10 Tips to Help Your Business Survive a Minimum Wage Hike

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The pressure is on small business owners to get creative as cities, counties and states increase the cost of labor. Here are some ideas for weathering the trend.

Minimum wages are rising. On Jan. 1 this year, increases hit employers in 14 states, according to the National Conference of State Legislators.

The minimum wage discussion can seem confusing. After all, there’s a federal minimum wage ($7.50 an hour since 2009) and state minimums. And often, they’re different.

But it’s easy to know which law to follow: As an employer, you are required to pay whichever is higher, your state’s minimum wage or the federal minimum. (See minimum wages in each state on this Federal Department of Labor map.) There are a few exceptions to the law — for employees who work for tips, younger workers and students, for example. The DOL lists the exceptions here.

More cities and counties are setting their own minimums, too. (Governing Magazine maps cities’ minimum wages). Currently, pressure to increase pay is particularly strong on the expensive West Coast, as this National Employment Law Project table shows.

Where state minimum wages are highest

Most states set their own minimum wages. About half of these are above the federal minimum wage. The highest state minimums, according to 2015 DOL data, are:

  • Highest: $10.50 an hour, in Washington, D.C.
  • Next highest: Washington state ($9.47), Oregon ($9.25), Vermont ($9.15) and Connecticut ($9.15)
  • Where the minimum wage is $9: Rhode Island, California, Minnesota and Massachusetts

The burden

Understandably, some employers feel their business threatened by rising minimum wages. And yet, a surprising number support the trend: 60 percent of small businesses surveyed in mid-2015 by the Small Business Majority, an advocacy and research organization, were in favor of gradually lifting the federal minimum wage to $12 an hour by 2020. Most had between two and five employees, and half of them said they already were paying employees $12 an hour or more.

On the plus side, many economic researchers say higher wages give employees an incentive to stick around, reducing turnover and employers’ costs for training and hiring. But there’s no denying that wage increases come directly out of an employer’s profits. How, then, do employers face this challenge, or threat, and survive? Here are 10 strategies that help businesses survive:

1. Get a coach

No doubt you have streamlined your business in every way imaginable. Even so, an outside expert may spot some inefficiencies that you have missed. Two places to turn:

  • SCORE: A nonprofit association that works with the Federal Small Business Association, SCORE matches volunteer mentors who have business experience with small business owners and startup entrepreneurs. There’s no cost. Other benefits include free confidential counseling by email or in person, free or cheap workshops, and online tools and information. Find a SCORE chapter near you.
  • An accountant: A CPA who specializes in working with small businesses may be able to suggest efficiencies or tax savings that you have not considered. Before hiring a CPA, screen your candidates by interviewing several, and ask detailed questions about the kind of help you need. Listen carefully to the answers and reject those who avoid offering specific solutions to address your concerns.

2. Bring in family

If you have to trim staff hours, see if you can get family members to pitch in in the place of staff. Immediate family, particularly, may not require a wage — at least not for a while, as they help you over this hump.

3. Raise prices

You don’t want to raise prices and raising prices may not even be possible, depending on what your competition is charging. Certainly, passing on increased business costs to customers is a last resort. But if it has been a while since you have raised prices, it may be time to look at the option.

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