The cost of labor is rising. Seattle approved a $15/hour minimum wage this month. The group responsible for pushing the higher wage is already at work to spread the increase to the rest of the state, which already has the highest state-regulated minimum hourly wage in the nation. It seems Washington may raise the bar (and the cost of staffing) for the rest of the country. Meanwhile, Congress has been wrestling with a move to increase the federally-regulated minimum wage to $10.10/hour. If these kinds of wage hikes come to your state or city, what can you expect as a business owner? One thing is certain; you should pay careful attention to your labor scheduling process.
It’s not just inflation and wage increases that are driving employers like you to take a closer look at labor scheduling. With the Obamacare employer mandate starting next year, careful attention to employee hours is more important than ever. Otherwise, you may be penalized if an employee unexpectedly reaches full-time status and has not been offered healthcare.
Other forces drive labor costs up as well. Consider other economic pressure that may require you to pay staff more to retain a capable workforce. In Midland, Texas, the recent influx of oil wealth has driven the average annual salary to over $80,000! The cost of living in the city has increased so substantially that all employers have had to adjust their wage models. Even entry-level jobs in fast casual restaurants, like your favorite hamburger vendor, commonly pay more than double the Texas state-mandated minimum wage!
In any of these situations, labor scheduling is a critical component to managing a budget in the face of more expensive wages and legislation. Here are some examples of how more careful labor scheduling could save your business a profound amount of money.
Example 1: Rising labor costs require more precise scheduling.
Should the average wage of your workforce become $15/hour, it may be beneficial to schedule in shorter increments of time. That is, reducing some of your employees’ shifts by just a quarter hour could save your company thousands of dollars a year. Do you only really need half of your 20-person staff to close down your store each night? Send 10 people home 15 minutes early each night and your 7-days/week business could really feel the savings.
(10 Employees) x (.25x$15/hour wage) x (365 days per year)
10 x $3.75 x 365
$13,687 a year saved!
Example 2: Schedule with Obamacare in mind.
If you are a large employer, it may pay to ensure that some of your staff stays within the Affordable Care Act’s definition of “part-time”. This means that the employee does not work more than 30 hours per week or 130 hours per month. Creating schedules that accommodate this could keep your business afloat as you navigate the Affordable Care Act.
(10 part-time employees) x ($6,000 average annual employer premium cost)
$60,000 a year saved by needing to insure fewer employees!
It’s important to take the Affordable Care Act into account when scheduling before an employee becomes full-time. In addition to premium costs, employers who fail to offer healthcare to employees for EACH month they are considered full-time may receive additional costly penalties. For more information about labor scheduling and Obamacare, visit www.EmployersAndObamacare.com.
Example 3: Schedule well to avoid more expensive overtime.
If you experience a sudden increase in labor costs due to an increase in federally-, state-, or city-mandated minimum wage, the last thing you need is to find yourself paying unexpected overtime. Saving even a small number of overtime hours each week could make a huge difference in how profitable your business is.
(5 Employees) x ($22.50/hour minimum wage OT rate) x (2 hours OT/week) x (52 weeks/year)
5 x $22.50 x 2 x 52
$11,700 saved in expensive overtime per year!
Whatever your strategy for addressing rising wages and Obamacare, careful labor scheduling must be a part of it. Creating and enforcing a proactive schedule will help your business remain successful in a rapidly changing market.
Authored by Jess Castner
