Keeping your businesses afloat is one of the primary goals of business executives. For that to happen, you will have to match consumer demands with quality products and services and maintain excellent relationships with your vendors. Most importantly, you will have to attract and retain the top talents in your business, especially with rising wages expected in 2023.
According to a recent survey, salary increase budgets in the United States are projected to hit an all-time high of 4.1 percent in 2022. This is significantly higher than the 20-year average of 3.3% and a record high for 2021. Gains in pay are expected to reach 4.6% in 2023.
While it is uncertain to predict the trajectory of inflation next year, it is essential to prepare for rising employee wages next year. At Expense to Profit, we introduce business executives to insider secrets and strategies for reducing operating costs and improving profit margins.
So, how do you pull this off?
Understand the Current Situation with Your Business
Firstly, you need to be fully aware of the health of your business before making plans for salary increments. That is because implementing salary boosts next year for your workers will directly or indirectly impact the current financial situation of your business.
Most businesses already pay more than the national and resident state minimum wage. Thus, it is vital to review your business operations to ascertain how you will pull them off.
This includes looking at your updated P&L statements, fixed and variable costs, benefits, and other operational costs. A clear picture of your business profitability is decisive action.
If your final price is not commensurate with your production costs, you can make a slight adjustment in price to balance your accounts. Explain this change to your customers so they will not be caught unawares.
Recognize the Seasonality of Your Business
Knowing the ups and downs of business is essential for any executive. Your company’s success hinges heavily on the timing of your sales and other financial transactions. Seasonal businesses have mainly relied on unskilled labor, making them sensitive to salary increments, if not minimum wage increases.
It is vital to synchronize your costs concerning your cash flow. Calibrating your seasonal labor costs is just as essential as purchasing inventory.
If you run a business and make the most revenues during peak months, you can place most of your workers on contract instead of hiring them full-time.
Think About Offering Benefits Instead of Implementing Increment on Base Rate
Another way to plan for rising employee wages next year is to offer benefits instead of base pay increases. This is a practice that is aimed at saving you money in the long run.
Offering flexible benefits to your workers will retain your top talented employees. A survey found that 75% of employees who receive benefits from their employer are more inclined to remain with that organization.
It is also going to improve your employee engagement and morale. Workers receiving benefits feel valuable and will always do their best. You can deduce that benefits are essential to job satisfaction, and you would not be wrong.
It is also essential to allow your workers to choose benefits that will be relevant to them instead of offering one-size-fits-all benefits across the board. This is a cost-effective tactic that will save you from wasting benefits that your workers do not need.
These benefits include health insurance, retirement benefits, remote work opportunities, flexible work schedule, and many more. We wrote a comprehensive article on Employer-Paid Benefits. You should check it out.
Keeps Tabs on Your Competitors
Another way to prepare for rising employee wages is to keep an eye on your competition. Knowing what strategies they are implementing to attract and retain their workers is essential.
This includes their salary structure, how frequently they offer raises, and how they budget for annual salary increases. Keeping tabs on your competitors can allow you to compete correctly for new hires and retain experienced workers.
Platforms like Glassdoor, Monster, Hired, and ZipRecruiter can give you an idea of how much your competitors are willing to pay potential hires. With that knowledge, you can offer your top talents better.
Know Your Funding Options
Knowing your business funding options is essential to maintaining a successful business. Whether looking for working capital or thinking towards business expansion, funding options are available to businesses today.
While a business loan might suffice, alternative options like cash advances and peer-to-peer loans are available to keep your business running. These funding options are essential as you can implement salary raises without worrying too much.