Small businesses have shown their resilience when managing higher material costs and rising interest rates. However, they must navigate yet another increase in operational costs – labour.
As of 1st July 2024, Australia’s minimum wage has increased, impacting many small businesses across the country. These businesses must stay informed about the wage hikes and make swift changes to adapt.
If you own a small business or are an advisor to one, here’s all you need to know about the minimum wage in Australia in 2024 and how to navigate it.
How much is Australia’s minimum wage in 2024?
The Fair Work Commission (FWC) has increased both the minimum wage and award wages in Australia by 3.75%. This decision has currently set the national minimum wage to $24.10 per hour and $915.91 per week based on a 38-hour week.
The wage increase has affected about 2.6 million workers, many of whom are employed by small businesses. According to the FWC, most of these workers are part-timers, and almost half are casual employees.
Small businesses will have to reflect this wage increase in their payroll from the first full pay period that starts on or after 1st July 2024. So, if an employee’s weekly pay period starts on Wednesday, 3rd July 2024, then the new rates will apply from Wednesday.
How does the minimum wage increase impact small businesses?
Since 2021, Australia’s minimum wage has gone up by 18%, making us one of the world’s highest minimum wage earners.
While this wage increase helps employees, it can be detrimental to small businesses that are already battling a tough economy. Luke Achterstraat, chief executive of the Council of Small Business Organisations (COSBOA), highlights how tough it is on small businesses.
“Unfortunately, the decision today will mean higher costs and more cost pressure for small businesses who are really struggling to churn out a profit and to remain in business at the moment.
The Australian Chamber of Commerce and Industry’s (ACCI) chief executive, Andrew McKellar, echoes this statement.
“It is inevitable that businesses will need to pass these increased costs through to consumers. Many small businesses are in a position where they simply cannot absorb any more.”
While small businesses recognise the importance of paying fair wages for employees, managing the added financial cost is crucial. Here are some strategies you can consider as a business owner to keep your operational costs healthy.
How Aussie small businesses can mitigate the minimum wage increase
Automate processes where possible
With the recent rapid developments in technology and Artificial Intelligence, businesses should consider utilising these resources to optimise their workflow. AI tools can allow businesses to improve their productivity in areas such as supply chain forecasting, dynamic pricing, HR management, and marketing.
Focus on product or service differentiation
When faced with steep competition, small businesses can find points of differentiation to set themselves apart in the market. This means developing and marketing their uniqueness against their competitors.
Differentiation strategies such as product and service improvement and order personalisation could potentially increase business attractiveness.
Invest on productivity
With the minimum wage increase, creating a productive workforce is more important than ever. Small business owners should consider improving their staff morale and promoting a positive workspace, as happy workers are generally more productive.
Planning your workforce with the following strategies could minimise the impacts of increased wages:
- Pivoting to flexible or remote work arrangements
- Rearranging schedules to optimise peak hours
- Cross-training employees for different roles
- Outsourcing non-critical tasks
Collaborate strategically
Small businesses should consider forming partnerships within the industry that can help them reduce labour costs. This includes sharing costs with other small businesses and engaging with trade associations for insights.
Besides labour costs, collaboration can provide cost-saving opportunities in other business areas. Strong partnerships allow businesses to negotiate alternate forms of payment with suppliers and creditors.
Restructure to manage debts
If your small business is facing significant financial distress because of the wage hike, speaking to a small business restructuring expert can be beneficial. A restructuring practitioner helps you efficiently utilise the Small Business Restructuring (SBR) process by the Australian government to reduce debts.
Additionally, a restructuring practitioner can help you find other debt-restructuring alternatives if SBR isn’t right for your business.
Key takeaway
Navigating Australia’s minimum wage increase calls for adaptability among small businesses. By introducing creative strategies in their processes, business owners can protect their business and plan for the year ahead.
Olvera First helps businesses stay ahead in a dynamic environment with bespoke restructuring solutions. Explore our blog for more insights on navigating the financial complexities of this dynamic industry.
