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How to Prepare for Hawaii’s Minimum Wage Increase

Preparing for Hawaii's minimum wage increase
On May 23, 2014, Governor Neil Abercrombie signed Senate Bill 2609 (Act 82), which incrementally increases the state’s minimum wage over a four year period, starting on January 1, 2015. The last scheduled increase will bring Hawaii’s minimum wage to $10.10 per hour on January 1, 2018.

While an increasing minimum wage is boon for employees—larger gross income, stronger purchasing power, and arguably, a better quality of life—it’s a bust for employers, particularly small businesses, who must figure out how to manage growing labor costs.

Prepare your company for the minimum wage increase

Even if your company doesn’t employ minimum wage or tipped workers, you still need to assess whether your current pay rates will continue to attract the same caliber of candidates and satisfy and retain your existing employees. Consider the fact that just three years ago, an $11 per hour wage was very competitive against minimum wage; in 2018, it’s only $0.90 more.

Review current wage and hour policies

Meet with your lawyer or HR consultant to review your company’s wage and hour policies. Address changes to overtime exemptions, wage structures, and tipped employees (if applicable). Non-compliance could result in labor violations and consequential liabilities, fines, or lawsuits.

Budget for increased taxes

When wages go up, so do payroll taxes. In addition to budgeting for hourly wage increases, plan for increases to social security, unemployment, workers’ compensation, and disability insurance expenses.

Conduct an in-depth job analysis

Take a hard look at the positions your growing and changing business needs and assess why you need them. You may realize that some positions are better suited for a temporary worker, while others could benefit from having a permanent dedicated employee.  If there was ever time to be strategic about the roles you fill and the people you fill them with, it’s now.

Improve company efficiency

Ask your employees for ideas on how to improve processes and cut costs. They are on the front lines of your business and may be able to offer insights that aren’t necessarily evident from the top down. Even if suggestions challenge longtime process or practices, it’s your job to ensure they are still helping, not hurting, your business.

Invest in existing employees

It may sound counter-intuitive to invest more time and resources into employees when you’re trying to manage growing labor costs. However, happy employees are good for business and can help your company be better prepared to handle future challenges, such as staff shortages or layoffs. Cross-train key employees, reward their commitment, and regularly acknowledge good work.

Addressing the effects that Hawaii’s minimum wage hike may have on your business and planning accordingly will help you tackle issues that arise and, more importantly, ease any impact to your company’s bottom line.

This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.

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