Minimum Wage Increase: The Hidden Risk to Your Business

Minimum wage increased. What are the hidden risk to your business now that the minimum wage increase is taking affect in multiple states? Listen in as we discuss the hidden risk to your business and how you can mitigate your risk by hiring right the first time.

Show Notes

Welcome to the In The Clear Podcast I’m your host Justin Recla along with my amazingly talented wife Tonya Dawn Recla.

Hello. Hello.

Welcome to the show everybody today we are going to be talking about things that are in the news, especially here in Arizona. I know a lot of states with the given elections for talking about the minimum wage increases that we’re seeing across the nation and the hidden risk to your business. It’s been a big topic lately I know for a lot of small business owners that we’re going to start feeling the crunch on their numbers of the cost of hiring employees just went up.

What Really Happens When You Hire the Wrong Candidate

There are a lot of small business owners that are very concerned especially like you mentioned here in Arizona because that’s a new thing for them and we’ve heard the horror stories of what have happened to businesses in all articles around McDonald’s putting kiosks in and stuff like that. You know me like I’m kind of middle of the road type a gal. So, while I love to listen to the conspiracy theories and kind of the people who want to bury their heads in the sand I think the sweet spot is right between those two. Like what does it mean and what are the specific implications for your business? So, you know one of the things we do with our consulting client is risk mitigation. This is very personal and it’s very specific to business and it’s an it needs to be customized in that fashion. So first and foremost everybody, stop freaking out, just because something might be bad for somebody else’s business it may be a really great thing for your business. But you just need to educate yourselves.

Prop 206: Arizona voters approve $12 minimum wage

Exactly, and part of that is coming down to hiring right the first time and looking at your employee acquisition cost, what does it cost you to train an employee, and what does it cost you if you lose an employee? Ultimately, just make sure you’re hiring right in the first place and having a process because at the end of the day if you hire right it doesn’t matter if the minimum wage is $12 an hour or $15 an hour you’re going to adjust your services accordingly. However, you can save yourself so much time and money by hiring right the first time.

Well, that’s why I’m so excited about the fact that we do employment screening not because, we do employment screening, because as you know that was really back and forth lengthy conversation for us to choose to go into that arena because we’re not real big fans of a lot of the labor laws. You know they probably served us very well when we were employees but as small business owners they don’t service as well. So, we did kind of stayed away from that arena. But I like the fact that you said making sure you have a due diligence process because whether it’s a B2B transaction for your business or whether it’s an employee hiring situation you want to make sure you have a process. So, yes we offer screening but that’s not enough. Folks, you have to make sure that you know exactly what Justin was just talking about. What does it cost you to retain an employee or to not retain employee and what is hiring wrong in the very beginning cost your company in on the flip side of that coin? What is hiring right and having a really valuable employee in the right place benefit your company.

Arizona Proposition 206

Exactly. You know what of the things that a lot of small business owners have to take into consideration is that it’s not just the cost of hiring that person and the hourly wages that you’re going to be paying them in there but all the time that you’re paying somebody else to train that person and all the time that you’re paying that person while they’re learning and learning in the job and making decisions of whether or not they are a good fit and one of the hidden risk to that is you can absolutely have someone pass a background check. But if they’re not a good fit for your culture, your business culture that’s a big deal.

Absolutely, and one of the cost that you didn’t mention was the opportunity cost. That’s something that most small business owners overlook because they don’t stop to think what if it doesn’t work. So not only could it go bad and you’ve got costs associated with that, but it also means that you’ve lost all of that time. I’ve often said that losing momentum is one of the worst enemies to a small business. We always think about the time and money factor but momentum is a big part of that and if your business has a lot of ups and downs, and ups and downs, and ups and downs, and then more downs than ups it takes a toll.

Well, and it can add up really quick because next thing you know you’ve lost momentum and now you’re having to scramble to get back to a place of just being good again. Whereas, if you had a process in place that prevented you from losing momentum especially when hiring people that’ll save you a ton of time and headache.

Absolutely. So what can we talk to people about, what can we give them right here now that help? because I mean I think we’ve kind of addressed the issue and so again don’t freak out. There are ways to mitigate risk. You know maybe you do have to go and completely up your employee process if you’ve got a large number of employees and that’s going to take a toll on your bottom line. Again, don’t freak out. There may be ways that you can outsource thing. There may be things that you can do in B2B transactions. There are always unique ways. You know if you want to sit down and have a talk with us about what that looks like or give us a call you know what we’re happy to discuss some creative ways to go about that. But let’s say that you are an employee dependent business what can they do?

Well first off, one of the biggest things that I’ve seen especially since this minimum wage change has come out is a lot of small business owners don’t have a hiring process. They have an application someone comes and fills it out and maybe you sit down across the table from them and then the person’s hired or they’re not. That’s essentially their process. So, what I would encourage small business owners to do is to actually put a process in place, one that includes having them fill out an application, going through an interview process, but then actually going forth and actually paying the money for an employment screening. That small amount of money that you’ll spend on an employment screening is going to save you a lot of heartache in the long run.

Well make sure that that employment screening is customized to your business. So, one of the things we looked at when we made the decision to get into that arena. We did it with that in mind because you know one small businesses employment screening isn’t good enough or another one. It really depends on what they’re going to do. I mean would you want an employee to be screened the same way if they’re stocking shelves in a warehouse versus teaching a room full of kids. No, you don’t. There are certain parameters that you want to take a look at and if you don’t know what those are you know ask somebody, get some assistance with that. Don’t just toss in the person’s name into an online you know clearance type of background company. If you don’t know what their processes or what databases they’re using or what it actually checks you are putting your business at risk. So, I agree with Justin that a due diligence process the employee hiring process is crucial and it can be modeled after our B2B due diligence process which is the three steps. Think about what you need to know about an employee. Learn how to ask questions like Justin talked about the application process. We love the filtering system where it’s simple can you follow instructions like what are some of the things you need your employees to be able to do they need to be technologically savvy.

If they do then have an application process that is heavy on the tech side of things so you can kind of gauge can they go to this link, can they fill out this paperwork, maybe they need to upload something you know whatever you can do on your end to filter the people that you really do take all the way to that screening process.

This is another key piece of the screening processes when you’re having someone fill out an application or maybe you’re taking a resume for somebody. There’s a stat out there you can find in a website that talks about how like 60 percent of people that fill out a job application, this is my big word for the week, Are you ready for it? Bloviate their job experience.

Oh gosh, well of course they do. And I mean we train people to do that right. again that’s why I prefer to work business to business. Not that businesses don’t bloviate as well we’ve learned that. But the onus is on you as a small business to have a process to mitigate some of that. You’re not going to catch everything but that’s OK too. But at least for your own peace of mind make sure that you are making informed decisions that requires you knowing what information you need and then gathering that information.

Exactly and one of the great things that you talked about with one of our Clear Business Directory members Rachel Lutowsky of Dynamic Leadership Solutions we talked about culture. So, maybe in integrating this part of your process of having the other employees that are currently working there. Getting their feedback on what they’re feeling. Do they like the person and do they communicate well with them; do they get along or are they going to be able to work together because that plays a big part of whether or not that somebody they’re going to want to hire.

Employee Engagement: The Key Ingredient to Increased Profits

That’s actually addressed in that Tribal Leadership book. They talk about one of the companies they featured in that book as a case study used, they had 10 people took the person out to lunch you know and the thinking on that was really valuable in the sense that you know you may be able to fool one or two people but you’re not going to fool 10 people, I mean maybe, we’ve seen psychopaths do it but regardless it betters your chances.

Exactly, so this is just some things that you can do to mitigate some of the hidden risks you know from hiring wrong because at the end of the day even like I said even with the minimum wage going to $12 even if it goes up to $20 an hour you can mitigate the risks by having a process in place by putting in having you know having people fill out an application doing an interview. But more importantly doing the unemployment screening on the back end before you hire to make sure that they are a good fit because you don’t know what you don’t know until you actually check it out.

Yeah, and again before you freak out thinking that your business is going to go under because you’ve run the numbers and you just cannot afford to pay the number employees that you have or the number employees that you need that amount of money really. Let someone else get some eyes on your business plan and your processes and your systems there are always ways to trim things down or to get more expeditious or lots and lots of very creative strategies are out there we’ve seen a lot of folks doing some unique stuff with businesses so don’t freak out just yet. There are things that you can do to mitigate some of the risks that we’ve talked about.

Exactly. So, if you’d like more information on our employment screening services you can go to clearbusinessdirectory.com/employment. We’ve got lots of valuable free resources on the site for you to take a look at a sample guideline sample policies and stuff that you can get and download to implement in your business today as well. Also, for the record we offer extremely affordable employment screening solutions with no monthly fees or dues pay as you go. So if you’re interested check us out at clearbusinessdirectory.com and until next time make sure your business is In the Clear.

2017-01-03T21:13:45+00:00

About the Author:

Justin Recla has over 13 years experience and advanced training with the US Army and federal government. He is a subject matter expert in tactical questioning, surveillance, counter espionage, threat and vulnerability assessments, and investigative techniques. He is an educator in concepts of effective communication and has taught hundreds of future federal agents how to conduct interviews and investigations. Justin brings his skills from the military sector and delivers them to the boardroom to help business owners protect their two most valuable assets: Time & Money.