Express couriers generally provide higher quality tracking information and much better customer service!

Looking where to start? Let us do the job for you at Easyship. With our one-stop online platform, you can now complete all the shipping steps from start to finish in one place. At Easyship, we make international shipping easier than ever before.

 

This is a guest post brought to you by Jessica Yeung at Easyship and edited by Dragon Law.

Jessica is an expert in the area of international shipping. Jessica heads Partnerships and Business Development at Easyship and is the Host and Founder of Easyship Academy workshops.

About Easyship

Easyship is your one-stop shipping partner. Our mission is to make international shipping easier than ever before.

Save costs by comparing 80+ couriers, select and ship with up to 70% discounted rates. Save time with ready-to-go shipping documents and calculated tax and duties. Expand your online business and sync your online store.

No sign-up fees, no cancellation fees, no service or handling fees.

We enable individuals, small businesses and corporations to ship from one side of the world to the other without any worries.

Sign up here for your FREE account.

Questions? Contact us at sales@goeasyship.com, Facebook, or Twitter

Fundraising via Convertible Note, Explained

July 29, 2016

Most businesses will require some sort of seed investment before they can enter into the next stage of growth. However, you want to be careful not to give up too much control over your business when raising funds.

Before you enter into negotiation processes, you want to be fully-aware of your own leverage. If you have a clear idea of what’s at play in a fundraising discussion, you will be able to negotiate a better deal for your startup.

Fundraising via convertible note has become increasingly popular among startups today. But do you know how convertible notes work?

Let’s get started with the basics:

What is Convertible Note?

A convertible note is a form of short-term debt paid back in equity. The investor puts cash in your startup and receives discounted shares when you issue shares at a later point. In other words, they don’t “own” part of your company just yet – this essentially means you get to retain control. At the same time, the investor is still considered a debtor. As such, they can set a maturity date for the loan and reclaim money later if you decide not to issue shares. Raising funds via a convertible note is therefore a popular alternative to SAFE financing and equity financing. Let’s compare the three:

To issue a Convertible Note, you will need these 3 documents:

  1. Convertible Note Term Sheet: This document summarises the key terms of the agreement between a startup and investors. It is generally signed at the beginning of the transaction once preliminary terms of the financing have been agreed, before commencing detailed due diligence and drafting of definitive agreements.
  2. Convertible Note Purchase Agreement: This document governs the key terms of the sale and purchase of the convertible debt. It is the legally-binding contract that governs the convertible note agreement.
  3. Convertible Note Certificate: A deed confirming the purchase by the registered holder of a convertible note instrument. It is a written promise to repay the debt at a specified time through equity (shares).

Read more: Download our free eBook on Early Stage Funding

Here’s a (simplified) example of what a Convertible Note Agreement might look like:

After negotiation, your investor agrees to provide you with $200,000 in seed funding. In return, you give him a convertible note that converts during Series A funding at a 20% discount rate. In other words, when you raise your Series A funding, he will get $200,000 worth of stock at a 20% discount.

Now, let’s imagine your startup gets a $5 million post-money valuation during series A funding. To get 30% of your company, VCs put in $1.5 million.

If your seed investor were to invest in Series A, $200,000 would get him only 4% of your stock. However, because he invested early, he gets a 20% discount on the stock, and thus ends up with 5% of the stock instead – $50,000 extra worth of equity.

What are the most important variables of a Convertible Note Agreement?

The three most important variables in a Convertible Note Agreement are the investment threshold, the valuation cap, and the discount rate.

The investment threshold denotes when the convertible note executes – that is, when the investor gets his equity. Usually, the threshold is set as a specific amount; for example, when the startup raises $1 million or more. It could also be executed at a specific time; for example, when the startup raises money through Series A funding. In most cases there is no practical difference between the two, as the note executes in Series A irrespectively.

The discount rate outlines how much reward the investor gets for taking the risk to come on board early. In the above example, the 20% discount rate meant that the investor walked away with 5% of your equity instead of 4%.

The valuation cap protects the investor from getting their investment too diluted when your startup takes off. In the example outlined above, the investor ended up getting a 5% equity share. But should you have been valued at $50 million, they would have received only 0.5% share in your company – even if they backed it first! A valuation cap ensures the investor that they’ll get a large enough equity share.

So how does a valuation cap work?

Your company gets a pre-money valuation during Series A funding. If the pre-money valuation exceeds the valuation cap, your investors gets the opportunity to execute the convertible note and are entitled to negotiate for a pre-fixed stake in the Convertible Note Agreement.

The following graph, created with formulas from Martin Kleppman’s blog, illustrates:

As you can see here, low VC investment means that your seed investor will benefit from the discount. By investing $1.5 million, as in the above example, he gets a 5% stake. But as your valuation grows and VCs put in more money, your seed investor’s stake dilutes. A valuation cap puts a floor to the degree of dilution.

You may also notice how a low valuation cap favours the investor. Founders and VCs investing in series A, on the other hand, benefit from a high valuation cap. The lower the valuation cap, the more likely you will hit the “floor”, and your seed investor gets a relatively large share of your company at a very low price.

Other common terms in a Convertible Note Agreement

Two other terms often included are the interest rate and the maturity date. As the convertible note is technically a loan, investors could charge you interest, and thus receive slightly more shares when the note converts. A maturity date is included so that the seed investor knows he will get money back should your startup delay or decide against Series A funding.

A good understanding of the Convertible Note Agreement is a great way to strengthen your hand in a negotiation with a seed investor.

Another way to strengthen your negotiating position is to make sure you have all your legal documents and processes in order. For starters, ensure you have a Confidentiality Agreement in place before you enter into any fundraising negotiations. Start drafting your Confidentiality Agreement with a Dragon Law free trial.

Sign up for a free trial. No minimum commitment, no credit card details.