(Courtesy of the Jacksonville Business Journal) – This year, Florida takes its first step toward a $15 minimum wage. And for small businesses still in shock from the financial toll of Covid-19, the move could seem like yet another blow.
But experts say companies in the state will have ample time to plan ahead since the increase will occur gradually over six years, allowing businesses to allocate the appropriate resources needed to lessen the sting.
In November, Florida voters approved a constitutional amendment to incrementally raise the minimum wage to $15 an hour by 2026. Florida is the first state in the South and the eighth overall to adopt such a measure.
The first hike will be in September, when the minimum wage jumps from $8.65 to $10 an hour. The increase is expected to improve earnings for the region’s lowest-paid workers, including thousands in the hospitality, tourism, retail and health care industries.
Some businesses encouraged the measure as they pushed for companies to establish higher-wage jobs. They reiterated how the pandemic revealed, more than ever, how jobs that do not pay adequate living wages can set an economy back during a crisis.
While there could be a few hurdles, some economists argue that raising the minimum wage could actually benefit the economy. The move will boost the buying power of low-wage employees so they have more to spend, a trend that could benefit local businesses during the post-pandemic recovery.
What’s more, businesses often report positive impacts from raising wages, including enhanced productivity and reduced turnover and absenteeism, which can cut into a company’s bottom line.
Business owners will need to consider a number of strategies to cover the multiple wage increases. This could include investing in automation, cutting back-end office expenses, raising the price of goods or services, and reducing payroll costs.
“For some businesses, $1 an hour doesn’t seem like a lot. But if you have hundreds of hourly employees or if you’re operating with low margins, it adds up,” said Mitchell Goldberg, a partner with Berger Singerman in Fort Lauderdale.
Who’s affected
Proponents of the $15 minimum wage argue it’s long overdue, especially for a state that is filled with low-wage service jobs in the tourism, hospitality, retail and food industries, which pay a median annual salary below $30,000.
The law still includes an exception for tipped employees. In Florida, employers are allowed to pay tipped workers, such as servers and bartenders, $3.02 below the state’s hourly minimum wage. Tipped workers will gradually see their earnings rise to $11.98 an hour by 2026.
But the raise will have far-reaching effects on other sectors, including the home health industry, which accounts for some of the region’s fastest job growth.
Home health care companies usually pay below $15 an hour because their services are often reimbursed by federal programs such as Medicaid at fixed prices. Those businesses will likely have to increase prices for consumers to keep up with rising labor costs.
What about automation?
Self-ordering kiosks and self-checkout lines had already emerged at retail stores and fast-casual restaurants before the coronavirus pandemic, but use of those technologies will accelerate as employers search for ways to reduce losses.
This could affect customer service-driven businesses, such as resort-style hotels, and reduce opportunities for unskilled and young workers.
The question for employers is: Can they reduce labor costs without sacrificing the personalized service guests pay top dollar for?
Jonathan Kurry, a partner in the Miami office of Reed Smith who focuses on retail and hotel real estate development, said many hotels already had problems meeting their expenses before the wage hike. So increasing payroll expenses as the industry attempts to bounce back from the pandemic won’t be welcomed.
It could be a crippling turn for some brick-and-mortar retail businesses already competing against e-commerce giants like Amazon.com, which are more in demand than ever during the pandemic. On the flip side, Kurry said raising wages could benefit businesses that have struggled to find talent.
“Hotels and restaurants have had problems attracting employees at their [current] wages, and paying workers more will make those jobs more attractive,” he said. “For the business, they could save money on hiring and training expenses because employees are more likely to stay on long term.”
Plan ahead
Experts all agree: The best way to tackle the gradual rise to $15 an hour is to start planning now.
“It’s time to crunch the numbers,” said Susan Eisenberg, a labor and employment attorney at Cozen O’Connor. “Do your best to estimate what your labor costs will be in September and how your company will pay for it.”
That might be difficult this year because of Covid’s impact on businesses and their labor requirements. Many are operating with furloughed workers or employees on reduced hours, and it’s still unclear how that might change by the end of the year. But planning ahead for annual $1-an-hour raises will be easier when the pandemic subsides, Eisenberg said.
Jean Cash, a human resources area manager for Oasis PEO, said businesses should also take a hard look at their balance sheets to determine where their funds are going and where spending can be trimmed. Retailers, for example, should evaluate their inventory to see what their best-selling items are, then cut out the items that aren’t moving.
“If you have too much inventory that’s not being sold, that’s money sitting in a room,” she said.
Job cuts as last resort
In some cases, businesses may need to turn to job cuts if they cannot afford the payroll increases that will come with a higher minimum wage. But there are only so many positions that can be eliminated without sacrificing a company’s operations.
Before going that route, small businesses should search for available dollars through other avenues such as using software to slash back-office costs, reducing staff overtime hours and raising prices, Cash said.
Layoffs and wage freezes should be a last resort to preserve employee morale, which already took a big hit during the past year, she said. Businesses should stay in touch with workers to keep them aware of what revenue-slashing strategies they’re pursuing and why the company is making those moves.
“You really need engaged workers in this environment,” Cash said. “That’s difficult if they’re worried about losing work or opportunities for raises.”
Waitresses photo courtesy of triebensee