How to Handle a Minimum Wage Increase in the Early Education Industry 

As payroll costs are the single largest expense in a childcare center or school, many company owners and executives are concerned with the potential increase in the minimum wage. No one likes to see increases in expenses without corresponding increases in revenues and profits. Here’s a few ways to deal with an increase to the minimum wage.

  1. Don’t panic. This wouldn’t be the first time our industry has seen an increase in the minimum wage. It’s not fatal. It’s just an adjustment.
  2. Do the math and determine how much your expenses will increase with the wage increase. Don’t forget to include the corresponding increase in payroll taxes. If you know the amount of the increase in your expenses, you’ll be better at making up the difference…maybe more.
  3. Raise your rates. The minimum wage increase won’t be a secret to your parents. You can raise your tuition rates (and other fees like Registration, Supplies, Fieldtrip…etc.) to cover some or all of the wage increase. It is more difficult to raise rates in some centers than others. In some cases it will be better if you use smaller, but multiple rate increases to help your parents get through the change.
  4. Shop your vendors. Over time, most early education companies will become complacent with their vendors. Over time, vendors raise their rates. A more competitive market place is always the friend of the consumer. Make sure you keep the quality performance you need, but shopping vendors can create significant and immediate savings.
  5. Ask your employees to give you suggestions about reducing costs. Your employees are often closer to the source of the waste so they recognize it sooner. Get everyone involved in the team effort. Offer bonuses to employees who find smart ways to save money.
  6. Invest in technology.   New technologies from inventory control to student-teacher ratio tracking to social media allow for lower costs, better service and more clients. Make sure you’re keeping up with the technology available to help your business perform at its best level.

If you’re diligent about these practices, you may find that an increase in the minimum wage leads you to higher profits. As always, we hope it helps.

Best to you…

Brad Barnett, President BFS®

BFS® is the Largest Non-Governmental Provider of FREE Resources to the Early Education Industry. If you have questions on a topic, watch a quick video by going to our YouTube Channel or access information by clicking on the Instant Q & A tab at the top of this page.

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