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Strategies to help reduce costs in the face of growing wages

Strategies to help reduce costs in the face of growing wages

The Fair Work Commission has increased the national Minimum Wage by 3%, effective from 1 July 2019 taking the new hourly rate to $19.49.

With these changes, many businesses may find they are in a position where they need to reconsider their finances. The direct impact of needing to increase rates for employees who receive base minimum wage payments, is no doubt likely to cause a nationwide affect as it forces businesses to be compliant with a new set of pay rules.

The minimum wage increase will have an administrative and financial impact on the bottom line, as it does every year. However, businesses shouldn’t see the change as the time to consider reducing staff numbers or increase product costs.

While mandated wage increases are a challenge for any business to implement – with every challenge there’s an opportunity to improve financial health. Being creative with cost savings and identifying new efficiencies can help your business manage the annual minimum wage increases.

Let’s look at some simple strategies to help reduce costs in the face of growing wages:

1. Comply

By law businesses must comply with the new national minimum wage and modern award rates. The cost of non-compliance can be more severe than the cost of implementing the minimum wage increase, with the potential for underpayment claims, penalties for non-compliance and reputational threat arising from breaches being publicised, as the Fair Work Ombudsman vows to take a firmer stance on enforcing pay regulations.

Recently there have been high profile cases of companies who have faced a massive cost as a result of not complying. As they say, prevention is the best cure. Making sure you’re compliant from the outset could save you a hefty bill later on. The importance of compliance can’t be overstated.

2. Time is money

To help to ease the financial burden that a minimum wage increase can bring, consider the other obligations related to workplace entitlements.

For instance, you may reduce overtime rates payable by ensuring your employee’s ordinary hours are within the ordinary span of hours or rostering provisions outlined in the relevant modern award. Also, by ensuring employees receive their meal breaks or required breaks between shifts, as outlined in a relevant modern award, the potential costs of additional loadings being payable to staff will be reduced.

3. Energy Saving

Energy and electricity costs are probably one of the fastest growing costs for businesses. 68% of CEOs surveyed by the Australian Industry Group expect energy input costs to continue rising in 2019, with 63% of respondents also saying they paid more for energy in 2018 than they did in 2017.

With regards to heating and cooling of a workplace, corners are easy to cut. There are obvious tricks, like increasing airflow into your office or place of work instead of turning on a fan or the air-conditioning.

Installing double-pane windows or ensuring resealing around doors, windows and air vents may be costly, however if you do choose to install these, the energy efficiency brought to your workplace will save you in the long-run.

Turning off machinery and equipment when not in use and ensuring light switches are turned off when exiting an unoccupied room, are further cost saving measures.

High energy prices have been on the national agenda for some time and the burden they present to small business owners is very real. It is also worth keeping an eye out for new programs and initiatives that will help you ease the pressure of energy prices.

4. Free Software & Digitisation of Work

There’s a lot of free software and apps that businesses can use to improve their efficiency. Google Docs is a popular example of free office software.

Free software has a clear benefit, but introducing software as a tool for all staff to use can also vastly increase collaboration, automisation of work and also streamline communication channels.

Strategising and organising software used, can also further help increase productivity. If a small business takes time to train staff on how to use relevant software programs in line with Company policy this can create buy-in and confidence in the utilisation of such technology.

5. Upskill and Train Staff

Money isn’t the only means of compensating, recognising and rewarding staff. Employers can incentivise and demonstrate the value in their employees through further training, career development opportunities or even flexible work arrangements.

The development of an employee’s skills and knowledge, through improved training and attention to career development will not only enhance their own future career growth but it will also contribute to the growth of the business. Enabling an employee to further explore an aspect of their employment that they are passionate about enhances productivity and motivation to learn and develop useful skills. The skills an individual develops at any given position of employment are invaluable. Giving staff opportunities to develop their abilities can be an investment in your workforce and your business, without necessarily having to spend more money.

If you need help understanding these changes, feel free to contact Employsure.

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