Preparing Your Business for a Minimum Wage Hike
Labor is an employer’s greatest expense, so when a proposal to raise minimum wage comes up, it can be very stressful. Fortunately, the end ramifications of a minimum wage increase aren’t as severe as you might think—and there are plenty of steps you can take to ensure your company is ready for the change. Here are some tips on how to prepare for a minimum raise hike.
Evaluate the Upcoming Changes
The first thing you should do when a minimum wage hike is imminent is figure out exactly how much wages will increase. For example, federal minimum wage is currently $7.25/hour, but the White House favors a bill that would raise it to $10.10/hour; should that bill come into effect, the following would have to change:
- Any employees making minimum wage would have to see an appropriate raise
- You would have to reevaluate any employees making above minimum wage (e.g., competitive salary) for a new pay scale
- People above and below you in the chain of command would need to have their pay scale adjusted
- You would have to reconsider your overtime protocols (or, depending on your budget, restrict them entirely)
- You would have to reprice your products and/or services
You would also have to look at your competitor’s pricing, then consider whether you could afford to match or undersell them.
The next thing you need to do is take stock of your company’s weaknesses. If you have any areas of inefficiency or superfluous services, you should consolidate or otherwise minimize them, since the wage increase will tighten your hourly spending. For example, paying two employees an hour’s wage each to do a job that one employee could feasibly perform in an hour and a half is inefficient; an extra half an hour of savings here and there will quickly add up.
You can also consider outsourcing appropriate tasks and redirecting employees in those areas to more crucial processes. Although freelancers and contractors are more expensive per hour than your regular employees, you’ll end up saving money in the long run, and you’ll be able to retain your employees in the process.
Rethink Your Hiring Strategy
While you’re allocating existing employees to more efficient areas, you will need to revise your hiring strategy for maximum efficiency as well. Especially in the wake of a minimum wage hike, you can’t afford to take risks with employees. This is a good time to ask for employee referrals, since you want someone who can seamlessly integrate into your team at a moment’s notice.
You should also consider implementing more employee incentives. As strange as it may seem—spending more money than usual when, in fact, you have significantly less—this is a crucial time in the hiring market for both you and your competitors. Giving your employees a raise or extra incentives will help your retention rate during this tumultuous time.
Abacus Payroll is ready to help your transition to a higher minimum wage be as smooth as possible. For any questions regarding minimum wage or other payroll concerns, call Abacus Payroll today at (856) 667-6225.