The minimum wage debate has been on the radar of workers, politicians and government officials for quite some time now, but 2019 marks a year of increased activity. This year, at least twenty states will work to increase their minimum wage, with some hoping to meet their ultimate wage goals within the first few years of the new decade.
For many small business owners, that means identifying ways to meet these new standards while maintaining healthy margins. The same is true for business owners who are hoping to begin potentially straining process before state mandates.
Either way, if you’re trying to account for minimum wage increases, there are a few ways you may be able to free up financial resources in an effort to offset your growing payroll obligation.
Take note of state and local wage changes
Minimum wages increases are currently at the discretion of state and local lawmakers, and that means there isn’t one overarching policy by which to abide. For example, business owners in Oregon are in the midst of a wage increase process that ends in 2022.
Similarly, wage increases also may vary at the city or county level. That’s the case in New York where New York hourly workers now receive $15 an hour while workers in Westchester County will receive $12 and others around the state of New York will receive $11.10.
In addition, many states enacted a multi-phase process that allows businesses to adjust to wage obligations over a period of several years as opposed to a drastic shift. As such, it’s important to account for those incremental changes as you plan your future budgets.
Reduce unnecessary spending
One of the first things you may want to do is inventory your expenditures. If business is going well, then it’s easy to overlook spending habits that may not be ideal. And, over time, these seemingly innocuous bills can become a significant weight on your budget.
For example, you may be able to revisit supplier relationships to negotiate lower rates or identify monthly services that you can find cheaper elsewhere or eliminate altogether.
A common reaction to age increases is to decrease staffing, and we’ll get to that, but before you do that, it may be beneficial to take a hard look at your existing processes. Are there ways you can make them more streamlined or efficient? Can you cross train employees? Implement apps or software to take care of some tasks?
As a result of this exercise, you may be able to find ways to optimize employee performance by changing the way they approach certain tasks, implementing resources and tools that improve workflow or decrease the need for additional employees during busy periods or seasonal upswings. As an added bonus, it could potentially make your life a lot easier in the long run.
Consider raising prices
Though few business owners want to worry about the ramifications of raising prices, doing so is often necessary in the face of a rising minimum wage. It’s not always easy, however.
If you’re considering raising prices, completing the first exercises above can help keep increases as low as possible. In addition, it’s helpful to look to other competitors to determine how your prices compare to theirs so you can limit customer alienation
The good news? If you’re raising prices due to minimum wage increases, it’s likely your competitors will be forced to do the same, at least to some extent.
Make smart staffing decisions
Another unsavory side effect of increased minimum wage requirements may be employee layoffs or other staffing changes, like decreased hours. If you find ways to increase efficiency, thinning out your staff may be a logical move, but it’s not always an easy one. The same can be true when it comes to cutting hours, which can make it hard for employees to adjust to decreased paychecks, even if they are receiving a higher hourly wage.
Keep in mind that a decreased staff can negatively impact operations, which can end up decreasing revenue and eating away at your margin. As such, you may want to leave layoffs and cuts as a last-ditch effort.
If you do need to make cuts, it’s important to do so in a respectful and dignified manner. Anything else can cause long-lasting workplace cultural issues like decreased morale, rumors, or ongoing fear and apprehension. Need some tips? Here are a few ways you can make downsizing easier for everyone..
For many small businesses, particularly those with a significant amount of hourly workers, adapting to the rising minimum wage can be challenging. Fortunately, there are several steps you can take to help make the transition easier.
Don’t run your business in one of the impacted states? Though you may not be required to make adjustments, current trends may mean a change is just around the corner. As such, taking these steps can help you prepare for future increases far before they’re mandated.
Pull back the curtain on your business credit to find better financing
Ready to see your credit data and build stronger business credit to help your business get financing? Check your personal and business credit for free.Check my scores