New Rules That Will Affect Your Small Business Finances in 2020
Small businesses have to deal with a lot of the same challenges year in and year out. They have to secure funding, they have to find ways to stick out against well-heeled competition, they have to attract talent with limited resources – and so much more.
On top of that, however, they also have to contend with whatever the government throws their way – and those challenges can vary from year to year.
Several new policies and laws passed in 2019 have changed the financial landscape for small businesses in 2020. Here, we want to discuss a few of the new rules and regulations that will end up affecting the costs of doing business and how you manage your company.
Minimum Wages Have Gone Up
Roughly 40% of the country instituted minimum-wage increases that took effect either in late 2019 or at the start of this year. However, they weren’t all the same. A quick breakdown of the 22 states that have implemented minimum-wage hikes, courtesy of Economic Policy Institute data:
- Inflation Adjustment: Alaska, Florida, Minnesota, Montana, Ohio, South Dakota, Vermont
- Legislation: California, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, New York
- Ballot measure: Arizona, Arkansas, Colorado, Maine, Missouri, Washington
In some cases, these measures come as part of plans to eventually reach a $15-per-hour minimum wage. The range of the increases is wide, too – some are small, like Minnesota’s 15-cent hike, while New Mexico is raising its pay by $1.50 per hour.
The effect isn’t just limited to small businesses in those states – it also affects the competitiveness of the 28 states around them. In a few cases, those states have raised their state minimum wages over the past few years, but 21 states still use the $7.25 minimum wage. As wages go up in the states around them, that might force some businesses to adjust on their own.
Overtime Rules Have Changed
An estimated 1.3 million workers now benefit from fresh revisions to the Labor Department’s rules on overtime pay. The previous threshold of $455 per week, or $23,600 annually, to receive overtime pay has been raised to $684 per week, or $35,568.
This rule could be especially painful to small businesses, simply because they lack the revenues to absorb the additional costs on those hours. Of particular note are the restaurant, retail and manufacturing industries given a bevy of positions that fall under the new threshold and thus would now require overtime pay.
Businesses’ options are clear, however: Raise base pay to put workers over the threshold, or limit hours on employees within the threshold.
California Consumer Privacy Act Has Gone Into Effect
Don’t ignore this just because you don’t operate in California – it still might affect you, and in a few cases, your state might be working on something similar.
California’s new labor law, AB5, makes it much more difficult for companies to classify people who work for them as non-employees. It effectively turns “gig workers” into full-time employees, which entitles them to the minimum wage, paid sick time and overtime.
While it targeted companies such as Uber and Lyft, which have drawn scrutiny for treating their workers more like independent contractors, the law doesn’t just affect drivers of ride-share services. It affects freelancers of many stripes. Writers, tutors, even truckers are suddenly at threat.
As a good for-instance, freelance writers have been limited to 35 articles per year per client – regardless of where that client is located. Thus, businesses that use freelance work with Californians might need to familiarize themselves with this new law, and its exceptions. And soon enough, this might extend to New York and New Jersey, which are considering similar legislation.
Those aren’t the only new laws and regulations that small businesses are dealing with in 2020. And they’re sure to see more as 2021, 2022 and the rest of the years roll by. But McManamon & Co. can keep you on top of the changing landscape. We offer a wide range of consulting services, from strategic sessions to proactive tax and cash-flow planning, and we can help you understand how changes at the federal, state and local level might impact your business.
Don’t get caught flat-footed by new laws that could impact your small business. Give us a call at 440.892.9088 or contact us online today.
Tags: consulting, McManamon, small business, small business finances | Posted in Consulting, McManamon & Co., small business