As business owners we’re always fixating on the bottom line. No matter what you sell, where your money comes from, how much or how often it all boils down to one simple formula – to stay in business more money must come in that goes out.
It is, ultimately, that simple.
The internet is making it easier than ever to start and run a business from anywhere, selling almost anything, to all corners of the world. Today, you can set up shop and get selling in five minutes.
But too many of us think that because we’re selling virtually, the old rules of business need not apply.
In many cases, this is true – we don’t need to pay rates and land taxes for ‘virtual’ real estate, we can trade in our own names, we can sell into countries without ever falling within their tax regime, we can dropship and bypass rigorous customs procedures.
We can hire staff overseas without regard to the employment laws there or where we live.
But what about when you hire staff in your own country? Many of us prefer to work with locally-based employees, as they often understand our requirements more easily, can perhaps work more independently, and work within our own timezones.
Living in a democracy, it’s easy to default to the old mantra of choice – potential employees are seeking work, so if they agree to the conditions of their contract with me, that’s ok. Even if it’s below – far below – what I’d have to pay them in an actual ‘job’.
We justify it in many ways: “It’s just a short contract”, “It’s not a real job”, “They get the benefit of not having to commute” – but ultimately, it all comes back to the bottom line. And the bottom line is that this area is not as gray as many assume: if you’re paying an employee below the required wage where they live, you’re breaking the law.
And the law doesn’t care if your employees are happy with the arrangement. The law doesn’t care that your employees have the convenience of flexible hours or holidays or working from home.
In the US, the federal minimum wage is $7.25 per hour. In some states it is much higher; in California and parts of New England, it’s upward of $9 per hour. Overseas can be much higher; In Australia, for example, the federal minimum wage is the equivalent of $15.58 per hour. If you’re interested, the complete list is here: https://en.wikipedia.org/wiki/List_of_minimum_wages_by_country.
So what does it all mean for us?
In a nutshell, we need to be more careful about what we’re paying our workers. There might well be a reason why you’re justified in paying an employee less than the amount required where they’re located. For example, if they are an apprentice or aged under 18 (but still old enough to legally work!).
With the growth of the online contracting marketplace it’s only a matter of time before some form of government regulation kicks in – think of what happened with online poker, Napster, the Silk Road and now companies like Uber – overnight, with a single decision, the entire landscape can shift. And to paraphrase Warren Buffet, when the tide goes out you see who’s been swimming naked.
If you’re caught underpaying your workers there can be real consequences for you. While the US Government is not likely to give two hoots about the rate of pay to your VA in the Philippines (though you should), they will exert their jurisdiction over the fact that you are paying your New York-based graphic designer $5 per hour – even if they claim to be happy with it.
And with the punitive sanctions that the US Government likes to attach to cases like this, I wouldn’t be surprised if, just like the six-and-seven-figure file-sharing fines dished out to a handful of students, a few people are held up as examples for the rest. I don’t know about you, but I’d rather not risk it.
So what do I do?
The formula is pretty simple – we need to do what we should have been doing all along. Assuming you live in the US, find out what the minimum pay and conditions are for the state or city of each employee (you can see the full list here: https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_States) and pay at least that.
Pretty easy, really, isn’t it?
In most cases, you’re probably paying enough already; nice work. But from a brief look on oDesk and Fiverr just now, I’ve found hundreds of people in the US willing to work for an hour at below the US federal minimum wage.
Are you looking for an “experienced graphic designer with skill and experience?” You’re in luck! Kathy from Rhode Island will work for just $4.44 per hour. Or perhaps you need a “talented copywriter who brings stories to life?” Well, if you’ve got a spare $5 per hour you can snap up Clint in Michigan.
Nothing that we do is an exercise in admonition. We love that you’re here right now, reading this article. Nobody is perfect and all of our businesses are flawed.
The trick to doing better is taking it one small step at a time.
So today, if you’re worried about the rate of pay for your staff, please perform this simple check. If you’re hiring people from overseas, please check out our article on how to do that the right way.
If you have any questions about how to identify problem areas or implement changes, please get in touch – we want to help!
When you’re confident that you are doing the right thing by your staff and your business, that is something you’ll want to shout from the rooftops. Your staff will appreciate it, too – and one universal truth of good employees is that what you give them they will always give back to you many times over.
So make an investment in your conscience, your staff and the future of your business today.