Employee Purchases, Consignments and Trade-ins

For the company to be profitable it must make more than 38% gross margin on all merchandise and repair sales. When the company sells items for 10% over cost (or adjusted cost) it is losing money because overhead costs are not covered by the 10% profit. In spite of this fact, we offer an employee discount on most merchandise and repairs to our employees as another benefit of employment.

The purpose of employee-purchase pricing is so that the employee, not a friend or family, can enjoy our products and by wearing and showing them, help to advertise them to others. The employee is not to purchase items at the employee discount to give to others. There are different discounts offered for gifts and family purchases.

The communication lines of the company belong to the company. Individual employees are not to profit personally from these communication lines. For instance, making a buy “off the street” (second hand directly from a retail customer) at a cheap price with the intention of buying it personally at a cheap price is unacceptable. Neither are employees to buy, either for cash or on credit, items directly from any of our suppliers, off the street, or from Michel (a wholesaler, a friend of the company and Leo’s partner in the LLC that owns this building).

Employee-Purchase Discount

The employee purchase price only applies to full-time employees who have completed the 90-day introductory period. Part-time employees may CSW for purchases and will be given a good price, although not the full-time employee purchase price.

The general rule for calculating employee purchase price is 10% over adjusted cost. If you are paying by credit card or financing, you must also include the credit card fees or financing fees on top of the 10%. Ask Accounting for current fee schedule at time of purchase.

To calculate 10% over adjusted cost, use the following math: Take the adjusted cost, divide by .90, and then add credit card/financing fees and sales tax.

Include this math in your CSW (see below).

What Cannot be Purchased by Employees

Not everything in the store is available for employee purchase. Items that are unusual, rare or hard to replace may not be available for employee purchase. For example, some estate pieces may be considered irreplaceable, or have a lot of profit potential when sold to a customer. Coins, bullion, or anything similar are not available for employee purchase – the paperwork costs more than the profit the company makes from the coins (and coins can be purchased at a local coin shop for the same price). Any item that is such a low price that the cost of writing it up exceeds the profit is not acceptable.

Employee Purchases of Hearts On Fire™

As we want to widely promote Hearts On Fire™ Diamonds, employees may purchase HOF diamonds for themselves, their spouse, or fiancé(e), at cost plus shipping. No 10% is added.

Employee Purchases of New Watches

The employee purchase of a new watch is calculated the same way as any other employee purchase, by taking the adjusted cost plus 10% (calculated as above, adjusted cost / .90) and adding credit card fees and sales tax. If the watch company offers an employee discount, then this acts as the adjusted cost.

Employee Purchases of Gifts for Others

Employees will not be given employee prices on items to be used as gifts. Inexpensive items cost the company as much as 100% over the actual cost because of the cost of ordering, inventorying, and accounting.

Employee gift items with a cost of $200 or less are priced by dividing the cost, including shipping, by .62 (example: $50 /.62 = $80.65) and then adding credit card fees and sales tax.

Gift items with a cost over $200 are priced by dividing the cost including shipping by .90 and then adding credit card fees and sales tax.

Family Discounts

One can sell jewelry or watches (not repairs) to a family member at a 25% discount off retail with no commissions paid. A “family member” is defined as parents, grandparents, your children or grandchildren, brothers and sisters and their spouses as well as cousins, nephews and nieces, aunts and uncles, and ex-wives or ex-husbands. No credit card fee is paid on family purchases.

Friends Discounts

There is no automatic discount on purchases by friends. Friends should be shopping here because you work here and because we will give them excellent service. But you may give a $100/$500 gift card to friends if the purchase price of what they are buying is over $500. If a friend wants to make a purchase of over $1000 then you may CSW for a discount.

Repairs Discounts

Repair services for watches, jewelry, and new custom work are offered to employees at 30% above total cost (labor plus metal and/or parts provided). This is calculated by dividing the cost by 0.70. Rhodium plating starts at $15 per item* for employees but will be determined based on size of item and labor needed. Batteries start at $7 each or 30% above Nam’s price to us, whichever is higher.

Estimates are approved by the repair manager and the COO via CSW. Completed employee repairs are rung up by the repair manager or COO with “employee repair” selected as the Contact Source for first purchase only.

For friends or family, a 20% discount off LHFJ retail is offered. The repair is taken in the normal fashion with the retail estimate and the discount noted in the job notes. The discount will be deducted when the job is managed in the repair department.

Repairs for friends and family always stay on regular repair lines. Employees should not write the repair up in the employee’s name but always in the name of the friend or relative.

* Item refers to one solid piece to be polished and dipped, or a pair of small earrings. Rings soldered together are one item. A wedding set of two separate rings is two items.

Employee Appraisals

The discounted rate for appraisals done for employees from San Diego Gem Lab is $90 for the first item and $55 for each additional item.

Submitting the CSW

To make a discounted purchase, write a CSW with all data including stock number, item description and showing all price calculations including adjusted cost, markup, credit card fees if any and sales tax. Indicate how you will pay (cash draw, personal check, credit card, store credit, layaway, financing, etc.). The completed CSW is routed to the Inventory Manager to verify the data. The IM may reject the CSW if the item is deemed to be inappropriate for employee discount, and/or is priced incorrectly. If even one thing is not correct, the CSW is returned and must be corrected by the employee before resubmitting.

1. Once the IM certifies that the CSW is correct and complete it is routed to the COO for final approval.
2. Once approved the CSW is forwarded to the Accounting department to verify the math is correct, ring up the purchase, and collect the payment. Employees are not to ring up their own purchases so that we can have this final check that all the numbers are correct.

Employee repair purchases also need to be requested by CSW same as above and approved by the Repair Manager first and then forwarded to the COO. The approved CSW is included in the repair baggie and attached to the invoice when rung up by a Repair department employee. The Repair department ensures that the price on the repair equals that on the CSW.

General

ALL EMPLOYEE SPECIAL ORDERS ARE TO BE PAID IN FULL IN ADVANCE. THEY ARE NOT TO BE PAID FOR WHEN THEY ARRIVE. ALL EMPLOYEE PURCHASES AND REPAIRS ARE TO BE PAID IN FULL BEFORE THEY ARE DELIVERED. The Inventory Manager (Repair Manager in the case of a repair) is to verify that full payment is made before any item is ordered or released to the employee or family member. No special orders are to be made directly by the employee with any vendor. The order must be routed through the Inventory Manager.

All employee trade-ins and consignments need to be requested by CSW to the Inventory Manager and authorized by the COO as above.

Examples

• Employee purchase for self = adjusted cost ÷ 0.90
• Employee purchase of new watch = adjusted cost ÷ 0.90
• Employee purchase for gift of/under $200 = adjusted cost ÷ 0.62
• Employee purchase for gift over $200 = adjusted cost ÷ 0.90
• Family purchase = retail − 25%
• Employee repair = adjusted cost ÷ 0.70

Add credit card or financing fees if used plus sales tax.

Statistics

Except for family sales, discounted sales are not counted on the salesperson’s sales statistic. They are invoiced using the Store E-Code 70 and only rung up in the Old Town location in Business Mind (never in the Wholesale location). Employee repairs are invoiced using the appropriate Repair E-Code.

Employee Gift Certificates, Christmas Bonus Certificates, Employee of the Month, and other Rewards of Merchandise Equivalent

Employee gift certificates, Christmas bonus certificates, Employee of the Month certificates and other rewards of merchandise equivalent cannot be used on special orders or memo goods. The COO will have final say on what may or may not be purchased using these certificates. Sometimes the store needs to keep a particular item that is unusual or in demand and cannot allow an employee purchase.