Small Business Owners To Struggle Under New Minimum Wage Rise

Published June 19, 2020 (last updated July 19, 2020) Author: Employsure

The Fair Work Commission’s decision to increase the minimum wage is another blow to small business owners already crippled by the coronavirus pandemic, according to Employsure, Australia’s largest workplace relations company.

The new National Minimum Wage will increase by 1.75% per cent to $19.84 per hour, a $0.35 hourly rate rise. In other words, a full-time employee will receive a $753.80 per week, an increase of $13.00.

The date the change comes into effect will be different depending on the industry:

 

  • 1 July 2020: National minimum wage and Group 1 Awards
    • Frontline healthcare and social assistance workers
    • Teachers and childcare workers
    • Other essential services

 

  • 1 November 2020: Group 2 Awards
    • Construction
    • Manufacturing
    • A range of other industries

 

  • 1 February 2021: Group 3 Awards
    • Accommodation and food services
    • Arts and recreation services
    • Aviation Retail Trade
    • Tourism

 

“This wage increase comes at a time when all businesses, no matter the size, can least afford it,” said Senior Employment Relations Adviser, Michael Wilkinson.

“The data the panel has used to decide the new minimum wage has been skewed by measuring the data of big businesses, and doesn’t consider the problems a small business with just a handful of employees face. Even those in Group 3 who don’t have to worry about paying more wages until February won’t have fully recovered from the financial fallout that has occurred in the past several months.

“There’s also the added confusion of the staggered three-stage approach. Splitting the minimum wage increase into different dates will create unnecessary confusion among small business owners in an already troubling time.”

COVID Cost:

While the Federal Government’s $1500 a fortnight JobKeeper wage subsidy has benefited about 3.5 million workers, COVID-19 restrictions have meant cash flow for small business owners has been limited.

“We’ve seen in the past that when the minimum wage is raised, there are often a number of serious consequences that come with it,” said Mr Wilkinson.

“The past several months have been utterly horrific for SMEs trying to get back on their feet. We’ve seen closures because of drought, bushfires and COVID-19, uncertainty in respect to casual entitlements, the impending end to the JobKeeper payment, and now on top of all that, employers are supposed to fork out more money they may not even have?

“A number of our clients have told us how they have pivoted their business during the pandemic to keep money coming in. They’ve made cost-cutting measures that have involved letting go staff, or seriously reducing their hours.

“Factor in a rise to the minimum wage, and it could be the final nail in the coffin for many businesses.

“There have been calls for the JobKeeper program to be extended past the September deadline, but unless that is ever agreed to, business owners should keep their heads out of the sand while preparing for the worst and planning for the best if they want to ultimately stay in business.

Looking Ahead:

With the conclusion of JobKeeper on the horizon and further restrictions being eased across Australia, businesses may need to make more cost-cutting measures.

“What we’re hoping for is a pragmatic approach that will prioritise the needs of all Australians while maintaining the viability of small businesses,” said Mr Wilkinson.

“I believe a freeze to the minimum wage in the future will help support the country’s economic recovery. We last saw it happen in 2009 due to unemployment concern from the global financial crisis, and a global pandemic shouldn’t be any different.

“Employers are operating closer to the margin of profitability than ever before, and we do not know if there will be a second COVID wave, or something else that could drive down business in the coming months.”

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