Balancing minimum wage laws and your spring budget

Like any other business, garden centers are bound to minimum wage laws. As minimum wages continue to climb upwards in several states and cities, these retailers are preparing for the impact on their bottom line.

With most garden retail businesses bringing on seasonal labor and carefully balancing their budgets for the upcoming spring rush, how will rising minimum wages factor into the busy season?

Of course, it depends largely on the state and city they’re located in.

The federally mandated minimum wage is $7.25, and 14 states have minimum wages set at the same level. Five states have no minimum wage laws and two others have state minimum wages below the federal requirement — in all seven of these states, the federal minimum wage applies by default.

For the remaining majority of the country, each state requires its businesses to pay a wage above the federal minimum, with states varying broadly from each other. As a result, different businesses are affected in different ways, especially when hiring additional help for the hectic spring.

Keeping up in the cities

An effort is underway in Seattle, Wash., to gradually increase the city’s minimum wage for all employers to $15 an hour by the year 2021, by adding incremental raises each year. As of the first day of 2017, the city’s minimum wage is already $15 per hour for employers with more than 500 employees ($13.50 for those offering medical benefits). For companies with fewer than 500 employees, the city minimum wage ranges from $11 to $13 depending on benefits and other compensation offered.

Brandy Landry, general manager of Sky Nursery in Shoreline, Wash., says her employees are rarely paid minimum wage, instead starting at around 50 cents above the state minimum of $11. However, with the city minimum rising each year, Landry is now planning out wage increases to stay competitive.

“Now that [the state minimum] just started, as of January, at $11, some of those people that normally would have started at $11, obviously, we’re going to raise it even more than that,” Landry says. “We’re looking over that schedule for the next several years, with them bumping it up 50 cents each year.”

California, Vermont, Massachusetts, Connecticut and the District of Columbia also maintain state minimum wages of $10 an hour or higher. Many others have state minimum wages ranging between $8 and $9.80.

In Colorado, a new minimum wage of $9.30 took effect this year, an increase from the previous hourly rate of $8.31. Mike Estes, co-owner of Rick’s Garden Center in Colorado Springs, Colo., estimates that the increase, when factored into his usual labor costs, will have a significant impact on his bottom line this season.

“I just did some rough figuring the other day, thinking that it’s probably going to cost us about an extra $20,000 in payroll this year,” Estes says. “When we get into the springtime, all the sudden, our staff grows from about 14 people to about 36, and some of [them] are going to be [paid minimum wage], and they’re going to work until the beginning of July or so.

“We have two choices, really, the way I see it,” Estes adds. “We either cut staff and try to get by [with fewer employees] or something, or we just look at our pricing and everything and try to thoroughly go through our complete inventory and say, ‘Alright, we need to pick up an extra 3 or 4 percent on virtually every product in the store.’”

For Sky Nursery, the rising cost of labor increases presents a long-term financial obstacle.

“We are such a seasonal business. We make our money in such a short time, and that really is what carries us throughout the year,” Landry says. “My concern is that we do fluctuate from 55 to 90 employees [during the spring,] and what is that going to look like in six or seven years? Will we have to cut back more people? Will we try and push people to do more? So, I’m not exactly sure how that is going to pan out.”

The rising minimum wages also introduce complications to the seasonal hiring process in terms of experience and seniority. People accustomed to making a certain wage may start to see younger and less experienced new hires making close to the amount of money as them due to the increases.

“The thought of paying $9.30 an hour for a guy who’s never even been in a garden center, and it’s a good chance it’s their first job… you know, that doesn’t thrill me,” Estes says. “But, the law is the law, so we do it.”

A developing situation

Recently, the potential $15 national minimum wage has entered the realm of political discourse. Although it seems to many like an unfeasible proposal, it has prompted businesses nationwide to think about the possibility, especially as cities like Seattle and New York City implement their own localized versions.

Laws governing minimum wages are constantly changing, as well as the officials who decide them, which is why Jean Martin, HR consultant with Seawright & Associates, recommends companies follow the news closely — particularly as it pertains to Andrew Puzder, the proposed new secretary of labor.

“He’s going to try to override what some cities, counties and states are doing, especially as far as these little stepladders to a minimum wage of $15 an hour,” Martin says. “He’s talked about a federal law that will override and kind of undercut what they’re doing, making their policies non-enforceable by using the federal policy as the guideline to use.

“That may not happen right away. If there’s a scheduled increase for 2017, whether it be in July or in December, I would plan on going forward, but keep an eye on the daily news because this is something that may be changing in the years to come,” she adds.

(Editor's note: As of press time, Andrew Puzder has resigned as Secretary of Labor appointee.)

In legal limbo

It may not be a pressing concern now, but toward the end of 2016, another labor issue with potentially monumental impact on the business world was looming. The overtime expansion bill, introduced by the outgoing Obama administration, would have increased the salary threshold for overtime exemption from $23,660 to $47,476, essentially greatly increasing the number of full-time and hourly workers in the U.S. eligible for overtime pay.

The bill has since been stalled in the court system and has effectively been sidelined. In Martin’s opinion, there is little to no indication that the new Trump administration will move forward with the bill in its current form.

“Even if the courts decide that this rule does have merit and it will go through, all the secretary of labor has to do is draw up a document that says ‘I will not enforce this.’ Then it’s dead in the water, and then he’ll go through an administrative process to overturn the whole thing,” Martin says. “There may be some compromise as far as a salary threshold amount or some other caveats to the rule, but it’s something [retailers] should keep an eye on. In my professional opinion, I don’t think it’ll go through as it stands right now.

In preparation for the new rule, some IGCs went ahead and increased their employees’ salaries to meet the requirements.

Whether an overtime expansion goes into effect or not, many owners and managers regardless find themselves in positions where it’s necessary to track hours and payroll costs and reassign duties as needed. Martin says it’s a helpful practice in general to ensure employees are filling their time appropriately.

“Cross-train people. If managers aren’t really doing manager functions, give [their non-manager duties] to somebody else so that you’re paying an hourly employee to do hourly work and having the managers spend their 40 hours on manager work,” she says.

Forging ahead

At the end of the day, IGCs are at the mercy of the letter of law. Even if a garden center’s staff is comprised entirely of above-minimum-wage workers, the retailer must stay competitive with other businesses in the market — which will inevitably affect spring profits, not to mention possible impacts on cohesion among staff.

“90 percent of our people are already above where the minimum wage currently is anyway, but I do have to consider that there are probably going to be people that were making $9.75 or $10 an hour and now this high school kid’s going to come in and make just slightly less than they are,” Estes says. “I don’t know how that’s going to reverberate through the staff. That part’s kind of the great unknown.”

For IGCs in states with rising minimum wages, all there is to do is plan, adapt and survive while continuing to provide for their employees.

“We always look at the industry standards when that report comes out, and we’ve always felt that we are either right in line or just above it,” Landry says. “Also, we do benefits and we also have vacation and do yearly bonuses and matching 401K. ‘it’s not just your wage, it’s all these other things that we offer.”