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Home / Small Business Resources / How Companies Can Handle Spending in the Wake of California’s AB5

Small Business Resources · August 3, 2020

How Companies Can Handle Spending in the Wake of California’s AB5

If your company utilizes independent contractors, then California’s landmark Assembly Bill 5 legislation could have a dramatic effect on your business. Specifically, the cost of doing business could suddenly increase to the point that your business becomes unsustainable. Fortunately, there are steps your company can take to reduce spending in other areas so that you can afford any possible implications of this legislation. To keep your business afloat, here are a few tips to help your company handle spending in the wake of California’s AB5.

Preemptively Consider Benefits

First, you should make sure to consider benefits preemptively. If independent contractors are suddenly eligible for the same benefits as regular employees, then this could get expensive quickly. Therefore, it’s a good idea to begin to consider which benefits you’ll need to offer these new employees so that you can research some affordable options. You don’t want to be left scrambling at the last minute, as this will inevitably cause you to pay more than you should. Even if the legislation doesn’t reach as deep as it could, it’s always good to be prepared. Think about what benefits independent contractors need or want and how this could affect the pay you offer. Perhaps talk to your independent contractors about it so you can see where their needs are.

Practice Limiting Employee Spending

There are many ways to limit employee spending to bolster your bottom line. Employees at many companies aren’t exactly known for avoiding waste, especially if their business expenses will be paid back by the company. If you suddenly have an onslaught of new employees, you need to figure out how to limit waste among these employees so that they don’t spend your company into bankruptcy. One great way to do this is to utilize business spending management software, which puts automatic controls in place to limit employee spending. By automating this crucial task, you can focus your energies on fighting other fires.

Streamline Your Marketing

Streamline your marketing to make use of more revenue streams. One useful characteristic of many independent contractors is that they often serve as free advertising for your company. If someone is choosing to work for you without any benefits in play, then they likely appreciate your company enough to speak positively about it. However, if these contractors become employees, this free marketing has the potential to evaporate. It’s important, then, to find an economical and effective marketing agency to take up the reins to ensure your company’s name remains in public view. This will streamline your marketing, which will help you get the revenue you need to keep up with the AB5.

Set Rules for Time

Finally, be sure you set rules for time spent working. Although independent contractors, in many cases, can work as much as they want, they are, in most cases, ineligible for overtime. As employees, though, these individuals now stand to receive extra pay if they work for more than 40 hours. Therefore, to help limit your costs, it’s important to put ground rules in place so that your employees understand how much overtime will be allowed and under what circumstances it can take place. This will help prevent an overabundance of overtime that doesn’t produce much in the way of results.

You’re Not Alone

Although this new legislation can be intimidating, it’s important to understand that you’re not alone. There are countless other companies facing similar issues, meaning that there is plenty of help to be found. Seek out this assistance while you can to prevent losing all that you’ve worked so hard to achieve.


Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information, contact Brooke via Facebook at facebook.com/brooke.chaplan or Twitter @BrookeChaplan

Filed Under: Small Business Resources

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