Your guide to the minimum wage increase

James McGrath from MYOB introduces the minimum wage increase and how to make sure your business is ready for it. Image from Visualhunt. ~WizeOwl

The federal government has moved to lift the full-time minimum wage in Australia – and here’s what you need to know.

Today, Fair Work Commission (FWC) raised the minimum wage to $719.20 per week, an increase of $24.30. This move affects about 2.3 million workers in Australia.

Before the announcement, union groups were pushing for a $50 per week increase in the minimum wage. Their argument was that to offset the reduction in penalty rates, there should be a corresponding increase in the minimum wage to help those most vulnerable – especially in a low-wage-growth environment.

Employer groups from industries such as hospitality and retail, however, argued for a freeze to minimum wage increases, saying there was already a comparatively high cost of labour to deal with. They argue that the low-wage growth environment is being caused by soft economic and trading conditions – so increasing a key cost to their businesses isn’t going to help them employ more people.

So now that the FWC has split the two positions right down the middle and handed down its decision, what do you need to do?

If you’re using a MYOB payroll solution

If you’re on an MYOB payroll solution, the minimum-wage increase will automatically be worked into your payroll software from 1 July.

So, the best approach here is to make sure your chosen payroll solution is up to date.

If you’re not an MYOB customer, the simple solution would be to try it out – it will make paying people and accounting for any further changes in awards or wages a breeze.

What does this mean for your business?

If you’re employing people on the minimum wage, there’ll be a change in the costs of doing business that you need to account for.

If you do think the minimum wage increase will have an impact on your business, here are four key ways to counteract it:

1. Forecast

To get an idea of what impact the minimum-wage increase will have, it’s important to forecast out by about three years to gauge what sort of impact it will have.

Remember, FWA looks at the minimum wage rate every single year, so it’s important to note that this may not be the only minimum-wage increase within that three-year window.

In any case, it’s important to have a good handle on your numbers so you can deal with challenges that your way.

2. Automate processes

A great way to save time and money in your business is to automate where possible.

For example, MYOB software automates admin tasks like bank feed reconciliation, debtor management, business record keeping and time sheets.

You can use the time saved on these tasks to monitor and coach your team, to make sure you’re getting the biggest bang for your buck now you’re paying more for labour.

3. Review your prices

Look at your sales and see whether increasing your prices could potentially cover the increase in labour costs.

This, again, is where having a handle on your numbers is a huge benefit.

If your labour costs go up about three percent, would increasing the cost of your product or service by 1 percent be enough to cover the increase?

How would your customers react to a price increase?

READ: The art of communicating price rises

4. Review your expenses

On the other side of the coin, review your expenses.

You may not be able to do much about the increase in labour cost, but are there other areas of your business you can look at?

For example, are there expenses which could be reduced or cut out?

When did you last review your list of suppliers? Could you renegotiate with those you use regularly or look around for a better deal?

READ: How to renegotiate with suppliers

Whichever way you want to go, dealing with a key increase in the cost of doing business is either about increasing revenue or cutting back.

The key to finding extra money in your business is having a great handle on your numbers, and that starts with having great accounting software geared to help you get stuff done.

For help with MYOB or any other Cloud accounting software, contact the experts at Bizwize today.