Article

6 ways to reduce the impact of minimum wage increase

Small businesses should take a proactive approach and prepare for wage increases.

February 11, 2014

By Michael Alter,
President and CEO of SurePayroll

Whether you're in favor or against minimum wage hikes, few would argue that small business owners, in comparison to large corporations, often face greater challenges to absorb increased costs to run their businesses. Margins, pricing, cash flow and credit access already loom in the background for small business owners. As a result, increased regulatory pressures may place a disproportionate burden on these businesses.

Historically, economists have been divided on the impact of raising the minimum wage on businesses and on the minimum wage job market. A recent University of Chicago poll of economists found that it will be much more difficult for people to find these jobs, suggesting a reduction in employee hiring or hours. On the other hand, consumer spending and employee retention efforts may positively impact small businesses and minimum-wage employees.

Michael Alter

In the end, the full impact to small business owners remains to be seen within the constraints of our new regulatory environment. However, similar to other challenges, it's all in how you prepare.

Follow these six steps to prepare for potential negative impact.

1. Understand profit margins, projections and business requirements to ensure profitability.
2. Determine permanent hiring vs. contracting decisions for staffing needs.
3. Make good hiring decisions —mistakes can be costly since training/onboarding new employees is a considerable investment.
4. Invest in employees — turnover decreases productivity and increases business costs.
5. Be sure to employ time and cost saving tools to standardize back office tasks. Consider outsourcing to easy affordable services that allow you to focus on growing business not administrative functions.
6. Research competition and adjust pricing accordingly.

Read more about staffing issues.

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