Managing the increase in minimum wage

The Fair Labor Standards Act sets the federal minimum wage at $5.15 per hour. The Fair Minimum Wage Act of 2007, signed into law on May 25, 2007, will increase the minimum wage over two years:

• $5.85 (July 24, 2007)
• $6.55 (July 24, 2008)
• $7.25 (July 24, 2009)

Thinking about these increases, they represent annual raises of 13.6%, 12% and 10.7% each for a total increase of 35.9% over the 2 year period.

While restaurants can receive industry-specific tax relief, many believe this could cause major issues for business operators. Imagine if your labor costs suddenly went up like this? If you operate at a 30% labor cost, this translates to a direct impact of 4% of your revenue right off your bottom line! What if your labor cost is 40%? That’ll be 5.44% thank you very much.

For companies that live and die on labor cost, this is a major blow to the bottom line. Especially when labor is the only controllable expense you have. This is why so many smart companies are turning to technologies such as Workforce Management (WFM) solutions to help them better manage their labor spend and squeeze out as many efficiencies as possible.

There are still a ton of companies using manual or antiquated processes who can seriously benefit from a WFM solution and for them, its not too late. Any business that employs people should be looking to automate as much as possible when it comes to managing their labor costs… this just makes good business sense.

And don’t forget, a rise in minimum wage also leads to an expected rise for those that are making a bit more than minimum wage… so whether you plan on giving your entire workforce a raise or not, you can bet that a majority of them will be expecting it.