The Minimum Wage Debate: Real consequences

2016 has barely begun, and arguably one of the most controversial and divisive topics confronting HR professionals is the minimum wage debate. As of January 1, fourteen states have raised the minimum wage, with 29 states plus the District of Columbia now setting minimum wages above the national rate of $7.25 per hour.

Income equality is one of the biggest issues on the political agenda, as presidential candidates see it as a step towards reducing poverty. According to some estimates, a federal wage hike to $12 an hour by 2020 would lift wages for 35 million American workers. On the other hand, opponents worry that the hikes would destroy jobs due to increased labor costs, while forcing employees to work harder and longer – as in the case of the restaurant industry in Seattle, which has purportedly faced the most job losses since the Great Recession.

No matter what your argument is, what is clear is that minimum wage will continue to be a contentious topic – and HR departments will need to consider the consequences of any reforms.

Rather than having the knee jerk reaction of reducing staff hours or decreasing the number of staff members when minimum wage changes take effect, companies should look more holistically at their business and assess how minimum wages will impact the organization longer-term.

The first obvious place to assess is whether people are working on the right tasks. Are there highly manual and inefficient tasks that could be automated? For example, is human resources spending too much time scrutinizing spreadsheets, showing what projects people work on to rationalize hiring decisions, rather than allocating more hours to drive strategies in hiring, training and retention? Or are they allocating too much effort in reaching out to potential candidates when this can be outsourced to a recruitment firm?

Secondly, with nearly 54 million Americans now doing freelance work, and with companies increasingly employing a highly diversified workforce that often includes a mixture of part-time and full-time employees, remote workers and independent contractors, companies need to evaluate the right blend of skills versus employee type against tasks. For instance, for one-off projects, does it make sense to bring in an hourly contractor for a particular activity? Using contingent workers can also alleviate the time and effort that comes from not only interviewing, hiring and training full-time staff, but also balance out resources so that HR is not faced with trimming staff numbers against higher business costs.

Thirdly, besides employee wages and salaries, are there other inefficiencies or areas in the business where you could be losing revenue? In the professional services industry, one of the primary sources of lost revenue is inaccurate hours in time sheets, missing receipts from billable expenses and inaccurate billing.

Finally, HR professionals should be at the helm of analyzing areas to invest in to grow. While this may sound counter intuitive as businesses, evaluate how to manage costs against minimum wage increase. As the pace of technology innovation continues, it makes sense to invest in the right technologies to reduce tedious administrative tasks and support long-term productivity and profitability goals.

As minimum wage changes continue to sweep across the country, the rate of pay is only one small consideration for businesses in the overall debate. Rather than tactical responses to employee pay, HR can be at the forefront of a win-win approach that drives longer-term business growth while helping people feel that their rate of pay is commensurate to their work and time.

Author Bio

Raj Narayanaswamy is the co-founder and co-CEO of time asset management software company Replicon. Businesses around the world use Replicon’s solutions to increase productivity, improve profitability and achieve wage and hour compliance.