Small business owners are amongst those most likely to be impacted by the Fair Work Commission’s annual wage review, with all modern award rates set to increase by 3.5 per cent on July 1, 2018.
The wage increase is the highest since 2011 and will impact over 2.3 million Australians who are paid at the National Minimum or Minimum Award Wage rates. New allowance rates for individual awards are yet to be announced but will be released prior to July 1.
The increase is set to impact SMBs, with Josh Vikis, Senior Employment Relations Adviser of Employsure suggesting the increase is high comparative to other OECD countries. Vikis tells Kochie’s Business Builders raising the minimum wage could affect employment figures.
In some cases, small businesses may deal with the shift by eliminating employees, Vikis suggests.
“We hear many small business employers already reducing the number of employees to keep up the rising costs of business. What’s worse, some decide to work even harder and put in even more time themselves.”
The weekly wage bill for Australian businesses could increase up to $55 million.
“Most SMEs won’t be charging customers 3.5 per cent extra from July 1, but will need to come up with an extra $24.30 per week per employee, paid at the expense of their bottom line,” Vikis adds.
“To afford the increases to minimum wage, many small businesses have to adjust their business models. Some businesses simply need to reduce their profit targets and take their extra payroll costs from their profits. Businesses that already operate on tight profit margins need to find money in other places.
“We have significant consultations with small businesses and the overwhelming view is that this increase will affect their bottom line significantly. Since small businesses employ a majority of the Australian workforce and generate a fifth of our GDP, it is vital that they are provided with sufficient support to remain profitable whilst spurring growth.”