Four Important Considerations Before Your Business Raises the Minimum Wage
The debate on minimum wage has raged on, especially in the past few years. For instance, fourteen US states and several cities are progressing with their own wage hikes. In fact, most of them have already taken measures to increase wages based on inflation. Some argue that a hike is well overdue, as such a move will help combat poverty. However, those opposing the idea are concerned about its potential impact on employment and company profits. They say that a pay hike will inadvertently lead to job cuts that will affect those the reform is trying to support. Naysayers point to Seattle, which has incurred the most job losses in the restaurant industry since the Great Recession, thanks primarily to an increase in the minimum wage.
Whichever side of the fence you’re on, there are reams of data to support the arguments on either side. What’s clear, however, is that employers need to consider several factors before increasing the minimum wage. For instance, they need to evaluate aspects like employee morale, productivity, customer satisfaction and business growth before revising workers’ pay in their business.
Four Important Considerations Before Raising the Minimum Wage
Before you increase wages or opt to cut employees’ hours (or staff numbers altogether) – have you considered these four factors, as mentioned below?
1. Match Employees to the Right Tasks
Rather than lowering the staff headcount, look first at how people are working. Are there highly manual and inefficient tasks that you could automate? For example, does the payroll department need to manually export the submitted expenses from one system before calculating employee reimbursements? Since survey data from Deloitte reveals that 27% of human resources (HR) staff spend their time handling and calculating payroll, which is mostly done manually. Or is the HR department wasting time in scrutinizing spreadsheets and determining what projects people work on to rationalize hiring decisions rather than allocating more hours to strategizing hiring, training and retention?
2. Identify the Right Pool of Talent and Skills for the Business
Not many PSO employees are working from their offices. On the contrary, most of them work remotely or in a hybrid setup. Numerous businesses today have highly diversified workforces with a mix of part-time and full-time employees, remote workers and independent contractors. In fact, according to an AT&T business report, the remote workplace ecosystem may witness some decline, but hybrid work culture will grow from 42% to 81% from 2021 to 2024. 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 imminent cost concerns could hurt your business in the long run – particularly if reducing hours and staff impacts employee morale.
Consider the time and costs incurred in interviewing, hiring and training new staff. For entry-level employees, it costs between 30-50 percent of their annual salaries to replace them, while the estimate is closer to 400 percent for high-level or highly specialized employees.
3. Scrutinize Your Processes and Operating Expenses
Besides employee wages and salaries, are there other inefficiencies or business areas 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. In fact, one survey states that businesses lose up to 28% of revenue due to inaccurate timesheets and timesheet filling errors. Meanwhile, after implementing Replicon’s professional services management solution, Xoomworks increased its data accuracy and improved the invoice turnaround time by 30 to 40 percent. Are organizations capturing all this information timely to ensure they aren’t leaving money on the table?
4. Invest to Grow
This sounds counterintuitive when your business’s foremost priority is to manage costs. But technological innovation is occurring at breakneck speed. Hence, 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 administrative accounting overhead by more than 75 percent. In addition, the solutions increased 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 knee-jerk reaction to raising the minimum wage could be to reduce staff hours or headcount. However, considering all the other factors that this decision could impact, the answer is not as straightforward as it seems. Clarity about business operations and costs, employees’ skills, and productivity will maximize your insights into how you address the minimum wage debate efficiently.