It’s part way through the year, and you may still be working on new plans, goals, and strategies within your company. One of the most important aspects to take into consideration is the annual budget.
For most companies, an annual budget will include a variety of expenses: rental/lease/mortgage agreements, insurance, utilities, and the cost of goods and services. If there’s one thing to remember when planning for 2019, it’s the need to anticipate and budget for payroll increases throughout the year, so you are comfortably prepared to respond to employee and market conditions.
Consider the following examples:
- ABC Company requires a steady workforce of 60+ general labourers at a pay rate of $14 per hour. With the minimum wage increase, and a highly competitive market where similar jobs pay well over $16 per hour, ABC Company prepared for the possibility of a mid-year pay increase by including it in their annual budget. When payroll costs rose by $10,000 per week, the transition was well within their ability to afford since it was planned for and included in the annual budget beforehand.
- XYZ Company created their annual budget at the end of 2017, which included all approved pay rate increases at the time. As 2018 progressed, it became evident that their compensation package could no longer retain the quality employees they had worked so hard to bring on.
Furthermore, their current offerings were not getting the attention they were hoping for, and there was no room for meaningful increases within their annual budget. As a result, Company XYZ struggled through the 3rd and 4th quarters as they lost employees to more lucrative offerings, and continually failed to attract new talent.
While increasing pay and offering other incentives aren’t guaranteed to address your staffing concerns, they aren’t even an option if you don’t budget for them.
In a tight employee market or an environment that has historically high turnover, you may want to consider alternative compensation options when a wage increase is not possible—for example, performance- or productivity-based bonuses, attendance rewards, or transportation subsidies.
It’s important to budget for success by considering the real possibility of mid-year payroll increases. Stay ahead of the curve by proactively responding to market conditions and monitoring your competitors’ offerings.
Keep an eye out for our upcoming blog about offering incentives to combat wage compression after a minimum wage increase. You can also sign up for our email updates to get all the latest news delivered right to your inbox!