Skip to content

The new minimum wage will increase your payroll. So what are you doing about it?

Throughout the country, legislatures are increasing the minimum wage. Some states, such as New York, have scheduled wage increases for each of the next five years, and, according to the Wall Street Journal, in July the minimum wage went up in 15 places: By the start of next year, 29 states and Washington, D.C., will have minimum wages higher than the federal level. 

However, creative and forward-thinking companies will want to do more than just watch their expenses go up. With planning, communication and execution, these laws can also act as a catalyst to better productivity. 

  1. Raise the bar for recruiting

With a higher entry-level wage, you can hire a better-quality, possibly more mature, employee. Ten years ago, one national retailer decided to pay the highest wage in its industry, and today that company credits much of its success to attracting more qualified and happier employees.  Your market to find good employees just got a lot bigger, so you’ll need to rethink how you recruit, where you recruit and who you recruit.

Look at it this way. If someone told you that you had to spend $40,000 for a car, you might as well get one that’s worth $40,000, right?

  1. Build a performance-based culture

Anytime you are paying more for a service, you have a right to get better service, too.  But this is critical now, because with higher wages and more payroll expense, you can no longer afford to live with mediocrity (as if you ever could).  Smart businesses will use this as an opportunity to develop a compensation plan in which the best performers are rewarded and the bottom 20% managed with some combination of training, discipline or separation.  You’ll want to be quicker to identify the future stars, too, to ensure that they stay with your organization and to take them “out of the market” for your competitors. One of the metrics that Gallup uses is “revenue per employee,” but there are countless ways to measure—and improve—productivity, once you decide what it is you want each employee to produce and to achieve.  As is stated above, it’s a culture that you’re building: one that lets everyone in the organization know that each person is expected to generate a reasonable ROI—Return (productivity) on Investment (payroll).


More ideas on how to counter the increased minimum wage by increasing expectations for employees, and also some warnings of unintended consequences, to follow soon….