It’s 2020, and while the United States minimum wage rate of $7.25 an hour has not changed since 2009, 24 states have either already implemented higher minimum wages or are going to before the year is over.
Even if the minimum wage in your state or local government did not go up this year, it might be a good idea to think about how you would navigate an increase in wages, as it’s been a hot topic not only among cities and counties, but also lawmakers at our nation’s capital.
The Raise the Wage Act of 2019—which was largely supported by large organizations such as the National Employment Law Project—may have lost in its efforts to implement a $15 minimum wage on the federal level, but a change could be coming to your area in the next few years.
The last thing you want to do to deal with the increase in labor costs is to reduce the number of employees working for your business. Fear not, there are other strategies to consider instead of increasing the unemployment rate. Here are five ways you can navigate around minimum wage hikes without losing your staff or gaining a lawsuit.
Plan #1: Get creative with your pricing strategy
It’s not smart to drastically increase your prices as a cure-all to minimum wage hikes. However, if you go about it the right way and increase prices where it matters, you can make up for the increase in labor costs.
Take a look at your most popular items as well as which items sell best during certain times of the day. After you’ve analyzed your sales data, take stock of your inventory cost. Do you sell a lot of fountain drinks or coffees? These are high-volume, high-margin items that you can increase without costing your customers an arm and a leg.
Tier pricing is another strategy to consider. Charge your customers less for to-go meals that have smaller portions, and a little more for those who want a sit-down experience. Do you have a retail business? Consider implementing a Good, Better, Best (GBB) model.
The GBB model offers customers three options for a product at a gradually increasing price point. This strategy tends to be effective because consumers love choices instead of being forced to buy the one option you’re offering. Plus, buyers are more likely to purchase the more expensive option if it’s considered “the best.”
Plan #2: Get your labor costs in check
As a busy business owner or manager, you’re likely to lose control of labor costs from time to time—and guess what? This costs you money, especially when the minimum amount employees must be paid per hour is higher.
You need a technological partner who makes no mistakes and lets no errors slip through the cracks while you’re tending to other crucial aspects of running a business. Homebase is the perfect solution for keeping an eye on labor costs.
When you sign up for a Homebase account, you’ll get robust labor cost reporting in real time. You’ll also be able to track labor costs as a percentage of sales automatically and easily spot trends by role or department to manage costs.
Homebase even stops time theft in its tracks by preventing early clock-ins with automatic photos that are taken at clock-in, and enforcing breaks by sending automatic alerts. These may sound like simple tools, but they can save you hundreds of dollars. The average Homebase plus user saves over $192 a month in prevented labor leakage. That’s $2,304 a year.
Plan #3: Reduce other costs for a better ROI
It’s time to hunt down and weed out any unnecessary costs that are weighing you down. Consider replacing cheaper items you have to keep purchasing with an upfront, high quality investment that will eventually save you as much money as you are losing in pay increases.
Take inventory on how you’re spending money on a month-to-month basis. Are there any areas where you can reduce? Can you rearrange some of your budget to make up for the increase in payroll?
Think of it like a game of “budget Tetris”—sometimes all you need to do is move around some pieces and the whole thing works.
Plan #4: Reduce operating hours
Look at how many hours your employees are working and how much you’re paying in wages. How many of those employees do you actually need working a given shift? In fact, do you really need to be open for as long as you are, or can you reduce your operating time by a couple of hours?
If you can’t cope with closing your doors a little earlier every day, consider limiting the amount of overtime your employees can take. As you likely know, non-exempt employees who work more than 40 hours a week must be paid one-and-a-half times their regular wages, which can add up quickly. Plus, the overtime salary threshold just changed in 2020, so you’ll want to keep an eye on how it affects your newly increased labor costs.
No matter which route you choose—even if you decide to implement a little bit of all of the above strategies—you’ll need a partner on your side to help keep track of team management better to avoid any unexpected increases in your costs. Sign up for Homebase and get started for free today.