Arizona is one of many states that have passed a law to gradually raise the minimum wage. If you’re a small business owner, it’s important to be proactive and not reactive as wages increase over the next few years. By doing so, you’ll set your business up to be as profitable next year as you are this year.
There are several pros to the minimum wage increase including boosting the economy by giving people the funds needed to purchase products, goods and services and helping employees with the price of inflation and a rise in cost of living. On the other hand, there are several cons including higher cost of production which increases overhead costs, a stalled job market when companies go on a hiring freeze to keep costs low and more outsourcing.
Preparing for a future wage increase now can ultimately help your company’s bottom line, but gearing up for change requires the following to-do list:
• Do research: The Economic Policy Institute’s Minimum Wage Tracker is a great place to start. Make sure to stay up to date with the minimum wage in Arizona. Also, note the differences for salaried employee payroll vs. hourly employees.
• Look at your budget: Based on your industry, you may spend nearly 40 to 80 percent of your gross revenue on salaries and benefits. According to the Society for Human Resource Management, the salaries can account for 18 to 52 percent of a business’ operating budget.
• Consider your ROI: Estimate how much you expect a new employee to make your business, determine what return on investment you want from the employee and then calculate the employee’s salary.
• Weigh sustainability: Ultimately, a business owner needs to consider whether minimum-wage employees are sustainable with the oncoming increases, and if they are, where can an employer manage and prepare for the oncoming changes?
• Apply for the Work Opportunity Tax Credit: WOTC is a Federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment. By taking full advantage of the WOTC, you can earn a tax credit between $2,400 to $9,600 for each new hire that qualifies.
• Implement a time and attendance system: Ensuring that you have a system that integrates with your payroll platform will save more money and time than most businesses care to consider. This also prevents time theft. Often the person managing these tasks at a small business is wearing too many hats. Integration, managing and streamlining this is an effective way to get ahead of the changes that will inevitably occur.
• Offer affordable retirement benefits: This is an important component but beware of the companies that sell the service at a low upfront cost with high asset fees. These third-party administrators often leave the owner as the fiduciary and expose them to be held personally liable, and negatively affect themselves and their employee’s ability to retire with as much as they should.
• Offer employee-paid supplemental benefits: Many organizations offer employee benefits that can include health and life insurance, pension plans and paid time off. In addition, companies may also provide a range of supplemental benefits. Employees typically pay all of the costs of these benefits that include additional coverage for hospitalization, workplace wellness programs, employee assistance programs that provide short-term counseling, identity theft protection and discounts on a variety of goods and services.
• Stay up to date: It’s crucial to the health of your business that you stay informed about current events and seek out information on anything that may affect your bottom line such as COVID-19 small business resources.
Keith Norris Miller has more than ten years of experience as a payroll and human resources advisor and is the founder of TrustedPayrollAgent.com.