Reaction has been swift and harsh to the Fair Work Commission’s sizeable increase to the national minimum wage, with SMEs left wondering how to absorb the cost of rising wages.
The national minimum wage, and minimum award rate, were both increased by 3.3 per cent this week, taking the national minimum wage to $18.29 per hour.
Combined with announcement a day earlier that Sunday penalty rate cuts would be staged over the next four years, Employsure managing director Ed Mallett said it amounted to a “double punch in two days.”
“We predicted the increase to be no more than 2.4 per cent, and are particularly surprised at the decision – 3.3 per cent is the highest we’ve seen in six years,” he said in a statement.
According to Mr Mallett, Aussie businesses will face a wage bill rise of up to $51.3 million from 1 July 2017.
“Most SMEs won’t be charging customers 3.3 per cent extra from 1 July, but will need to come up with an extra $22.30 per week per employee, paid at the expense of their bottom line.”
Peter Strong, CEO of the Council of Small Business Australia (COSBOA), told My Business that while a 3.3 per cent increase for low income earners was not much in itself, if would be difficult for SMEs to be able to absorb this cost.
“If you’re in business, you’ve got to make a profit – well for small businesses it’s not a profit, you’ve got to make your own living,” he says.
“At 3.3 per cent, it isn’t high [but] it is an imposition on business, and one of the big problems we’ve got is that big businesses can absorb this, particularly in retail and hospitality, whereas it’s much more difficult for a little business to absorb any increase in costs.”
He adds: “What we want is a focus on the economy and a focus on making sure that businesses can pay good wages by being profitable and successful.”
Howeve, Mr Strong says that the real problem for SMEs is not the headline rate increase to the minimum wage, but that SMEs trading on Sundays are being subjected to a higher wage bill than that of big businesses.
“There’s a bigger hit on small businesses that open on a Sunday than there are on big businesses that open on Sunday, because they pay lower penalty rates. So we end up paying double – we pay the increase plus we pay more increase than Coles or Woolworths for example,” he says.
“Coles and Woolies and McDonald’s and Kmart – all those big companies – negotiated enterprise agreements back at the beginning of Fair Work, so about six years ago, and what they negotiated was a higher rate during the week, and to subsidise that, the Sunday workers were put on time and a half. Now [SMEs are] paying double time on Sundays and they’re paying time-and-a-half.”
Mr Strong says this has in effect created a “two-tiered workplace relations system” which is working to undermine SMEs.
“It’s a disgrace,” he says.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.