The current federal minimum wage is $7.25. Lawmakers however are working to change that – pushing for a wage increase to $12. In some states, minimum wage has already increased – with Seattle increasing its minimum wage to $11 last month, with plans to increase to $15 by 2021. In California, minimum wage is currently $9, with plans to increase to $10 in 2016, but lawmakers are pushing to raise that to upwards of $15 over the next few years.
This is great news for everyone that will be seeing a raise. Business owners on the other hand need to figure out how they are going to manage these increased labor costs.
How Are Businesses Responding?
Many are already reevaluating their budgets and shuffling funds to prepare for these increases. Some restaurants have even done away with tipping and instead put a 20 percent “administrative fee” on each bill. Still other restaurants are simply raising the price of their food to offset the cost of wages. For Panera Bread, the company has decided to avoid the issue as much as possible by replacing all of their cashiers with kiosks by 2016.
For larger businesses the problem must be dealt with much sooner because of the city's minimum wage law and the expedited schedule for businesses over 500 employees.
Renowned restaurateur Tom Douglas, one who is on the expedited schedule, has raised his menu prices to help deal with the increased labor cost that he is already dealing with.
Douglas, who owns 13 restaurants, said the wage hike will add an average of $1.50 per course or about $5- $6 per customer check.
Ethan Stowell is in the same boat as Douglas, with nine restaurants in the Seattle area. He will also need to implement his wage hikes on a faster timetable and predicts a 25 percent price increase across the board.
These examples aren’t the only ways to prepare for what’s to come. Here are a few other ideas that anyone can use.
Know Your Bottom Line
Invest in People, Not Recruiting
The average cost to replace an employee varies, but all studies agree that it is expensive. The Center for American Progress reports that it costs a business 16% of the annual salary for jobs earning under $30,000 a year and 20% of the annual salary for anyone earning $30,000 to $50,000. With a price tag like that, hiring the right people from the start cuts down on turnover rates and increases profitability and productivity.
Automation Is the Future
Technology is always making our lives easier. There are certain jobs and tasks within your organization that can be automated or at least done in house to save money. Take over your book keeping using an online platform, or have another trusted employee take it over. The technology is out there, you just need to figure out how it fits into your business model. However you can implement systems to handle administrative tasks will help save you loads of cash in the long run.
Be Creative and Innovative
Another way businesses can offset the cost of the minimum wage increase is by participating in the sharing economy.
Here at BizX we’ve created a community of businesses and consumers that can buy and sell amongst each other using BizX dollars rather than US dollars. BizX allows businesses to transform excess inventory and capacity into new and profitable customers. The BizX earned can then be used to purchase necessary supplies or services, freeing up the cash needed to cover the minimum wage increase.
