Free Enterprise - The FindLaw Small Business Law Blog

Managing the Rising Minimum Wage: 3 Tips for Small Businesses

In recent years, states and even some big cities like San Francisco and Los Angeles have been passing new mandatory minimum wage laws that will be phased in over time. These gradual pay hikes are meant to protect workers, of course, and minimize the strain on employers accommodating the wage increase.

But for small businesses operating on tight margins, even a small mandatory increase spread across all employees can be painful. A raise to workers means increased payroll taxes and potentially other added expenses to the extent your employees receive benefits. Let's consider a few suggestions from Forbes on how to manage a minimum wage increase.

Balancing Act

Budgeting is always a balancing act. When expenses increase in one area, you need to either make more money or spend less in some other area of your business. Here are three ways to handle this.

  • Reducing Costs: Mandatory wage increases present an opportunity. Review all expenses. Comb through for excesses. Are there areas where you are spending more than you need to? Forbes also suggests that this may be a time to open an investment account that could be earning your business more money. In other words, view this as a time to rethink money and your business generally. Are you spending wisely and where can you get a better return on your expenditures?
  • Reviewing Hours: Consider the business hours of operation and employee hours. Do you need to be open at the crack of dawn or late at night? You might, depending on the business you are in. Also think about cutting some employee hours or having fewer people on at slow hours. Of course, you won't be helping your workers much if you give them a raise and cut their hours, and you may find that you cannot afford an uncommitted staff (when the boss is not committed to workers' well-being, workers necessarily feel less committed to giving their best).
  • Raising Prices: The logical response to added costs for a business is passing those along to consumers. To the extent that you're concerned about this, rest assured that all your competitors will be facing the same difficult choices and will probably also have to make some initially painful adjustments.

Consult With Counsel

If you're concerned about wage obligations or any other aspect of your business operations, speak to a lawyer. Get guidance.

Related Resources: