Case Study 1
Employee Trade Benefits

John Locke, owner of Marshall’s Formal Wear, in Edmonton, Alberta was having difficulty retaining staff and differentiating himself from other potential employers within the Edmonton market.  John was discussing this with his Trade Broker and she came up with an idea that could help John hire and retain his staff.

For this case study John’s cost of goods sold is 25%, which includes his cost to rent formal wear from his supplier and for cleaning the formal wear when it is returned.  John joined as a Tradebank Classic Account.

Employee Retention Through Trade $ Benefits
An affiliate account* was opened for each employee. Once the employees received their cards they would be able to spend at any of a number of businesses on the Tradebank network. The employees were asked to sign the affiliate application in order to receive their affiliate cards. A meeting was then held with the employees to discuss how the Trade $ Benefits would work. During the meeting, the Trade Broker showed them how to logon to myTradebank and view their accounts, the client directory and classified section.

The Process:
John gave the affiliates the right to spend as much as they wanted to on their trade account. During the following month their cash pay would be reduced by 75% of their spending the previous month. [eg. Bill Smith the tailor spends T$500 on restaurant meals and his wife going to the spa during February. In March his pay is reduced by $375 over two pay periods.] Thus giving the employees a bonus for utilizing trade instead of cash. He found that for his business this was the right level of incentive and cost savings. The minimum reduction (i.e. maximum bonus) John could give and still be breakeven on the transactions is 42%.

ONE EMPLOYEE'S INCOME ANALYSIS (ASSUMES EMPLOYEE WAS 10% OF TOTAL T$ SPENDING)
		VALUE W/TRADE	VALUE W/O TRADE
Salary		$32,000	$32,000
Trade Benefit		$2120
Reduction in Salary		$(1590) __________	__________
Net Before Tax, EI, CPP		$32,530 __________	$32,000 __________
Effectively introducing trade is a 7.7% raise. Also, the Trade Benefit is not an insurable earning (ie no EI charged to employee or employer - another approx $30 savings for the employer and the employee on $2000)

At the end of each month, Tradebank would transfer dollars from Marshall's Formal Wear's account to each of the employees accounts to balance out the purchases that they had made that month. John agreed to ensure tha his account had enough dollars to cover two months of his employees spending so that he would never create deficit. This was first established at $5000 trade and would be reviewed regularly. In any case where the affiliate was spending more than $500 trade the transfer from the main account would happen during the month. [note: all of the terms were written into a one page agreement and signed by Tradebank and John Locke]

EMPLOYER COST ANALYSIS
		CASH	TRADE
New Business			$21, 200
Cash Fees		$(2590)
Cost of Goods		$(5000)
GST Remitted		$(1200)
Employee Utilizes the Trade			$(21,200)
Reduction in Cash Payroll		$15,900 __________	_________
Net Savings		$7110 __________	$0 _________

INCOME STATEMENT ANALYSIS
		W/TRADE	W/O TRADE
Revenue		$800,000	$800,000
+ Trade Rev.		$20,000 __________ $820,000	__________ $800,000
COGS		$205,000 __________	$200,000 __________
Gross Profit		$615,000	$600,000
Marketing (cash fees)		$2,590
Admin. (incl. Payroll)		$525,300 __________	$520,000 __________
Net Income Before Tax		$87,110 __________	$80,000 __________

Some of the items the employees used the trade dollars for were:

• Dentist
• Chiropractor
• Hair Salon
• Spa
• Restaurants
• Golf
• Gifts
• Glasses

*Affiliate Accounts
There are no charges on an affiliate account - the cash fees are charged to the employer on the transfer of trade dollars to the account. An affiliate account can only receive funds from its parent account (ie cannot sell into the system) and can purchase. Affiliate accounts are not allowed to go into deficit. If the parent account is cancelled the affiliate accounts are cancelled as well. As part of the affiliate application the parent company takes responsibility for the affiliates purchases (ie funds can be transferred from the parent company account to affiliate account if the affiliate account overspends.)