How Would Minimum Wage Changes Impact Your Company and Crew?

When it comes to discussing federal wage issues, present a clear message and openly address inevitable questions and concerns from employees

Interested in Business & Technology ?

Get Business & Technology articles, news and videos right in your inbox! Sign up now.

Business & Technology + Get Alerts

Question: The federal minimum wage will be increasing at some point soon and we are wondering how to address this with our employees in terms of the impact on their pay and the expectation of pay increases for themselves. What suggestions do you have? 

Answer: The question is certainly timely and relevant. As we will briefly explain below, specific answers as to increase percentages or the impact on other company benefits are unique to each PRO in our industry. An added complexity is that individual states have their own minimum wage laws. Also take into account that many proposals reach the higher minimum wage in steps over several years. We will deal in generalities and make overall suggestions as to approaches to consider with any future increase in the federal minimum wage.

A few facts that may be relevant in discussions between management and employees:

 The federal minimum wage was established in 1938 at $0.25 per hour and has been raised 22 times by Congress. The last increase was effective in January 2009 when the rate rose from $6.55 to $7.25.

 29 states and the District of Columbia have a minimum wage higher than the federal minimum wage.

 28 states and the District of Columbia have increased their minimum wages since January 2014.  

Given all these differences in wage rates between states, it is not feasible nor permissible for us to present or to suggest any wage specifics. Taking the above into consideration, this is indeed a topic that employees will be interested in and perhaps concerned about.

Here are some suggestions on handling these wage discussions within your company: 

Be proactive in presenting the fact that the federal minimum wage will be increasing. Everyone in the company needs to be aware of exactly what that means. This topic has been front and center in recent months and open communication is necessary. Just as PROs have consistently demonstrated during the COVID-19 pandemic, the sharing and discussion of relevant information is remarkably effective and appreciated throughout the company.

Consider a company or department meeting to have this discussion. Using this approach, everyone in the room is presented with the same information at the same time. Entertain questions and discussion as needed. To further increase employee satisfaction and morale, we would suggest making the offer to address individual questions or concerns in private.

Discuss economic impacts on the employees as well as the company. In some situations, in some states an increase to the federal minimum will be minimal, while in other states it could be significant. Any potential increase in salaries will increase expenses and taxes for the company. The company must evaluate its pricing structure to customers and examine company expense line items.       

Accurately present the numbers. Most people are probably unaware of the vast differences in wage rates from state to state. Present how this change will specifically affect your state. Hypothetically, if the federal minimum wage rate were set at $14.50, most people would assume that it doubled, or increased 100%, from the $7.25 rate. This would be the case if your state’s minimum matched that of the federal government. As previously discussed, however, this is not always the case. If you live in a state with a minimum wage of perhaps $11.00 an hour, the increase is $3.50 an hour or roughly a 50% increase. 

Address the overwhelmingly obvious question of “How will this increase affect my wages?” Once again, stick to the facts. You may decide, for example, that if the minimum wage increases $X.00 per hour in your particular state that everyone’s salary increases $X.00 per hour. You may, however, decide that your employee wages are so far more than the minimum, that only a small increase, or no increase is warranted at this time. Explain the logic of the company’s position in a simple, calm and easy-to-understand manner. 

Consider creating an employee benefits statement. Present to employees with the total compensation package, which includes all benefits — insurance, paid time off, 401(k), bonuses, commissions, etc. This big-picture approach takes the discussion away from the hourly wage comparison with federal minimum wages. We would suggest presenting an overview in the company meeting and then perhaps an individual statement to each employee. Perhaps if this is done for the first time now for the fiscal new year, it could perhaps evolve into an annual statement for each employee. Total compensation may be much more than an hourly wage and, of course, will vary from company to company.

EXAMPLE:

Your company’s employee benefits statement can be as simple or as detailed as you wish. The point of this exercise is to demonstrate that each employee is important, appreciated and well-compensated for the job they perform. The total benefits received may be much more than just an hourly rate, or base salary.

Consider a three-column format: 

The first column could list “Direct Pay” on top, followed by “Indirect Pay” further down this column.

The second column could list “Company Contribution” and the third column “Your Contribution.”

Under “Direct Pay,” you may want to list the previous year’s earnings. If the employee is relatively new, perhaps their six-month total or even just a quarterly total for much newer employees. Do not forget any bonuses or other incentives earned.

“Indirect Pay,” is where each company’s form will differ widely. Some benefits are standard and obvious while others will vary from company to company. While most of your employees will have 12 months’ worth of data, remember to adjust the annual benefit to reflect the correct amount if you are showing only partial-year totals.

Use the second column, entitled “Company Contribution” and the third column “Your Contribution” as appropriate.

 Government-mandated benefits (all are “Company Contributions” and nothing for “Your Contributions” except for FICA limits and possibly state disability)

 Social Security/Medicare (FICA)

 Workers’ compensation

 Federal and state ynemployment

 State disability

 If applicable, some portion of various insurance coverages could be “Company Contribution” and some “Your Contribution.”

 Health insurance

 Dental insurance

 Vision insurance

 Possibly, a 401(k) or some other company-sponsored savings plan. The amount contributed by the company and employee will vary

 Perhaps cellphones are provided and/or an allowance is made toward the employee’s monthly bill. This amount will be in the column “Company Contribution” 

 List sick and personal days as benefits even though the dollar amount will be included in the “Direct Pay” amount

 Service techs may have uniforms provided by the company

 Other benefits  

FINAL THOUGHTS:

Open communication is a strategy we found highly effective in our business and the COVID pandemic has further demonstrated the value of that policy. In the event of an increase in the federal minimum wage, proactively communicate with your employees. Discuss the facts and circumstances for your particular state, and finally, present a detailed statement of all benefits that are part of their total compensation package.  



Discussion

Comments on this site are submitted by users and are not endorsed by nor do they reflect the views or opinions of COLE Publishing, Inc. Comments are moderated before being posted.