When the Ontario government passed legislation last year to increase the minimum wage by 21 per cent, businesses warned they would be forced to eliminate jobs and reduce hours and benefits for employees. Now, those cuts are happening.

The decisions are all due to the increase that kicked in on Jan. 1, which raised the minimum wage to $14 from $11.60, and to prepare for the hike to $15 coming on Jan. 1, 2019.

Shannon Leslie Stewart won't be hiring a student this summer to work in her consignment store, Covet Community Closet in Stratford, Ont. Ms. Stewart is also putting off plans to offer employee benefits and has changed her salary structure to include commission, instead of paying above minimum wage as she has in the past.

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"Not hiring a student was a hard decision for me to make," says Ms. Stewart. "I love having young students and giving them their first job experience … It might be a good social investment, but I have to think with a business mind."

Ms. Stewart is among thousands of business owners in Ontario making changes to adjust to the higher minimum wage. She says she isn't opposed to paying employees more, but the rapid increase has left her struggling to cover the costs.

Worker advocates argue the increase was necessary to keep up with slow wage growth for low-paid workers and believe the extra income will be spent, helping boost the economy. Some have raised concerns about businesses such as Tim Hortons franchises that have reduced employee benefits and cut back paid breaks to help offset the wage spike.

Ms. Stewart says she will continue to offer a 30-minute paid lunch to employees and will start paying them a 5-per-cent commission on sales, instead of a salary that's above minimum wage. Before Jan. 1, her employees made $13.10 – $1.50 above minimum wage – and received no commission.

"I can't afford to pay more than $14 [an hour]" in fixed wages, Ms. Stewart says. "I really work hard to retain staff. Part of that process is to give them a bit better than everyone else gives them."

Jackie Fraser, co-owner of Fraberts Fresh Food in Fergus, Ont., has reduced her store's operating hours by six hours a week to save payroll costs. Ms. Fraser also won't be spending a day in the office to do marketing and paperwork and will be working in the store instead.

"It's little things like that we're doing to save on payroll costs," she says. Her staff already earned above minimum wage and will be receiving a 10- to 15-per-cent pay increase, but not the full 21 per cent that those making minimum wage will receive.

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"I'd like to bump them all up 21 per cent, but the math doesn't work," she says. Employees will still get discounts on groceries they buy from the store, and turkeys at cost at Thanksgiving and Christmas. "We're not going to pull back on that. It would be cheap to do that," she says.

Ms. Fraser says she's not opposed to the minimum wage hike, "just the ridiculous timeline." She's trying not to raise prices on her products, given how competitive the grocery market is, but is waiting to see how much costs will go up from her suppliers as a result of the higher labour costs across the province.

Deena Ladd, co-ordinator at the Workers' Action Centre in Toronto, says business owners should welcome higher wages and maintain benefits to attract and retain good employees.

"You need to be sharing the profits that you make with the people who work for you and make sure that when they go home at night they are able to pay their bills," Ms. Ladd says. "This is how our economy prospers – when everyone does well and not just the [business] owners."

Ms. Ladd worries some business owners are blaming a higher minimum wage on higher costs when there are other factors such as inflation, higher commercial rents and fuel prices. "That's the whole point; wages haven't increased at the same rate," Ms. Ladd says.

She cautions companies about slashing employee benefits, citing the recent controversy around Tim Hortons. "We are customers. We can also march to the business that supports decent wages and working conditions," she says.

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In many cases, labour-related cutbacks are being made by businesses that find it tougher to increase prices, such as retailers and restaurants, which are considered discretionary spending, says Ryan Eickmeier, vice-president of government relations and public policy at the Canadian Franchise Association.

"The first option would be price increases. If that's not possible, they're starting to look at some of the human resource options," says Mr. Eickmeier. "The non-essential sectors are the ones that are starting to look internally for those cost savings."

Dan Kelly, president and chief executive officer of the Canadian Federation of Independent Business, says the most frequent examples of cuts he's heard about include reductions in hiring summer or part-time staff, cuts in hours for part-timers, reduced hours of opening and eliminating benefit plans or extra paid perks.

"Several have said they will have to reduce their total head count or, at minimum, hold off replacing vacant positions," Mr. Kelly says. "Some have said they'll opt for more experienced employees as the higher minimum wage won't allow them to take a chance on a trainee or inexperienced worker."

Shelley Clair, owner of Orr Cleaners in London, Ont., is planning to cut part-time staff and will also no longer be paying staff for the holiday Monday in August, which was considered a perk since it's not officially a public holiday in the province. She has also reduced her operating hours on Saturdays at two of her three locations to save on payroll costs.

"It's called the Fairness Workplaces Act," Ms. Clair says, citing the partial name of the bill behind the minimum wage increase, "but to me, it's not very fair … I don't think the government truly understands small businesses."