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If you're a business owner with hourly employees, you’re likely experiencing some measure, perhaps significant, in increased labor cost. In non-pandemic times this is normal and occurs gradually over time. These are not normal times. Labor supply is severely constrained in many sectors of the economy. Depending on your industry, this trend is forcing you to deal with a range of issues. While there is no magic solution for addressing the pressure wage growth puts on your margins, here are a few tips to help you stay profitable.
If your employees are asking for a raise: Consider revising their job description to include expanded responsibilities. In an ideal world this would mean you can perform the same work with less people. Also, consider using performance bonuses in place of pay raises, which tend to become permanent when the economy goes back to “normal”.
If you're paying more to locate or hire: Ask for better terms from your recruiter, a longer guarantee or reduced fee. Also, look for opportunities to promote from your existing team and hire under them to reduce fees.
Increase your prices: I know, this seems obvious but the real key is the “how”. A few things to consider: 1) Do you need to make a permanent price increase or will a short tem add-on fee or surcharge suffice. 2) If you do raise your prices, you’d be justified as inflationary pressure is its highest in a decade. If so, take the time to explain the “why” to your customers, no one likes surprise increases.
9-10-21
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