Who's Paying?

Beyond the Minimum

Unless a local ordinance requires you to comply, paying a living wage remains a personal choice. Amaral suggests you think about it early on. "Write it into your business plan about how you're going to get to a point where you're paying a livable wage over three years," he says. How does an established business make the switch? The first step is to estimate the financial hit and to determine whether you will need to raise the cost of your services. You should also phase the raises in slowly so you don't add chaos to your cash flow. Amaral based his raises on performance.

When she founded Independent Marketing Services (IMS) two years ago, Krishna Fells-Mathison, president and CEO of the Mt. Vernon, Washington-based financial services outsourcing company, incorporated living wages into her business plan. She calculated hourly wages based on her estimated overhead and profits, and also built in incremental raises determined by employees' productivity and the success of the company.

Today, employees at her 20-person firm start at $10 per hour plus benefits, and she recently gave them across-the-board raises ranging from 3 to 8 percent. Fells-Mathison, 48, shells out $50,000 a month on wages alone-but she sees a payoff: Her turnover rate is only 1 percent annually, and sales this year are estimated at $2 million. She believes that paying higher wages shows respect for employees and motivates them to work harder.

"It's our responsibility as business owners to do good budgeting and growth," she says. "If we do it reasonably well, we should be able to pay people decently so they'll do the work we want them to do."

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Chris Penttila is a Washington, DC-based freelance journalist who covers workplace issues on her blog, Workplacediva.blogspot.com.

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This article was originally published in the December 2001 print edition of Entrepreneur with the headline: Who's Paying?.

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