Make the Most of a Minimum Wage
General Business News
Make the Most of a Minimum Wage
Some states do not require a minimum wage while others are poised to mandate a minimum wage of $15 over the next few years. This makes the question of how to optimize the minimum wage a high priority for business owners. Labor costs make up a significant portion of a business’ expenses and, depending on the industry, can be as much as one-third. With labor taking up so much of a business’ overhead budget, how can small firms make the most of a higher minimum wage?
Establish a Baseline
Whether a higher minimum wage is being proposed, scheduled to begin next year or increase on an annual basis, the first thing a business should do is examine its current state of operations. Study cash flow figures, profit margins and hiring projections for the next year. Once you’ve established an accurate and current financial picture, consider some adjustments moving forward to accommodate a higher minimum wage.
Look for Efficiencies
While an increase in minimum wages often can’t be controlled, look for efficiencies among existing staff to offset additional hiring or increased hours for current workers. In an office setting, a business could set higher expectations for mailroom workers to process more packages or for telemarketers to convert more calls into sales. Those who use the Internet at work can have limits placed on access to social media and news websites to minimize time spent on non-work related activities.
Automate or Personalize?
Consider how you can use technology to complement the workforce to help build a more efficient business. The following automated technologies may be able to reduce labor and marketing costs:
- Help callers route their calls without a receptionist by implementing an Interactive Voice Response (IVR) system
- Integrate an online booking system into your business website
- Use a location-based marketing app to passively target customers within a defined area
These are just a few examples of how limited resources can be allocated to deal with a higher minimum wage. While human resources can’t be replaced in all tasks, there are many benefits to using automation beyond the increase in direct wages, such as additional savings from training and recruiting costs, payroll taxes, health insurance premiums, retirement packages, workers’ compensation insurance costs or litigation from a disgruntled employee.
Balance Prices and Labor Costs
You also may want to consider how much to increase efficiencies through automation compared to the customers’ experience and expectation of personalized service. One way to accomplish this is to survey your customers to see what they might like automated. For example, would customers like to speak with a receptionist, but still book online? Using surveys is an effective tool because it helps understand your specific customers, not an entire population. Younger generations, such as millennials, may be more likely to use mobile devices for banking and communication. However, using an automated system to book an appointment or make a payment might not be the first preference of the entire millennial generation. Conducting a survey can help determine the ideal human and automation ratio.
The minimum wage is a contentious topic that cities, states and Congress will likely debate for the foreseeable future. While the matter will be argued in city councils and state and federal legislatures, business owners may wish to explore what human resources and technological options presently exist that offer viable options in the wake of higher mandated minimum wages.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.