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HOW WILL THE RISE IN MINIMUM WAGE AFFECT YOUR BUSINESS?

Find out if the changes to the national minimum wage and Modern Award rate will affect you or your business. 

On June 1 2018, the Fair Work Commission delivered its annual wage review; this year saw the highest percentage increase since 2011. This decision will have a significant impact on all businesses and industries and more specifically the 2.3 million employees who are paid at the national minimum wage or minimum Modern Award rates.

What this means for businesses

Starting from the first full pay period commencing on or after July 1 2018:

  • All Modern Award rates will increase by 3.5% (with weekly wages rounded to the nearest $0.10
  • The national minimum wage will increase by 3.5% to $18.93 per hour (and $719.20 per week for a full-time employee), which is an increase of $0.64 per hour for the hourly rate
  • Pest control award rates start at $702.30 per week so will rise to a minimum of $726.90 per week.

The FWC’s decision only confirms the basic increase in minimum rates while confirmation of the specific rates (including new allowance rates) for each individual Award have not yet been released.

Whilst good news for employees, it does mean businesses will need to take a close look at how they fund this increase in costs.

Josh Vikis, a senior employment relations adviser at Employsure, a workplace specialist firm representing over 17,000 SMEs (small and medium-sized enterprises) commented, “After consultations with small businesses, the overwhelming view is that this increase will affect their bottom line significantly. Since small businesses employ the 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.”

Juggling the cost increase

The weekly wage bill for Australian businesses could increase up to $55 million across the country. The rise in minimum wage will have a greater impact on small businesses, as larger companies can typically afford to pay above Award rates.

While most pest managers won’t automatically increase their prices to make up the shortfall, they will need to come up with an extra $24.60 per week per employee – which comes at the expense of the bottom line.

For pest managers who own their own businesses, this may mean adjusting the business model. “Businesses that already operate on tight profit margins need to find money in other places. They they will need to consider reducing costs, increasing prices, or reducing operating hours, or take a mixed approach to maintain current profitability,” said Mr Vikis. There is also the option of simply reducing profit targets, and taking extra payroll costs from overall profit.

Whilst not necessarily the first option, small businesses on tight margins may consider reducing hours, reducing the number of employees, or cutting back on contract staff.

What steps do you need to take?

If you pay your staff at Award level, the increase to minimum rates takes effect from the first full pay period commencing on or after July 1 2018. This means increasing the salary of your minimum wage staff from this point onwards.

If you already pay above Award rates, you may not be required to increase your employees’ wages, provided the rates you pay are above the increased minimum Award rates. (As long as you are not required to increase employees’ wages under their contracts of employment or applicable enterprise agreement.)