Hello there, I’m Cort Maddox.
I’m an adviser with the Lord Fairfax SBDC and today I get to come to you and talk about changes coming to the Virginia minimum wage.
Not sure if you’ve heard about this but as of May 1, 2021, in the state of Virginia, the minimum wage will go from $7.25 to $9.50.
After that, we will see an increase on January 1, 2022 to $11.00 per hour then every January 1st thereafter until January 1, 2026 if will increase $1.00 per year until it eventually gets to $15.00 per hour.
All of this barring any adjustments from a Federal level, but right now, that’s the plan for Virginia.
Now I want to dive into how this is going impact your business then talk about things you can do to prepare.
First, this is a 31% increase. This is a dramatic increase and one we have not seen in the past. This is going to impact your small business.
I want to go over a potential example to show we as consumers can expect to see and then show how businesses can try to manage this as well.
On January 1, 2022 the minimum wage will increase an addition 16% when it goes from $9.50 to $11.00 per hour. This is a 52% increase which is a big increase given that the average business has an average overhead of about 20-30%.
When you increase your overhead expenses by roughly 52% you can see the impact.
In addition, this will mean an estimated increase of 13% in employer/employee taxes that you will pay on behalf of your employee. This is about a $.50 increase per hour that will need to be taken into account.
Now, let’s consider a $15.00 product.
In order to account for the estimated 59% increase, 52% wage increase plus $.50 per hour in taxes, you will now need to charge $23.85 for that same item to accomplish about the same margin.
That is a heavy hit for customers.
This is why we want to help you to come up with resources to lessen the impact. We want to help you be prepared to make this adjustment without negatively impacting your current customers.
Our team wants to help you keep the number of disgruntled customers as low as possible. We’re all dealing with a lot of things in life right now. Adding another possible stressor to our lives right now is not something we want.
But, this change is coming and you need to be aware of what this change means.
Please make sure you do not violate any labor laws during this process because the consequences will greatly impact your business as well.
We will be hosting an online workshop to provide you more resources. We want to help you navigate these changes because they are going to impact your business.
In the meantime, if you have questions or need help with any business challenge, reach out to our team, we’re here for you at no charge.
Remember, we are funded by the state and local Economic Development Centers, not by small business owners. We are here to serve as your resource. Let us know how we can help!