How can your business thrive under the minimum wage increases?
Minimum wage increases always impacts businesses in a number of ways. It tends to mean less hiring, more use of contractors, and increased costs for the organisation.
On the 1st of April, the minimum wage is going up to $18.90 per hour.
Those businesses with ‘low-skilled’ staff will be hit the hardest. It also tends to result in more unpaid interns popping up and 90-day trial cast-offs; those who are let go as soon as the probation period is over.
However, an unintended consequence of the increases is that those on salaries begin to question their value in the business, and also want a raise.
Needless to say, the wants and needs of these existing workers shouldn’t be ignored. More on that later...
When the minimum wage goes up, it tends to be a difficult time for both businesses and staff alike. On the one hand, your current staff are at near capacity; but on the other hand, you’re struggling to pay your existing staff.
What do you do?
Before you stress out, it’s important to fully scope the impact of the changes on your business:
An extra $1.20 per hour means an additional $48 per week per adult staff member.
For the starting-out and training wages: These will also receive a boost, increasing to $15.12 per hour.
An extra $0.96 means an additional $38.40 per week, per staff member on the starting-out or training wages.
The next step is to calculate the total increase in costs. What is the total cost and can your current business cover this?
If so, great! If not, you’ll need to take steps to come up with a solution.
Every business needs positive cash-flow to operate sustainably. However, if the minimum wage increases take you from green to the red, there’s a few options available to you that you might want to consider.
How can my business cover the minimum wage increases?
Firstly, it’s important to recognise that you’re not alone. All of your competitors are having their costs increase also.
No one can escape minimum wage increases without operating illegally and getting hit with severe punishments.
The next step is to take a deep breath and make a plan. A plan that will see you through this potentially tough period for your business.
Okay, so what are my options?
It always costs less to retain a good staff member than it does to recruit and train a new one. So your focus should always be on keeping your best people in the business.
Below are other solutions you should consider:
1) Complete an expenses audit
Are you able to decrease costs without letting people go? Can production expenses be lowered? Could you save costs by changing suppliers or updating vendor contracts? Are there any other opportunities to reduce cost?
2) Seek new opportunities to increase revenue
The classic response to increasing cost is to raise the prices of your products and services. This can also have the adverse response from customers who decide to spend less with you, or not at all. Nonetheless, another solution can be finding new ways to increase revenue such as launching a new product or service.
3) Find new ways to increase your profitability
Alternatively, you can look at ways to increase profitability such as streamlining your business e.g. it could mean reducing your products or services to only focus on your most profitable market offerings. Or it could be moving premises to reduce overheads etc.
4) Letting people go
You don’t want to let your best staff go; a lot of business owners won’t want to let anyone go. However, sometimes dire situations offer no other alternative. If you do have to do this, you will want to ensure that you manage redundancies in the right way, and fulfill your legal obligations at the very least.
5) Keeping your best people during difficult times
There are tonnes of resources out there to help you retain your best staff. Perhaps the surprising factor is that many of these ‘strategies’ still work even when your business is experiencing financial difficulties. Strategies such as focus on maintaining a strong organisational culture, being honest and transparent, offering more flexibility e.g. working from home, and potentially looking at other ways to compensate your staff’s efforts.
The minimum wage increases on April 1st don’t need to be cause for panic if you 1) begin preparing for it now and 2) you create a plan and execute on that plan. There are a number of solutions which can be effective depending on your type of business and your industry. These solutions include doing an expense audit, finding new ways to increase revenue and/or profitability and sadly, redundancies.
Nevertheless, before you make the call to let people go. Ensure that there aren’t other ways that you can operate sustainably while keeping your existing staff satisfied and performing well.
If you want to create a plan to help your organisation thrive under the minimum wage increases, or you just want to discuss your options, get in touch below.