Change Is Here
On July 1st, there was an increase of the minimum wage from $12.00 to $13.25 for companies with 26+ employees in Los Angeles County. For companies with less than 25 employees, the wage was increased from $10.50 to $12.00 per hour. All companies will be forced to offer sick time to all employees, both part-time and full-time. Additionally, an immediate payout increase will be increased by 15 to 20%.
How will the change affect your business?
Every business and niche has different issues to deal with. In general, the industries that are hit the hardest tend to be related to hospitality and retailing. This does not mean that other industries aren’t going to struggle with the increase in wages. More often than not, this is caused by a high number of employees that are registered with a minimum wage. Small and medium sized companies can be heavily impacted by this.
Decrease of Cash Flow: This is the first thing that will happen to your business and will drive every other change you’ll make. As complicated as the time to adjust to the change is, the apparent losses are a light at the end of the tunnel. Again, it depends on the industry you are in to know how long this recovery will take.
Retaining Talent: When costs increase, employees fear of cutbacks. Iit can be said that salaries are a cost for employers at some point. It’s in this cutback process where you should start looking for ways to maintain your talented and seasoned employees. In the end, it is them who give your clients value. It’s in your hands to decide whether they continue doing so or to start looking for new people to train.
Acquiring Talent: Since costs are higher, your company may find that there is no space for additional talent. If jobs need to be filled, it’s crucial for your recruiting or HR department to seek the best prospects because every cent counts.
Rising Prices: A common practice is to increase the price of services or products to absorb some of the impact coming from the increase in wages. However, clients are smart and they will notice when you increase the price. This is one of the main reasons why they start looking for a substitute product or service. Be patient and wait to use this last ditch effort because it can cost you potential business.
What can you do about it?
Now comes the tricky part, how can you be creative enough to not take the burden of the rise on of wages? Here are some alternatives:
Adapt With Your Employees: You should be communicating with your employees often. In small and medium sized companies, the communication between management and employees is very close. Communicate with your employees what is happening and try to reach an agreement that will be beneficial for both parties.An example of some possible changes that you can communicate to your employees are::
- Shorter working hours shifts
- Creating a new pay grid
- Changing how you value each position
Outsourcing: Sometimes outsourcing can be one of the easiest ways to keep your teams stable while you nurture the skills of your current teams. Reducing costs can imply the recruitment of new untrained staff but if you outsource, you can recruit top talent from overseas in a cost efficient method. Outsourcing allows you to focus on the next wave of core team members that will push your business quality and value.
- Cost saving
- Frees management time
- Optimizes resource utilization
- Might face language issues or barriers
- Sluggish response times
- Negative business connotation
One of the many services that Advancio offers is Business Process Outsourcing. We have a proven track record working with clients from small businesses to enterprises.
Look At New Markets: This should be thought out carefully. Opening a support office in a nearshore region can have a great impact on your clients. Some of the more popular places are Latin America, Europe, North Africa, and Canada. Going this route can allow you to find regions with a vast talent pool and low entrance barriers.
This should be thought out carefully. Opening a support office in a nearshore region can have a great impact on your clients. Some of the more popular places are Latin America, Europe, North Africa, and Canada. Going this route can allow you to find regions with a vast talent pool and low entrance barriers.