At some point, most retailers grapple with the decision of how to compensate their employees, but the age-old cliché "you get what you pay for" should be taken to heart. Most of us would agree that paying more for a quality employee is a worthwhile investment. After all, the attitudes and abilities of your employees are crucial factors in the success of your business. These are the people at the front lines of your operation-your café's ambassadors. But is there a formula to follow when determining your pay scale? Is there an industry wage standard at which to look? Is minimum wage even an acceptable consideration?

There are many factors that come into play when considering the fairness of paying an employee minimum wage. The applicant's work experience, competition for employees in your marketplace, store profitability (or lack thereof), the level of professionalism you want to uphold, and the ethical questions related to paying employees a livable wage all factor into this decision. There is no steadfast formula to follow when determining employee pay, but typically, labor costs should equal 35 percent or less of your business's sales. Above that, it becomes difficult to achieve profitability.

America's basic federal minimum wage rate is $5.15 per hour, but individual state standards range from a mind-bogglingly low $2.65 per hour in Kansas to $7.15 per hour in Alaska. Overall, however, the coffee retailing industry seems to be bucking the minimum wage option. According to the Specialty Coffee Association of America (SCAA), the average pay for full-time, non-management coffeehouse employees in America is $7.26 per hour, a rate well above the national standard.

I recently spoke with several coffee business owners around the country about their practices and philosophies related to minimum wage compensation, and, not surprisingly, opinions varied considerably from state to state. Take Jeff Ericson, owner of Camino Island Coffee Roasters, a roaster/retailer with several locations on Camino Island, Washington. Ericson didn't want to own the type of business that would constantly require him to squeeze out the maximum productivity from underpaid employees in order to be profitable. He made a conscious decision to enter the coffee business because he believed it would be profitable enough to provide respectable compensation to his employees. "I pay my employees $10 an hour, which is significantly higher than Washington's minimum wage of $7.01 per hour," he says. "My objective is to provide employees with a local living wage."

Ericson recognizes the importance of controlling labor expenses in order to realize the desired profitability from his business, but he says that paying a higher wage rate gives him personal peace of mind. Also, because his employees have less financial worries and they feel fairly compensated for their efforts, they have better morale and more pride in their work. "There is a real sense of community among my employees, and as a result, they sell more," Ericson says. "When employees enjoy where they work and they feel adequately compensated, they do a good job, and they stay with you for a long time." Not surprisingly, since opening more than two years ago, Ericson has not lost a single employee.
   
But while Ericson is committed to paying his employees fairly, he is opposed to government-imposed wage rates. He says that Washington's $7.01 minimum wage rate is, on many occasions, a disservice to young, inexperienced workers looking for that first or second job. "I've had sharp 16-year-old kids walk into my store looking for a job, and I might have been willing to take a chance and invest in them had it not been for the starting wage requirement," he says. Instead, Ericson says the average age of his employees is around 25.

Sal Mellelo, owner of Mellelo Coffee Roaster in Medford, Ore., also has several retail locations. Like Ericson, Mellelo believes in compensating employees fairly for their efforts, but he thinks there are times when starting an employees at minimum wage are justified. "Teenagers looking for their first job have no real-life experience to offer," he says. "You don't know if they'll be trainable, if they'll show up on time or whether they'll even show up at all. You have to pay them minimum wage until they can show you what they can do."

But perhaps at the core of the minimum wage debate is the question of whether or not business owners should feel a moral obligation to pay employees a livable wage. Can we honestly promote fair-trade coffee and better living conditions for coffee workers in producing nations if our own employees cannot sustain themselves on a full-time wage earned at our business? This is a question every coffeehouse operator should ponder.

Most retailers agree that the issue of minimum wage should be addressed on a case-by-case basis. For example, an employee who is completely dependent upon the income of your employment will have very different financial needs than a part-time high school student living at home with her parents. And an employee with experience will generally be offered a higher starting wage than someone with a limited work history. But as unfair as it may seem, wage rates are not always based upon levels of performance. Consider the process of a professional sports team manager who might sign a contract with a new player at a higher rate than that of an existing loyal player. The acquisition of the new player rounds out the roster, making this relationship advantageous to the entire team. The goal is to build the strongest team possible, and in doing so, you may realize that you have to compensate employees differently based upon your business's needs.

Sometimes retailers may decide to start employees at the minimum wage because their employment market allows for it. I recently helped a client open a coffee bar in Bismark, N.D., who fit into this category. She started all her employees at minimum wage ($5.15) because it was the norm in her region. Bismark is home to an abundance of high school and college-aged kids looking for jobs, but their options are limited. For them, working at a hip coffee bar, even at minimum wage, is more desirable than dropping fries at the local burger joint. Starting her employees at minimum wage helps keep expenses down while the business gets started. Then, the employees who excel in the first few weeks will be given raises.

Geof Gaines, owner of the Coffee Depot in Riverside, Calif., found himself in a similar situation with applicants willing to start at minimum wage ($6.75). Gaines owns a large coffee bar popular for its live entertainment. Concerts by jazz, blues and swing bands pack the place with eager consumers. "Every kid in town wants to work at my place" he says. While Gaines has raised the wage for some of his long-term employees (those who have worked for him since the café opened two years ago) to $8.75 an hour, the substantial tips they earn diminishes any concern about earning minimum wage. Gaines estimates that each employee accumulates between one and five dollars in tips per hour per shift, and he says that number increases substantially when the staff works special events.

Chuck Durand, owner of Earth Tones Coffee House, an upscale coffee bar in Rochester, N.Y., wishes he would have started his employees at minimum wage ($5.15) when he opened a year ago. "Specialty coffee was new to our area, and the ramp up has been slow," he says. "We serve an excellent product and deliver attentive service, but our sales growth has been slow. But because I started all of my employees at $6.50 and because profitability was nonexistent for some time, I couldn't give my employees raises. In hindsight, it would have been wiser to start them all at minimum wage so that I could give them raises soon after. It was tough not being able to reward those who deserved it."

Unfortunately, a retailer must sometimes start employees at minimum wage and hold them at that rate for as long as possible because the business's lack of profitability does not allow for greater compensation. If a business is losing money or merely breaking even each month, increasing payroll expenses simply may not be an option. But if you feel strongly about paying your employees more than you can currently afford, you'll obviously need to reduce costs in other areas of your business. The best option is to cut back on discretionary costs. For instance, if you're using a payroll service, consider purchasing software that will allow you to do payroll yourself. Another option is to absorb some of the labor costs by pulling some of the work weight. However, I suggest this with reticence because as the owner of the business, manning the espresso bar or cash register full-time can keep you from the vital work of managing your store's operational flow.

Ultimately, the decision of whether or not to pay your employees minimum wage is dictated by your business philosophy and goals. It's about the kind of employer you want to be, the kind of people you want to employ, the level of quality you strive for, and the kind of company culture you want to promote. As a retailer, you have most likely invested substantial sums of money, time and effort to open and build your coffee business. You've taken substantial risks. The reason you opened your business was to enjoy yourself and make money at the same time. The reality is that employee wages are a major expense of your business, and you must control costs if you are to realize your financial goals. But when you achieve success, sharing your rewards with those who have helped you get there will benefit everyone involved. Take care of your employees, be honest with them, look after their best interests, and sleep peacefully at night.