Addressing Wage and Overtime Changes

Originally posted January 26, 2016

How to proactively manage changing labor costs.

In industries where profit margins are thin and in which labor makes up a large portion of operational costs, changes in wages (and the subsequent implications they have on overtime) should always be kept top of mind. Service contractors can be proactive and manage the challenges presented by these developments. Start by examining your current processes and look for opportunities to enhance efficiency and reduce costs sustainably across your organization.

Recent US Wage Updates

Although the federal minimum wage for nonexempt employees remains at $7.25, as recently as this month, several states, cities and counties have increased their minimum wage. Other states are projected to increase later this year. It’s important to monitor these changes within your jurisdiction to ensure compliance.

Review recent US updates here.

Recent Global Wage Updates

Wage changes are happening on a global scale. In the UK, the National Living Wage and National Minimum wages both increased in 2022. Also this month, workers in Australia realized an approximate 5% increase for hourly employees.

What you can expect from changing labor costs.

Whether you’re a small, growing or global company, changing labor costs impact your bottom line.

While there are some common tactics businesses’ employ to offset rising minimum wage costs, some of them are easier said than done, especially in today’s economy.

  1. Raising prices: Your clients are operating under the same challenges you are. With global inflation and supply-chain costs tightening everyone’s belts, it may be harder to successfully renegotiate contracts to accommodate rising labor costs.
  2. Reducing staff and hours. Labor market challenges are still being felt worldwide. Overtime costs are increasing, employee churn is high, and shifts are difficult to fill.
  3. Reduce costs. Even if you’re shopping around for different suppliers and vendors, ongoing supply-chain issues may continue to make your inventory harder to stock (especially in a cost-effective way).

Actions to take now to combat wage and overtime changes.

The best advice we can give, especially as other common tactics fail, is to proactively streamline processes. If you’re spending unnecessary time doing any of the following, there are trickle-down implications to your labor costs.

  • Managing inventory
  • Scheduling (and rescheduling, as employee availability shifts)
  • Assigning, collecting and reviewing daily activity work tickets or route checkpoints
  • Managing employee time off
  • Reviewing SLAs and providing proof of service reporting to clients
  • Billing and collecting client payments
  • Preparing for and processing payroll
  • Managing compliance
  • Integrating financial information directly with your scheduling and operations solution

By proactively streamlining processes now, you can offset labor costs even as increases occur. Making improvements can have a sustainable impact over the long-term by reducing costs and maintaining or even increasing profit margins without compromising quality or raising prices. Businesses that maximize technology in the right areas can more easily create efficiencies across the organization and effectively comply with labor rules.

If you’re new to streamlining processes, we can help you determine the toolkit you need to address your business’ unique daily challenges. Contact us for more information.