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Inflation Relief For Employers

Writer's picture: Sheldon LeeSheldon Lee

Austrian economist Ludwig von Mises once referred to inflation simply as an increase in money and credit. By this definition, inflation has arrived — at least in the short term — brought on in large part by the unprecedented federal spending masked as a response to COVID-19, and more recently, Russia's war on Ukraine.

In 2021, much of the inflation was in asset prices – stocks and houses – but now the fast rising prices of consumer goods and services is hitting employers hard.


As if severe labor shortages and the prospect of skyrocketing taxes weren’t enough, small business owners, restaurants and franchisees (who provide the majority of new jobs) are now dealing with the effects of this inflation. Restaurants are being acutely impacted by these trends cutting across our economy, as higher labor and food costs put pressure on already thin margins.


Inflation reduces the value and purchasing power of every dollar, making everything more expensive. The Federal Reserve insists that the significant increase in inflation is “transitory.” Given the numerous supply chain disruptions that occurred across the world due to COVID-19 restrictions the past two years, this may be true. But considering the current administration’s economic agenda, it’s likely that inflation won’t go away in the short term.

Just as the American people were coming out of lockdowns and were eager to go out and eat and spend time and money, the party seems to have come to grinding halt for many. Home delivery, for example, was enhanced during COVID-19 as people spent more time working at home and had extra stimulus money. Those same home delivery businesses are now possibly faced with a double whammy of more competition as COVID-19 restrictions vanish, and juiced-up unemployment benefits make it harder for them to hire and retain employees. If the customers’ wages can’t keep pace with sharply rising prices, the restaurant industry, including the pizza delivery business, will feel the pain.

Kraft Heinz CEO Miguel Patricio recently said his company is “very concerned” about the drastic rise in inflation and looking at the possibility of increasing prices for consumers. You can almost guarantee that every restaurant owner in the country is facing the same difficult choice.

Think about it. If inflation continues to increase, the costs for raw ingredients and supplies will continue to increase right along with it. It’s only a matter of time before restaurants further increase their prices to consumers. The fact that the labor shortage is also forcing many businesses to raise wages to court a dwindling supply of potential employees all but guarantees a callous choice – raise prices at the counter or potentially go out of business.

But inflation (printing money) doesn’t just raise the cost of food — it devalues the dollar – a hidden tax on everyone as it raises the cost of everything. As families are faced with increasing costs of utility bills, groceries, gas, and household essentials, they will be increasingly less likely to spend on “extras.”

All of this is particularly tough for the pizza delivery business model. Imagine you own a pizzeria. Not only are the costs of your raw ingredients rising, from flour and salt to tomatoes and mozzarella, but gas is more expensive too, as are employees. On top of that, inflation starts to wallop your customers, and those families that ordered at least once a week start ordering every other week. And then just once a month.


Rapidly rising costs coupled with a severe decline in customer base isn’t sustainable for any business. If something doesn’t change soon, these dynamics will result in significant headwinds for the great small business owners of America, franchisees and family restaurants struggling to get back on their feet.


Some Relief - Every Bit Helps


Recently, states across the nation have approved employers some relief. As the saying goes, 'Every little bit helps'. States are encouraging employers to take advantage of a program called The Better Healthcare Benefits Plan or BHBP. The BHBP is approved to do a couple of important things. First, it is a tool employers are encouraged to use to better recruit and maintain talent. Strengthening employee benefits, especially in the area of healthcare benefits, is very important to employees at this time. Most employees, especially those in service-focused industries such as restaurants for example, are very concerned about exposing themselves to further health and mental risks the pandemic has created. Further, the BHBP provides employees essential healthcare benefits that includes accessing doctors, prescription medication, and healthcare support through the Cleveland Clinic and the nationally acclaimed Work Shield worksite program.


Second, ALL COSTS ARE COVERED on behalf of the employer and employees by this state approved program. In addition, employers who elect to participate will receive significant additional funding provided via an increase in FICA tax benefits. This was especially designed to find a creative way for employers to offset current and future healthcare costs such as MEC costs, and extend a means of funding ongoing business operations costs as the additional funds created by the BHBP are discretionary.


The impact of inflation and rising taxes is impacting employers of all sizes, especially business owners such as franchisees, restaurants, and pizza delivery businesses alike. But, every little bit helps, and here is one way employers can soften the impact.



 

Sheldon Lee is a seasoned benefits consultant who thrives on helping employers lower their healthcare and benefits costs, while helping to engage employees to be proactive with their own health and wellbeing. After losing both his parents to critical illnesses and disease, his focus is helping employers and their employees find real solutions to lowering healthcare costs, especially claims costs, that in most cases can be addressed through benefits programs focused on a preventative approach.

Sheldon also thrives on business development, especially building and growing JKB Consulting Group's team of expert and dedicated brokers and partners. To learn about the BHBP as well as inflationary and cost savings strategies, please contact him at: sheldon.lee@jkbconsultgroup.com

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