It’s becoming increasingly evident that increases to the U.S. Federal minimum wage are coming.
Democrats and Republicans differ on how--and how quickly--to get it done, but it looks like it's going to get done. From the perspective of workers and the representatives in Washington D.C., it’s been too long since the last U.S.-wide increase took effect in 2009.
For job creators who already live on the edge of acceptable margins, an increase in the minimum wage creates a dilemma of how to run their workforce so that they can keep up with the same demand within their tighter budgets. It’s not a simple problem to solve, and it confronts all businesses, from small businesses to large enterprises. All these job creators wonder: “How can I get all this work done if I can’t afford to employ as many people?”
If you’re on a budget, reducing the number of people you hire is probably a necessary part of any solution here. But you can’t rely on productivity gains to keep you effective with a smaller workforce of more expensive employees. Running your own expensive and slow hiring process for more workers to meet a surge in demand for a short period will set you up for failure because you’ll incur a lot of expense (money and distraction) to source those workers and miss some opportunity to meet demand because internal hiring is slow. Once the surge is over, you’ll need to complete a painful layoff process in a few weeks--and now with higher wages you’ll be under more pressure than ever to time that layoff perfectly. Even if you succeed, you’re just setting yourself up to repeat the same expensive, slow, painful process over and over again for future surges.
You need the flexibility of an elastic workforce to address variable demand: a workforce that quickly expands when you need it to grow to meet new opportunities and then readily contracts when your budget requires you to cut costs.
Yesterday’s solutions don’t work as well as they should. Trying to fill the gap with independent contractors used to be a popular way to increase and decrease a workforce to fill demand, but it’s becoming a riskier proposition every day. At the same time that Congress is considering an increase in the minimum wage, there are also calls to move toward a Federal test for independent contractor (1099) classifications matching California’s ABC Test. Attempting to classify a worker as an independent contractor when they perform work within the usual course of your business will fail the ABC test and expose you to risk of fines, penalties, and class-action lawsuits that can represent an existential threat to your business. That’s not a path to achieve long-term efficiency or effectiveness.
Instead, the job creators best-positioned to solve this dilemma are partnering with a temporary staffing solution. With a smaller and higher-paid workforce under the new increased minimum wage, temporary staffing enables you to keep a lean core group of employees and then flex the workforce up and down to meet seasonal and other short-term demand fluctuations. Like the independent contractor solution, temporary staffing offers the flexibility of bringing in temporary workers without the big misclassification risks, because these workers are properly classified as (W-2) employees working for the staffing agency. However, the traditional brick-and-mortar staffing agencies have substantial limitations (inefficiency and waste, pencil-and-paper technology, and failure to provide data visibility, for example).
I’ll be the first to admit that the staffing industry hasn’t always been equipped to solve this dilemma efficiently. If you’re looking for a fresh perspective on efficient technological solutions, I recommend checking out a solution like Employbridge.
Employbridge is a thought leader and platform innovator that can help you integrate a managed, hourly elastic workforce to solve your dilemma as a job creator.
In summary, a higher minimum wage will make it more expensive than ever to keep a group of employees with sufficient capacity to meet surges in demand. Consider the old saying: “You don’t build the church for the Easter Sunday crowd.” An elastic workforce is like the Easter tent that can quickly and effectively add capacity when your lean core workforce needs help, and then simply scale down when the surge dissipates. Unlike a risky independent contractor solution, consider adopting a strategy of using temporary staffing (especially the new innovators in that space) to build an elastic workforce to set you up for long-term success.