Saturday, January 12, 2013

How to avoid paying minimum wage

Chris Rock sums up the problem with minimum wage nicely. It's a pesky law designed to tell business owners that hey, this is as low as you can go. Any less, and you could find yourself in court.


However, that shows a remarkable lack of creativity. There's no need to pay people minimum wage. You can get away with paying them far less - and indeed nothing.

So, for business owners who are looking for ways to reduce their costs, here are six ways to pay less than minimum wage. They're all perfectly legal, and all quite genuine. I've been exposed to every single one of these business strategies personally within the last twelve months, and I've seen the businesses that use these strategies flourishing. After all, reducing costs is the key to increasing profits, increasing profits is good for business, and what's good for business is good for America, right?  So it's your patriotic duty to deal with the recession by circumventing minimum wage.

1. You don't work for me - use "independent contractors"

Minimum wage only applies to employees. But if someone's working for themselves, then it's up to them how much they charge you. It's just a business arrangement. So if someone agrees to do this amount of work for that amount of money, and it happens to work out as $3.50 an hour, that's their problem, not yours. Of course there are rules about whether someone qualifies as an independent contractor or an employee, but you can usually ignore those. After all, if they're not happy, they can choose not to work for you any more. Get some competitive bids going, and see how low you can drive the price. You may be surprised.

Pro Tip: when they've agreed the rate, tell them it looks a little low, and offer to increase it slightly. You're still only paying $3.60 an hour, but it makes you look like you care.

2. Doesn't apply here - go overseas

More and more jobs can be done by people working remotely. And if they're remote, they can be anywhere. Why pay an American $60 for a full day's work if someone in Sri Lanka, Pakistan or the Philippines will do it for $20? Look around on places like Elance and oDesk, and you can get people who'll happily work for $2 per hour or even less and think they're making good money.


Pro Tip: always ask for a "test project".  If you're lucky you can get this for free, but at the least, they'll keep their rates low in the hope of more long-term business. Then never use them again. Repeat ad infinitum.


3. Just until you get up to speed - mandatory training

If the job requires any skill at all, then you can require your staff to take a training course - at their own expense, of course. Conveniently, you (and only you) offer this specialist training at an affordable price, which you deduct from their wages. Alternatively, you generously offer to cover the cost of training, which happens to involve on-the-job experience for three months. Obviously, they won't get paid during this training period, but at the end of it, they'll have a real, well-paid job... and then you fire them and start over with new trainees.

Pro Tip: If you're really smart, fire them before they complete their training, then point at the small print that says that they're liable for the full costs of the training if they fail to pass the course. Then you send them a bill. Hey, someone might actually pay it, and now your employees have become a revenue stream.

4. Why pay at all? - use interns

You don't need to make people think that they might get a job with you in order to get them to work for free. That's what interns are for. They're just there to build their resume. If you run a fairly straightforward business, you can run almost everything on interns. College kids can build web sites, operate tills, write copy, answer phones, and so on.

Pro Tip: remember to offer a staff discount. That way they're still spending money with you, you're still making a profit out of them on top of the free labor, and they think they're getting a great deal!


5. It's just helping out - unpaid overtime

Business is tough. Everyone needs to put in just that little bit extra. Of course, you can't make people work for free, but you know, you've got to go with the hardest workers, and if they don't want to do those extra few hours, there's someone else who will. Pay for 20 hours, get them working for 30.  That cuts the wage bill down and fosters a sense of company loyalty.

Pro Tip: remember to call in at odd hours so it looks like you're working your butt off too. Send emails at midnight, or leave text messages at 6am. Investigate scheduling services, or else employ an intern or a low-cost Filipino to send out of hours messages on your behalf.

6. We're all in this together - make them shareholders

In a small business, you can really get people to do ridiculous amounts of work for free by promising them a share in the profits. Obviously you can't pay them right away, but when the money comes in, you'll give them a cut. Remember to pay out your bonus and all your other expenses before you calculate the profit share, and practice your "disappointed" face when you tell them that because of unexpected financial issues, there's only about $160 profit to share between five of you.

Pro Tip: soften the blow by saying that under the circumstances, you're willing to pass on your share, so you'll just split the profit four ways, but hopefully next year will be better. See, now you're being generous and understanding, as you hand over two $20 notes for a whole year's work.

So, next time one of your staff complains that they don't have enough money for food, or gas, or medicine, or somewhere to live, explain to them how generous you're being by paying minimum wage. Then fire them and replace them with someone who'll be happy to work for half that.You now have a happy employee and you're making more profit - everybody wins!

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