Owning and operating a business comes with a plethora of expenses, and among the largest of these expenses for most employers is paid out to employees in the form of wages. Right now, the federal minimum wage for all workers in the United States is $7.25 per hour; however, many states have gone on to pass their own set of regulations stating minimum wages higher than what's required by the federal government.
Florida is one of those states whose regulators are demanding a higher minimum wage than what the federal government mandates. Starting on January 1st, 2019, the minimum wage is $8.45 per hour, an increase of $0.20 over the previous $8.25 an hour minimum wage. Furthermore, workers that receive compensation in the form of tips must be paid a minimum of $5.44 an hour and earn a minimum of $3.02 in tips.
The Department of Economic Opportunity (DEO) in Florida has led the charge for the increase in January and will continue to adjust this wage in accordance to the fair market wage rates based on the Federal Consumer Price Index for Urban Wage Earners and Clerical Workers in the Southern Regions.
Florida’s government reconsiders the minimum wage every year on September 30th and bases their decision largely on the Consumer Price Index, which typically rises in small increments every year.
Currently, there is no news of legislation that would suggest another minimum wage increase in the near future; however, there are several state legislators that have advocated on behalf of a $15 per hour minimum wage. Despite there being no current news, it would be wise of employers to watch closely and prepare for the possibility of a $15 minimum wage come the first day of 2020. It’s also very possible that with each year from now, the minimum wage will gradually increase the reach the $15 threshold.
Since every business differs in the amount and type of workers they hire, there is no one size fits all solution to prepare for increases in the minimum wage; however, I can provide a few tips that businesses have used in the past to prepare for such an event.
1. Run a break-even analysis with your costs adjusted for more expensive labor and ensure your price points will still be capable of returning a profit. If your business is no longer capable of exceeding its break-even point with a minimum wage increase, you’ll have to either cut costs of operation, increase costs of the goods and/or services you provide, or both.
2. Prepare your hiring department for a minimum wage increase. Minimum wage increases will impact your ability to scale your business, so you’ll need to create different hiring scenarios based on the minimum wage. If you were planning to hire 10 employees at $8.45 an hour, you may need to consider hiring only 9 employees at $9, and so on.
3. With technology becoming more advanced, as a business owner with a duty to provide returns to shareholders, you may need to start utilizing technology that decreases labor costs or eliminates labor costs altogether. Automating things like clerical work, manufacturing work, and customer service positions may be the only way you continue being profitable despite a rising minimum wage. One recommendation I can make is to utilize the tools offered by Hubworks. Their software and hardware solutions like Zip Clock and Zip Schedules provide excellent automation of tasks that should help to lower overall operating costs.
4. Hiring workers at a higher minimum wage isn’t always a bad thing. One tip I suggest would be to hire employees that have an inherent future with your business. These are people that are currently studying and building skills that your business may leverage in the future at higher levels. Building steady long term relationships with employees who started at the bottom and move up the ladder into management positions almost always proves to be a valuable strategy. Since the wage is already higher than before, you can attempt to promote employees with bonus schemes or commission instead of raising their wages.
5. I strongly advise business owners to utilize cutting edge software that automates financial forecasting. Conduct future forecasts by using the Zip Forecast automation software, which creates a future inventory and employment plan, and gets hands-on with business vital data at different wage price points.
As a business owner, there is not much you can do to prevent wages from rising. As inflation impacts pretty much every aspect of our economy, your operating costs are bound to rise. With that said, the cost of the goods and services you provide will also need to increase, and since people are making more money, that makes sense.
The best advice to any business owner fearful of minimum wage increases is to be prepared. Minimum wage increases will happen regardless, and the only option business owners have is to plan and prepare for multiple different minimum wage increase scenarios.