States across the United States are passing legislation to increase the minimum wage. The federal minimum wage hasn’t budged from $7.25 per hour since 2009, but states from Washington to South Dakota, California and Alaska are raising their own standards. Many states are now paying their lowest paid employees at least $15 per hour. With all of these wage increases it is essential for small business owners to make sure they can afford to pay their employees. To help you understand this issue this article will focus on three simple ways to prepare for a minimum wage increase.
There is a lot of discussion surrounding the issue of minimum wage increases. While a survey performed in July 2014 found that more than 60 percent of small-business owners in the U.S. support raising the federal minimum wage to at least $10.10 per hour, these increases can have a profound impact on small businesses.
This is hardly the first time the minimum wage has increased dramatically, and it will undoubtedly happen again. Here are three simple ways to prepare for a minimum wage increase:
- Clearly Understand Your Cash Flow
Having a clear understanding of your profit margin, revenue and expenses will help you tremendously as you prepare to cope with an increase to minimum wage. Understanding the cash flow of your business will help you know how many employees you can afford to pay. Use your QuickBooks system to pull up-to-date reports and set up a meeting with your accountant to make sure your information is accurate before making any decisions.
- Make Wise Hiring Decisions
One of the most vital lessons that can come from an increase to minimum wage is that your employees truly are your human resources and you need to look at them as investments, and not a resource that should be revolving. When making a hiring decision, it is wise to focus on investing in employees who will be worth your initial investment. Ideally they will stay with you so you aren’t constantly training new workers. If your budget doesn’t allow for a long-term employee you can also look into hiring a seasonal employee or a freelancer.
- Automate And Adjust
If you are looking at your cash flow and know you cannot afford to pay your employees a higher wage, there are ways to adjust your overall business strategy so that you can pay your employees the legal rate and keep your doors open. For instance, you could look at increasing your prices to help cover the cost of a higher minimum wage. Price increases are always a little bit complicated so make sure you do thorough research and a competitive price analysis before taking action. Another option would be to automate some of your business systems. For example, you could purchase accounting software, such as QuickBooks, to handle your business finances rather than continuing to pay a human accountant. This could help you work more efficiently and allow more room in your budget to pay employees.
An increase in minimum wage doesn’t have to create chaos in your business. Use these three simple ways to prepare for a minimum wage increase to get your financial ducks in a row ahead of time. It will time well spent.