• Andrae Gaeth

How will the minimum wage increase affect your business?

Updated: Mar 9, 2019

Our current Labour-led Government have stuck to their word regarding employment law, resulting in significant changes being ushered in from December 2018 to May 2019. These changes ensure the power is swung more in favour of employees and will make a significant difference to the 200,000 odd minimum-wage earners and their families. However, at an increase of $231 million per year in wages nationwide, there is no doubt that businesses will be drastically impacted.


Minimum wage increases

Perhaps the most significant change initially is the minimum-wage increase on 1st April 2019 from $16.50 to $17.70, with the starting-out and training wages following suit by remaining at 80% of the adult wage. This is significant for employees, equating to an increase of $48 per week before tax, and will only rise from there with the goal being a $20 minimum-wage by April 2021. However, where employees benefit, employers must be ever-more creative to absorb what is essentially a marked increase in running costs. Typically, they have two options: Either, they must increase prices to consumers to cover their increased overheads; or they must reduce running costs in other areas to keep their overheads stagnant.


Work visa restructuring

There is a significant restructuring of the work visa system planned for 2019, where all employers supporting temporary work visas for migrant staff must be accredited. There will be different levels of accreditation according to visa type and the nature of work. For example, standard accreditation would apply to all employers supporting temporary work visas for a maximum of five employees. For employers hiring labour, specific labour hire accreditation would be required. If the visa sought was work-to-residence, or the employer supports more than five temporary work visas, then premium accreditation would be required. There will be labour market testing with a minimum annual salary offer of $78,000 needed for work-to-resident visa employees. Certain criteria for each level of accreditation could also be imposed including induction training for migrant employees, with pastoral care and industry partnerships being criteria for both labour hire and premium accreditation.


Trial and Probationary periods

The historical 90-day trial period is being eradicated for companies with a staff greater than 20. It will no longer be possible to dismiss someone within 90 days of the start of their employment which will inevitably affect hiring processes heavily. The 90-day period stands for businesses employing less than 20 staff, and the larger businesses are still permitted to use probationary periods.


Compulsory tea and meal breaks

Where the previous Government had vague wording for legislation surrounding rest and meal breaks essentially permitting the employer to govern them as they ‘saw fit’ and in a ‘reasonable’ manner, our new Government is reinstating the laws that changed in 2015. These will see staff who work an 8-hour day being permitted to have two 10-minute paid tea-breaks and one 30-minute unpaid meal break. The meal breaks must also fall roughly in the middle of the shift, within reason.


What impact will these changes have on the hospitality industry?

The key to a business surviving and thriving through any adverse changes which hamper services, is to be aware of what’s coming and plan effectively for it so that the changes have minimal impact on the business itself while enhancing staff culture and quality of products and services.


The vast majority of small hospitality businesses rely on seasonal staff that are on temporary work visas and are paid minimum wage. Therefore, the company cost structures and budgets will be based on these constraints which are about to change significantly. It is therefore imperative to be prepared for the increased costs and involvement of employers in the visa process, particularly regarding accreditation requirements and ongoing support of employees on certain visas.

It is also important to budget for the inevitable increased wage costs associated with the new legislation. There are a number of creative and sensible solutions to either absorb the increase of the expenses or to adapt rostering to maintain stable wage costs as a proportion of total sales. The first can be achieved by perhaps reviewing supplier agreements and negotiating better deals based on minimum order quantities, lead times and loyalty. Alternatively, perhaps by looking for ways to reduce waste and operate a leaner business model where time and resources are invested wisely into areas of greatest value.


The balance between wage costs and sales comes down to staffing, both rostering and how staff time is utilised. Perhaps you could consider altering staff numbers during peak times or restructuring shift start times and lengths to support mandatory meal breaks with minimal impact to the business. If you don’t already use a product such as hospoIQ, now could be the perfect time to start as it provides valuable analytics and insights into how wage costs relate to sales, where imbalances occur, and how improvements can be made. This enables better future rostering so that the business can strive for increased profits and viability despite the imminent industry changes.

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