After 1st July 2009 when the Fair Work Act 2009 was established, workplaces in Australia followed this new governing system for their business. Employers, employees, contractors as well as the community were, and still are required to have a thorough understanding of this new system. They are expected to comply with it otherwise they will be penalised.
Due to the fact that the earnings inequality was increasing, Kevin Rudd decided to increase the minimum wage by any amount from fifty cents to over $16 in an hour. Thanks to this decision by Fair Work Australia, the minimum wage workers get to enjoy earning extra every week, which allows them to achieve a better standard of living. The extra amount ranges between a minimum of $18.70 and a maximum of over $641 every week.
How does minimum wage affect your small business?
When this decision was taken, it was very clear that the industry of small-scale businesses would be affected the most by this change. The change was bigger than the minimum weekly wage set by the Australian Chamber of Commerce and Industry (ACCI) by $8.50 but when compared to the minimum weekly wage proposed by the Australian Council of Trade Unions (ACTU), the minimum weekly figure is still behind by around $27 a week. While it is believed by most of the business groups that the change would definitely affect the hiring decisions of small businesses, the truth is that this hike is not enough to prevent the low-paid workers from falling further behind in the case of the average weekly earnings.
What is minimum wage?
The minimum wage can be defined as the base rate of pay received by an employee for the ordinary hours of work put in by him or her. This figure is affected by the industrial instrument that applies to the employment of the employee in question. Some examples of industrial instruments would be a modern award, transitional pay scale, national minimum wage order, enterprise agreement and so on. As a small business, the minimum wages to be paid to your employees are determined by a specialist Minimum Wage Panel belonging to the Fair Work Commission.
There are many ways in which the minimum wage affects your small business. At face value, the increase in minimum wages increases the staffing costs of a company. If you were to observe this legal requirement then it means that you will have to pay extra to your staff every month and this in turn increases the overheads of your small business. An increase in the minimum wage may encourage members of staff to ask for further increases in pay as this would seem like the perfect opportunity for them to get more remuneration for the hours of work they put in for the company.
Owing to higher labour costs, the overheads of your small business would increase. In order to make good profits while sustaining increased overheads one will need to adjust other areas of the small business in order to keep things well balanced. When the overheads of a business increase, a competent entrepreneur would take this as a challenge to find even more cost-effective ways of operating the company. One of the ways of doing this would be to increase the prices of products or services offered by the company.
Increasing your prices
Now, a direct and sudden increase in the price of a product would definitely ruffle the feathers of your customers, which is why it is advisable to make your move carefully. A good trick to apply here would be to increase the prices of the services and products of your company that are underpriced. This way you can keep pace with inflation and make subtle increases in prices without bringing it to the notice of your customers. If your small business employs a lot of workers, then hiring new staff wouldn’t be feasible when the minimum wage increases. Thus, you will need to look for new ways to make your current batch of employees more efficient.
There is another useful strategy that you could apply in your small business in order to cope up with the legal requirement of increasing the minimum wage of your employees: to encourage workers to work overtime. While you will still be paying the staff members extra for the overtime hours they put in, you will not need to pay extra salaries because no new employees have been hired.
Put simply, the minimum wage should be seen as a good thing, as an employee with a better standard of living will feel more stable, allowing them to put more into their work, and giving them the opportunity to try and better themselves within the business to earn more still. As a small business, thinking outside of the box when it comes to raising prices or working overtime you’ll be able to reduce the effects of minimum wage and still operate profitably.