Matt DiGregory doesn’t like having to raise prices.

Sometimes, though, he has no choice.

As CEO of a four-restaurant operation – three Range Cafes and Standard Diner – costs have risen on him. Annual minimum wage increases initiated in 2013 have boosted his staffing expenses by 10 percent. He’s also seen his unemployment insurance expenses jump by 40 percent, or about $80,000, per year.

Add to that the higher price of providing health insurance to employees: What was a $12,000 monthly bill two years ago now runs $20,000.

Given that restaurants already run on slim margins, the mounting costs forced DiGregory to raise prices on certain menu items about four months ago. He said the only other alternative would have been to settle for lower quality ingredients, an option he doesn’t want to consider.

Charging customers more for their favorite sandwich or burrito can draw ire from some and DiGregory doesn’t like it any more than they do.

“I’d give anything if we could go back to the prices we were charging 10 years ago,” he said. “But there are so many things tacked onto us that we have to compensate for.”

Like DiGregory, other local small-business owners say a recent wave of new regulations and soaring expenses has forced them to make difficult decisions – forgoing their own paycheck, eliminating jobs or raising prices on their goods and services.

They’re absorbing shocks from several different directions, whether it’s the minimum wage hikes approved by Albuquerque voters or the Legislature-established changes to the state-run unemployment insurance program. Some also must adapt to new Affordable Care Act provisions and could ultimately be affected by proposed revision of federal overtime rules.

Not everyone is struggling. There are employers who report minimal disruption. La Montañita Co-op, for example, hasn’t had to change much because it already paid employees above Albuquerque’s minimum wage and offered health insurance for even the part-timers on its 285-employee staff. Human Resources Director Sharret Rose said health insurance prices have gone up, but the company continues to shoulder 80-90 percent of the cost.

“It’s very important for us to have our workforce be taken care of,” Rose said, noting that the payoff is content employees who tend to stick around.

But, for others, there has been a cumulative, drastic effect.

Terri Cole of the Greater Albuquerque Chamber of Commerce referred to it as an “avalanche” of challenges, while Minda McGonagle of the National Federation of Independent Business described it as a “mountain of regulations” that limit employers’ flexibility, and increase financial and administrative burdens.

DiGregory said it’s not necessarily the individual issues, but the sum of them. Even before it was required, DiGregory offered health insurance for his management-level employees. He said he would extend benefits to all workers if he could. He doesn’t necessarily disagree with minimum wage increases. The problem is the timing. Several costly – and often complicated – changes have cropped up in short order. Someone from the Range’s operations team is now taking human resources classes at Central New Mexico Community College to navigate the new circumstances.

“I think (small-business owners) are frustrated,” said Brian Stone, a human resources consultant with the Accounting & Consulting Group in Albuquerque and president of the Human Resource Management Association of New Mexico. “Honestly, I think it keeps some folks from starting new businesses.”

“It seems we never change out regulations,” said McGonagle, state director for the NFIB, which counts about 2,000 members across New Mexico. “I think every year it gets tougher because there’s more rules to follow.”

Growing frustrations

Frustration crested earlier this summer when two Albuquerque city councilors introduced the Fair Workweek ordinance, which, among other stipulations, would have required employers to provide their staffers paid sick leave, written work schedules at least 21 days in advance, compensation for unexpected shift changes and $150 in “retention pay” every two weeks if there was no work, unless the employee chose to waive it.

Proponents argued that it would offer new protections for thousands of Albuquerque workers and create a healthier, more productive workforce. Andrea Serrano, deputy director of OLÉ, a group that helped draft the ordinance, said it came from “hours and hours and hours of community members getting together” and discussing the issues, and that certain provisions have widespread appeal.

Jon Hendry, president of the New Mexico Federation of Labor, said he supported the ordinance because all workers deserve the same benefits union members already get through their contracts, such as paid sick leave and advance notice of scheduling.

“We’re big believers in these things. … We know the value of these things,” he said.

But business interests railed against the proposal. Mayor Richard Berry announced he would veto the ordinance as introduced. The sponsors ultimately withdrew it. Councilors Isaac Benton and Klarissa Peña have indicated they might posit something similar in the future – likely focused on paid sick leave – but Serrano has said other backers will attempt to get the ordinance directly before voters as part of the 2016 ballot.

Dave Riddle, co-owner of Albuquerque’s Shoes on a Shoestring stores, already offers his employees paid time off, pay above minimum wage and other benefits that include health insurance – even though the Affordable Care Act doesn’t require it of companies his size.

But Riddle joined the chorus of Fair Workweek detractors, noting in an email to Benton earlier this month that it was “yet another stone in an already rocky path of trying to operate a small business in New Mexico.”

He cited a host of other issues already creating financial pressure. Like DiGregory, Riddle said he’s seen dramatic increases in health insurance costs and unemployment insurance. The state has changed the way it calculates businesses’ unemployment contributions so that companies that use it more pay more, but also to ensure that the fund – depleted in recent years – has enough in reserve. Shoes on a Shoestring saw its rate rise from 1.42 percent to more than 5 percent of the first $23,400 in wages per employee.

“It all adds up,” Riddle said in an interview with the Journal . “It all comes out of the bottom line and, if you want small businesses to stay in business, they’ve got to have a bottom line.”

Making ends meet

Dealing with rising costs isn’t as simple as raising prices at his shoe stores.

Riddle said that could do more harm than good, since he has to stay competitive with other retailers and online outlets. He has, however, cut back on staffing. Primarily through attrition, he estimates his workforce has decreased by 10-12 percent in the past couple of years. His two-store company now has between 25 and 40 employees, depending on the season.

DiGregory, too, said he’s eliminated a handful of jobs, though his staff is still nearly 300 strong across four restaurants. But, in addition to the occasional price increase, he’s had to implement other changes to cover rising costs. That includes fastidious food prep to combat waste – there are now clear standards for how much turkey goes inside a turkey sandwich – and a monitoring system to better track hours. His company currently covers 100 percent of health insurance costs for about a third of the employees, but keeps careful watch to make sure part-timers stay below the 30-hour threshold that would require they also get health insurance coverage.

“That’s definitely hurt us,” said DiGregory, adding that he previously tried to give employees however many hours they wanted. “We’ve had to schedule people less hours, so they don’t get into that area where now we have to pay them health care.”

Local business advocates argue that any rule or change that adds to employer expenses may have that type of unintended consequence. Jason Espinoza, president of the Association for Commerce & Industry in New Mexico, said compliance with new requirements often means reallocating resources.

“That means less money for salaries, for benefits, for other operations or expansion,” he said.

Significant increases in employment costs have put the owners of Quality Lawn Care, a 25-year-old Albuquerque maintenance company, in a strange holding pattern. Co-owner Vivian Hairston said the company has seen its unemployment insurance costs quadruple this year, from about $700-800 per quarter to about $3,000, something she suspects has to do with a claim from a problematic employee they terminated a couple of years ago. The company has never seen such an extreme jump, she said. It has created such a financial hardship that the owners haven’t paid themselves for three weeks and Hairston is working two outside jobs to make ends meet.

Raising rates on customers isn’t a viable option. A $1 price increase four years ago due to gas prices cost the company some business. Hairston said Quality must strike a delicate balance because its service is a convenience and not a necessity for most clients.

“It makes it a little bit more stressful to increase prices and pass that back onto the customers,” she said, “but, at some point, I think that’s just the only way we’re going to continue to stay in business.”

She said she and her husband and co-owner, Robert, have become reluctant to hire because of the expense and the paperwork hassle. When she realized she absolutely required an office assistant recently, she decided to go through a staffing agency instead. The upfront cost was higher, she said, but the agency takes on many of the other filing and financial responsibilities.

Currently, the company has six employees in addition to the owners. Hairston said they’re not sure they can afford more people, but they need more people to make more money.

“It’s sort of a Catch-22,” she said.

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 Under pressure

Affordable Care Act

Under the federal health care law, employers with 50 or more full-time-equivalent employees face fines for not offering coverage to employees who average at least 30 hours per week. Those who don’t comply face a $2,000 charge per employee (not including the first 30 workers), though there is no penalty for part-timers who don’t get coverage. If an employee’s premium doesn’t meet certain affordability standards and the employee receives tax credits to get insurance through the exchange, the employer faces a fee.

There is a special exchange — called SHOP — intended to help small businesses compare and buy plans.

Minimum wage

In 2012, Albuquerque voters overwhelmingly approved increasing the city’s minimum wage. On Jan. 1, 2013, the wage rose to $8.50, an increase of $1. For tipped employees, the wage went up to $3.83 from $2.13. The rate adjusts annually to keep up with cost-of-living increases. Currently, the minimum wage is $8.75 per hour — or $7.75 if the employer provides certain health care benefits. The rate for tipped employees is now $5.25.

Unemployment insurance

In 2013, the New Mexico Legislature approved a bill to change the way an employer’s unemployment insurance contributions are calculated. It established a new system intended to levy the highest rates on employers who use it the most and also allowed the Department of Workforce Solutions to determine the final rates with an eye toward keeping the program solvent. Because the recession greatly depleted the state’s unemployment insurance reserves, a company’s individually calculated rate is being multiplied by the highest possible “reserve factor” in 2015.

Overtime regulations

President Barack Obama has proposed changes to federal overtime rules in an effort to make more employees eligible for extra pay. Today, companies don’t have to pay overtime to salaried management-level employees who earn more than $23,660 per year, even if they work significantly more than 40 hours per week. The president has pushed to raise that threshold to $50,440 a year, something he says would make as many as 5 million more workers eligible for overtime.

Fair Workweek

Since withdrawn by its sponsors, the Fair Workweek proposal introduced by Albuquerque City Councilors Isaac Benton and Klarissa Peña would have required employers to offer staff members paid sick leave, written schedules at least 21 days in advance and $150 in “retention pay” every two weeks when there wasn’t work, unless the employee waived that requirement.