Four important considerations before your business raises the minimum wage

Minimum wage considerations

If there’s one thing that has gained further momentum in the opening days of 2016, it’s the minimum wage debate. Fourteen US states and several cities are progressing with their own increases, with most already taking effect from the first day of this year.

Some argue that the hikes are well overdue, in the quest to combat poverty. The federal minimum wage is more than more than 25 percent below its peak in 1968, and a hike of $12 by 2020 would lift wages for 35 million American workers. On the other hand, opponents raise concerns about the potential impact on employment and company profits – and that the increases will inadvertently lead to job cuts that affect those the reform is trying to support. Naysayers point to Seattle, which apparently has incurred the most job losses in the restaurant industry since the Great Recession, thanks primarily to minimum wage increases.

Whatever side of the fence you’re on, there are reams of data to support either side of the debate. What’s clear, however, is that when it comes to enacting minimum wage increases, there’s a lot that needs to be considered well ahead of any changes – including aspects such as employee morale, productivity, customer satisfaction and business growth.

Before you increase wages or decide to cut employee’s hours (or staff numbers altogether) – have you considered these four factors?

1. Match employees to the right tasks. Rather than axe the number of staff, look first at how people are working. Are there highly manual and inefficient tasks that could be automated? For example, does payroll need to manually export expenses submitted from one system to then calculate employee reimbursements? Or is human resources wasting time scrutinizing spreadsheets showing what projects people work on to rationalize hiring decisions, rather than allocating more hours to drive strategies in hiring, training and retention?

2. Identify the right pool of talent and skills for the business. It’s increasingly rarer to have all employees completely office-bound – many businesses today have a highly diversified workforce that includes some mixture of part-time and full-time employees, remote workers and independent contractors. It’s estimated that 45 million people, or more than one in five US adults, are part of the rising “on-demand” economy – working on a contingent basis in the digital marketplace. Additionally, trimming your headcount due to concerns about costs in the short term could hurt you in the long run – particularly if reducing hours and staff impacts employee morale. Think about the time and costs that come from not only interviewing, hiring and training new staff. For entry-level employees it costs between 30-50 percent of their annual salaries to replace them, while for high-level or highly specialized employees the estimate is closer to 400 percent.

3. Scrutinize your processes and operating expenses. Besides employee wages and salaries, are there other inefficiencies or areas in the business where you could be losing revenue? For example, in the professional services industry, one of the primary sources of lost revenue is inaccurate hours in timesheets, missing receipts from billable expenses and inaccurate billing. After implementing Replicon’s professional services management solution, Xoomworks was able to increase the accuracy of its data and improve invoice turnaround times by 30 to 40 percent. Is this information being captured in a timely fashion to make sure that money isn’t being left on the table?

4. Invest to grow. This sounds counterintuitive when your business is looking to manage its costs, but as the pace of technology innovation continues at breakneck speed, investing in the right technologies to minimize tedious administrative tasks and support long-term productivity and profitability goals makes sense. Replicon’s combination of client billing and time and attendance solutions helped Logic Healthcare reduce its accounting administrative overheads by more than 75 percent, increase accuracy on projects and billing by more than 25 percent, and improved productivity for its consultants who could manage their time and expenses on the go.

Sure, the kneejerk reaction to minimum wage raises could be to reduce staff hours or headcount. However, when you think about all the other factors that could be impacted with this decision, the answer is not as straightforward as it seems. Clarity on business operations and costs, employees skills and productivity will maximize your insights into how you address the minimum wage debate.

Avatar
ABOUT THE AUTHOR
Lisette Paras
Get started today.
Set up a free trial based on your business needs. Start Free Trial

News from week beginning 19th October

By Steve Brooks - October 26, 2020 What a week, with both Workday and Sage Intacct holding conventions. Several PSA vendors announced new releases including a major update from FinancialForce.…Read More

Replicon Announces Time Intelligence Platform for Cloud-based Solutions from SAP for the Professional Services Industry

Replicon Time Tracking for Service Organizations Delivers a Single Source of Truth for Time. Replicon announced today that its Time Tracking for Service Organizations application is available for purchase on…Read More

Webinar Recap: Uncover Huge Profits with Accurate Project Time Tracking

As remote employees become part and parcel of the new normal, most leaders are beginning to realize that they need a better way to manage their projects, people, time and…Read More

5 ways to improve service delivery in your organization

In a highly competitive market, service-based businesses need to capitalize on any opportunity to set themselves apart from their (often very similar) competitors. While implementation, system details, and service management…Read More

Demystifying the millennial workforce: 5 tips from Trunk Club’s Andrew Anderson Devine

Time magazine labels the millennial generation the “most threatening and exciting generation,” infamous for “narcissism [and] its effect: entitlement.” In the workplace, the perception of the millennial workforce is no…Read More

Common pitfalls in professional services organizations & how to avoid them (1/3)

The professional services organization (PSO) landscape is changing -- employees are harder to recruit and retain, a globalized marketplace increases competition for clients, clients want more for less, and management…Read More
  • Polaris
  • Cloud
  • In The News
  • Corporate
  • Professional Services Management
  • Project and Program Management
  • Shared Services Management
  • Time and Attendance Management
  • Workforce Management
  • Customer Feature
  • Feature Update
  • Time Intelligence
  • Industry News
  • Webinar Recap
  • Global Compliance Updates