Although the federal minimum wage stands at $7.25 an hour — as it has since 2009 — many businesses have been making headlines by raising their entry-level wages to more than double that figure.
Starbucks, for instance, already pays more than 30% of its workforce at least $15 per hour, according to a December letter to Congress by CEO Kevin Johnson, in which he vowed to increase that fraction to 100% over the next few years. Chipotle also promised to increase its average hourly wage to $15 in May of 2021.
While the push for such a large wage hike is causing some small business owners to panic, there are many ways to ensure your business stays competitive in the job market — including, but not limited to, raising your own wages.
Here’s How To Keep Your Small Business Competitive
Consider Your Own Wage Hike
Obviously, one of the best ways to stay competitive with wage increases is to increase your own wages. Even with great benefits, a $7.25 per hour job is a tough sell for an employee who might be able to make $15 — or even $12 — elsewhere.
Which means that this might be a great time to sit down and review your business budget. Are higher wages actually possible? You might not have to get all the way to $15 per hour to make a big difference. According to a recent study, in many mid-sized American cities — including Pittsburgh, Knoxville and Spokane — a living wage is actually closer to $13 per hour, which might be more achievable.
If a major wage increase simply isn’t financially feasible for your business, there are other valuable benefits you can offer employees in their stead (or in addition to a more modest wage jump).
One very highly sought-after perk? Flexibility. The freedom to work where they choose can help employees feel more empowered in their work and even make it easier to get their work done free of distraction. Case in point: one 2020 Harvard Business Review study of employees working from home due to the pandemic found those workers spent 12% less time in big, not-so-relevant meetings and 9% more time interacting with customers and partners. (Bonus: If you’re not paying for office space, maybe you could afford to increase your employees’ wages.)
If you’re not quite ready to bite the bullet and go fully work-from-home, or the nature of your business doesn’t allow all tasks to be completed remotely, you might also consider implementing a hybrid schedule, which allows workers to enjoy the benefits of working from home while also participating regularly in collaborative, in-office efforts.
Help Employees Pay For, or Continue, Their Education
We’ve all heard the unsettling national student loan debt figures — these days totaling about $1.7 trillion. While an individual’s student loan debt might vary depending on what they studied and how they funded their education, chances are many of your employees are still paying off their college educations.
Many companies, including Aetna, Estée Lauder, Hulu, and Staples (just to name a few) have added student loan repayment perks to their benefits packages. These perks can come in all different shapes and sizes, from a student loan payment match to a flat amount offered monthly in student loan reimbursements. Staples, for instance, offers certain full-time employees $100 per month in student loan repayment assistance — it doesn’t have to be super expensive to be a valuable and competitive perk.
Many companies also fund ongoing education programs for employees, particularly when they study in related fields. Again, it doesn’t have to be 100% tuition coverage to be valuable: FedEx offers eligible employees up to $1,500 per year to cover certain educational expenses.
Increase (or Implement) Your 401(k) Match
Depending on your budget, a major wage increase might be impossible — but offering a higher 401(k) match (or implementing one in the first place) could be within reach. A 401(k) match is an excellent way to encourage employees to save for retirement, which can also help decrease their day-to-day financial stress and increase productivity.
From the employee’s perspective, a 401(k) match is essentially free money (even though it’ll be difficult to access until they reach retirement age). And the perk is valuable on the employer’s side of things, too: matches are deductible on your federal business tax return, and you may also be eligible for a tax credit of up to $5,000 for starting up a retirement plan in the first place.
Increase (or Implement) Paid Time Off
If you can’t afford to pay your employees a higher hourly wage, maybe you can afford to pay them to take some time off. And while paying for “nothing” may sound like a less-than-savvy financial move, research suggests that it’ll still benefit your business in the long run.
Vacation time can help employees rest and recharge, coming back to the office more relaxed and better able to perform their job duties well. And when employees know they’re not trading their livelihood for their mental health, they’re able to more fully relax while they’re out of the office.
Still looking for ways to jumpstart your business and change the way you work? Talk with your accountant to understand if there are funding options or loans that might offer you the flexibility you need to implement lasting changes — including changing the way you compensate your employees. After all, they are your most valuable asset.