How Your Business can Adapt as Minimum and Competitive Wages Rise

In 2022, 25 states raised their minimum wages. Increases are expected to continue, with 13 states having passed legislation to increase their state minimum wage in 2023. Currently, 30 states across the U.S. have minimum wages higher than the federal minimum wage of $7.25 per hour. However, many businesses already offer wages above the federal or state minimum. As these minimums keep rising, how will that impact your business’ ability to offer competitive wages?

For businesses like restaurants, minimum wage increases can certainly be intimidating. Are minimum wage increases something to fear? How can you compete for talent with other local businesses if you can’t outpace their compensation? Keep reading to find out.

H2: How Minimum Wage Increases Impact Businesses

Minimum wage increases impact businesses in several ways, but most obviously through the higher expenses for staff. For the typical restaurant, labor represents around 30% of monthly operating costs. Restaurants also typically have relatively-low profit margins, and if a new minimum wage increases the monthly cost of employment even marginally, the effects can be felt throughout your business.

As a result, minimum wage increases force businesses to adapt and change to maintain a competitive wage offering. Change is never comfortable, but leaning into it can lead to opportunities for your business.

H2: Tips for Recruiting Employees as Competitive Wages Increase

If you compare competitive wages today to wages from 50 years ago, it’s easy to come to the conclusion that workers today earn far more. However, due to inflation, the increasing cost of living, and many other factors, workers have significantly less purchasing power today than they once did, even in states like Colorado, where the minimum wage is $12.56 an hour. Workers are aware of their earnings, and they’re making themselves heard by demanding higher wages.

So, how can you compete for talent in the modern workforce when the wage a worker expects may be higher than what your business is accustomed to paying? Well, here are a few tips to try:

H3: Be Transparent About Pay

When you’re hiring, being dodgy about pay can put potential employees off, and ultimately waste everyone’s time by going through the interview process just to find out that the pay doesn’t meet their expectations.

Not only does being transparent avoid wasting your time, but it also can attract more applicants and fill your open positions faster, as job seekers are able to quickly identify whether your role is a match for their needs. Some states, such as Colorado, have even introduced laws requiring salaries and pay ranges to be posted with online job listings.

Finally, use estimates for tipped employees. For restaurants, broadcasting a pay rate or salary isn’t always an option, as tipped employees could earn the minimum wage or well above it depending on the day.

H3: Focus on Your Existing Staff First

While increasing your starting wage might help you attract new employees, your staff who have been with you for a while might feel less valued when they see that. Whenever possible, focus on raising the wages for your existing employees first.

While focusing on retaining your existing employees might not seem like a recruitment strategy on its face, it’s a critical part of attracting new talent. When employees trust that their employer will raise their wage, they may be less likely to search for new work elsewhere.

H3: Look Beyond Wages

Compensation consistently ranks as the number one factor employees care about. However, it’s not the only thing that employees care about. If your business can’t compete by increasing wages significantly, there are still highly-attractive benefits you can offer to attract new workers. If your business is looking for creative ways to attract new talent, consider things like:

Offering flexible hours
Allowing employees to work from home if possible
Expanding your part-time work offerings

Even if you can’t offer a wage that beats your competitors, you can still make changes like these to win loyalty from new and existing employees.

H2: Is Paying Higher Wages Bad for Business?

Ultimately, wage increases can hurt some businesses and help others. Businesses with higher profit margins are often able to absorb the costs of higher wages and slowly make adjustments elsewhere to account for the increased labor costs. On the other hand, businesses with lower profit margins could struggle, as wage increases force rapid changes. Despite that, any business can reap the benefits of higher wages, such as:

Attracting better workers
Retaining valuable employees
Increasing productivity due to rising employee satisfaction

As a business owner, providing competitive wages can be a difficult subject to navigate. When you’re invested in your staff, raising wages is the right thing to do, but it’s not so simple when your budget is already tight.

Contact your local Society agent to discuss challenges and the right coverage for your business.

Author

Society Insurance Team

As a mutual insurance company, we operate and exist for the benefit of our policyholders. For more than 100 years, Society has been helping businesses overcome the unexpected with comprehensive coverage packages and outstanding claims handling, underwriting and risk management.