The National Minimum Wage increased in July this year, a positive change for Aussies to help manage the increasingly expensive world that we live in. In case you missed it, we created a comprehensive minimum wage guide for businesses here.
The increase has been idly celebrated amongst employees, but did you know that it is also a positive for employers? If you are asking why don’t fret, we have enlisted help from financial adviser Victoria Devine, owner of Zella & She’s On The Money (SOTM) to explain it all, plus provide handy tips for your business budget. Victoria, over to you!
This year’s minimum wage increase of $40 per week, equates to a total increase of 5.2%. This means Australians on the minimum wage are earning $812.60 weekly or $21.38 per hour. Formerly workers on the minimum wage were earning $772.60 weekly or $20.33 per hour.
The increase (including that seen by workers on award rates) has been reported to impact more than 2.7 million workers.
What does this mean for employers?
As employers, we have a responsibility to ensure that our employees can purchase the same goods and services year on year. Even if they don’t receive a typical pay rise, we should aim to keep up with inflation. If you are slightly stressed about the recent increase, a good place to start is to look at it over a twelve-month period or apply it to your cash flow on a month-to-month basis. You’ll likely find that the jump in wages isn’t as significant as you first thought.
Remember that to keep up with inflation you should reprice the product or services you offer. Though it can be tricky to not feel guilty about increasing your prices, if you’re not raising your prices and inflation is still on the rise, then the product or service you are offering is actually cheaper than it was last year!
Tip: On your invoices, contracts or letters of engagement make it clear that this year you’ll be charging X, but next year you’ll be charging X + inflation or X + 10%.
What are the most important things a business owner needs to know about the minimum wage?
Though it may feel substantial, with a little research and planning you can make moves to ensure the increase doesn’t impact your bottom line. Do some cash flow projections, and talk with your bookkeeper or accountant to establish what this means generally and how you can account for the adjustment.
It’s important that you understand the date that the increase was set, and then make sure you’re on the front foot if there is any back pay required; employees will lose respect for you if they realise you haven’t been paying them correctly and we don’t want that!
But, how does this positively impact my business?
A clear win for employers when it comes to the increase in minimum wages is that your staff will be more satisfied. And are likely to put in more effort for reward and feel a greater sense of loyalty to you as their employer. It’s also fantastic because it means your staff can manage the rising cost of living a little easier and live more comfortably, reducing stress and making them more present and content employees on the whole!
How can I factor the increase into my already tight budget?
While you’re no doubt happy for your employees, it’s very normal to feel stressed about the added pinch the increase in minimum wage could have on your business. While it’s normal, stress is rarely ever productive and what we need to do now is reassess budgets and create a plan to make up for that hit. Start by asking yourself,
- What changes can you make to your business to possibly bring more money in?
- Could you run a new marketing campaign to inspire new clients to come through our doors?
- Conversely, could you cut back on the marketing budget for the month and work on enhancing existing relationships to strengthen client retention?
perhaps you could cut some subscriptions you don’t need?
- Maybe you could talk to your landlord about renegotiating the rent of your store?
It’s very easy to think “well this is the way we’ve always done it”, but when we review our practices and question our old habits, ways of shaving off some spending without impacting staff often present themselves. While you may feel alarmed initially, once you realise there are small things that you can do to shave a little bit off your outgoing expenses and understand the real and positive impact this increase may have on your staff, we are confident you’ll begin to feel far better!
This article is only for educational purposes and does not constitute legal, financial or tax advice. Make sure you consult a professional regarding your unique business needs.