Yes, believe it or not, $23/hr is common for most industries – not $15/hr or $14/hr like many seem to believe, especially in the cleaning or service industry. $15/hr is just a false front in order to deceive employees into thinking they are actually making that much and to trick new, inexperienced small business owners into believing that is all they are paying; it’s a lie.
It comes as no surprise that the US is known for employing a marketing strategy that involves manipulating prices to make people believe that things cost less than they actually do. If you go to a restaurant in most other countries and a burger on the menu is priced at $10, $10 is what you pay, not $10.99 or $10 plus an unknown tax that changes from state to state. The customer should worry about paying a set, upfront fee and the business should worry about those taxes being added to that upfront amount. Nevertheless, many businesses will add other hidden additional fees that are not properly disclosed to customers when signing a contract.
We find this business practice to be absolutely disgusting. As a customer, I hated signing up for something with the idea that I would only spend x amount of money (which, in most cases, was my max budget) just to find out that there were all these additional fees added afterward. As a business owner, I find it even harder to deal with all these outrageous additional fees that we are forced to pay. It is very hard, if not impossible, to survive if your business makes less than $150k a year, because 80% of that goes to paying labor and overhead costs. The rest goes to paying loans when you are still getting off the ground.
As a small business owner, you come to find out so many things along the way, and many times, it conflicts with the original concept of the market for that business. For example, the cleaning business industry has the highest rates for insurance and labor fees, yet it is one of the worst regarding underpaid employees and unregulated rates due to exploitation. As an ethical company, we want to set the record straight and be a different kind of cleaning business; a cleaning business that doesn’t deceive, appreciates its cleaners, and doesn’t use derogatory terms like maids or servants or treat them as such. We take pride in this occupation and the amount of effort and skill that it requires. We appreciate our employees and their dedication. This trade is not an easy job to do or even an easy skill to learn. Therefore, we believe in compensating our cleaners for their commitment and for going above and beyond and not leaving us for an easier job. For this reason, we want to clear up a lot of misconceptions about small businesses, especially in the cleaning industry.
Minimum wage is not $15/hr in the state of California; it is at least $23 for industries of hard labor. While $14/hr is the minimum requirement baseline fee for all industries, even for the easiest of jobs, it is not the actual amount that businesses pay. Businesses pay employers’ taxes of 15% plus mandatory workers’ compensation, which can go anywhere from 33% to 50%. Yes, workers’ comp charges more than what we pay for our taxes and retirement: 55% to 65% more! This is insight that you do not typically find on Google. That comes out to at least $22.5/hr. Additionally, there is still business insurances and payroll fees (which are not cheap), plus the time to register employees’ hours, unless you can afford a manager to supervise hours, etc. In an industry where you must stay competitive and people want to pay as little as possible because of the degrading stigma around it, or only pay for the hours that involved actual cleaning, it leaves very little budget for training, commuting, restocking, and maintenance, let alone a budget for administration or management. To make matters worse, employees only see half of that money. All employees have to pay an additional 15% in taxes from their gross income, so they only take home $12/hr out of the entire $22.5/hr that the employers are paying. It is nearly impossible to create jobs for people when most of the earnings go to the government and even more to insurance companies.
It’s hard to believe that in the state of California, where it is practically a luxury to live, one pays more money to insurances (that most people never use) than what you pay for retirement funds and social security. Insurance companies take advantage of this situation because they know that businesses have no choice. This is something I wish I would’ve known when I was an employee. It would have helped me be more considerate with my bosses about company time and be more understanding with small business owners as well. Perhaps this is why many businesses encourage and even push customers to tip because they can’t afford to pay any more on employees’ fees. It’s no wonder so many business owners try to hustle their customers, but that is not the way to make this situation better.
Another consequence that comes out of this is that many people think that they are doing cleaning employees a favor by cutting out the “middle man” (the cleaning company that hires, does background checks, and trains them for the job) and offering to pay them directly at an hourly rate that is just a little bit above minimum wage. I am here to tell you that the only person they are doing a favor to is themselves. First of all, small businesses are what sustains a more balanced economy. As a small business owner, we must follow regulations and pay taxes and fees that help this economy. These regulations force us to make sure our employees are not being exploited and get paid for all their company hours. We can’t just hire people for one day of the week and then call them back whenever we feel like it and expect them to be waiting for us to give them work again. We have to guarantee them sufficient hours in the week so that, in return, they can commit to a certain schedule for us as a company. It’s called an equal exchange and it does not come easy. It requires a lot of work, administration, and marketing investment.
If you have a residential employee who you are paying under the table, make sure to give him/her at least a part time job or the equivalent pay, plus 15% extra (the equivalent to the taxes you would pay as an employer so he or she can save for a retirement or disability fund). That way, they can afford their own workers’ compensation in the case of an accident. This comes out to a roughy $450 per week. This would be ethical, fair, and an equal exchange. In contrast, as a cleaning company, we usually charge about $100 for weekly service and it can be tax deductible, in many cases, which seems like a much better deal.
Lastly, don’t call your cleaners maids. It’s a derogatory, classist term for “female servant.” (More on that in a different blog post.)
Just a little something to think about next time you want to haggle small business prices.