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Date Posted: 3/26/2014

What a Minimum Wage Hike Means for Your Payroll

By Stefan Schumacher, editor of The Payroll Blog

As you’ve probably seen in the news, there has been a lot of talk recently about raising the minimum wage across the board, for the country. A number of states have already done so and the president issued an executive order, raising the minimum wage on federal contractors. How you feel about the issue from a political or socioeconomic standpoint is completely up to you.

You may be wondering, though, if the minimum wage were to go up in your state, how would that affect the company payroll aside from the obvious increase for anyone getting paid minimum wage? Well, since payroll taxes are connected to wages that’s something else to take into account. You may have to rethink slightly how you operate your business, particularly if you are a small business.

There are some basic measures you should consider:

• Keep a close eye on profit margins. If your profit margins are tight, you may want to project them out considering a possible minimum wage hike, so you know what that will mean to your bottom line.

• Be extra careful in hiring. Regardless of what you pay a given employee, the cost in time and resources of training them is significant. You don’t want to have to do it more than once for the same position in a short period of time.

• Looks for other areas of the business where you could be saving money. Are you using the most efficient tools for a task such as payroll? If payroll is costing you a lot, test the market and see if there are better solutions for your size and needs.

A potential major change in government policy is always something you want to be prepared for in business – whether you are for it or against it. A little bit of forward thinking can make any transition easier.


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