Minimum wage on the rise again – what does it mean for businesses?

While some were expecting it, confirmation of a 6% increase in the minimum wage with less than seven weeks warning is a concern for many businesses. The increase will no doubt result in upwards movement in other employees’ wages too.

On Friday last week, Workplace Relations and Safety Minister Michael Wood advised that the minimum wage would increase by $1.20 per hour to $21.20 from 1 April 2022. The starting-out and training minimum wage will increase from $16 to $16.96. The increase ensures that those paid the minimum wage are keeping pace with the current rate of inflation (5.9%).

This increase will impact those businesses that have a large percentage of minimum wage earners the most. With hospitality in this classification, this comes at a time when Government relief for Covid is being turned off, and demand is still down due to restrictions in place and people choosing not to socialise as much.

Many businesses that we have spoken to have already been adjusting their prices for inflation, and it is expected that prices will continue to rise to account for the additional cost the increase in the minimum wage brings. This then leads to flow-on implications with inflation continuing to increase, requiring another increase to wages, and so on.

So what can you do? Here are some ideas to help you keep ahead of the game:

• Review your pricing (if you haven’t already done so), consider the market and the ability for you to increase your prices
• Identify your unique selling point and highlight any benefits and/or advantages of your product, communicate this with your customers
• Prepare a financial forecast for the year ahead to understand the implications for you
• Review the mix of your staff and look for areas where you can make savings
• Consider what processes can be automated and/or streamlined, there may be more time savings than you realise

With the right planning and review of your current position, your business can be ready for this increase, and move into the new financial year with confidence.

To discuss getting your business prepared, contact a Nexia advisor.