As a business owner, you have to worry about hiring the right person, training the right person, paying the right salary and basically doing everything right, right?!
Even though you may do everything you’re supposed to, there are things that are out of your control.
This year, your employees are going to see less money each paycheck and it’s not the bosses fault.
Everyone’s paycheck is about to take a hit because the rate of workers’ payroll taxes, which fund Social Security, has been 4.2% for the past two years. As of Jan. 1, it’s back to 6.2%, on the first $113,700 in wages.
Some business owners say it’s a tough talk to have with their employees that may not understand that it’s not the bosses fault.
Mike Brey, who owns four Hobby Works shops near Washington, D.C., recently had to notify his store managers about the upcoming change during a conference call. He called the experience uncomfortable. “These are the people who can least afford it,” Brey said.
Brey said he can’t raise compensation to ease the pain. Enduring the recession meant cutting his own salary, firing workers, taking on half a million dollars in debt and raiding his own 401(k).
“Any business that survived the recession did so by digging a big hole,” Brey said. “We can’t dig any deeper.”
Payroll taxes are key for financing Social Security, and the break of the past two years has forced the government to replenish the funds with borrowed money. The tax break was always meant to be temporary.
Workers earning the national average salary of $41,000 will receive $32 less on every biweekly paycheck. The higher the salary (up to $113,700), the bigger the bite, but business owners say their lower wage employees will feel it most.
So, how can you weather this storm?
The key is education.
As a boss, you need to sit down with your employees and explain in detail what this will mean for their paychecks, why it happened, and what it means going forward.
As captain of the ship, you will still bear the brunt of the responsibility, but that comes with the territory.
The most you can do is to educate, empathize (it affects you too!) and then move on. If your employees do have concerns, don’t brush them off. Sometimes every single dollar is accounted for by employees and this could cause some stress and anxiety.
If you continue to educate, train and keep those lines of communication open – your business, and more importantly, your employees, will weather the storm.