Australia is often praised for their approach to welfare, working conditions and minimum wage. Compared to other first world countries such as the United States, we are ahead of the curve when it comes to providing everyday Australians with better working environments.
As a result of inflation and various political pressures, the Australian government have increased the minimum wage as of July 1, 2021. The minimum wage is being increased by 2.5%, up to $20.33 per hour, or $772.60 per week for full-time employees.
While this is a welcome rise for those Australians who are on minimum wage, many businesses are still dealing with the repercussions of the recession and uncertainty surrounding the current restrictions along the east coast.
While businesses will naturally adapt, the Fair Work Ombudsman is calling the increase “modest, fair and non-disruptive”. This may be true for many large corporations; however, the adjustment period will definitely be tough for some small and medium sizes businesses.
So, if your profit margin is already relatively low, how can you survive the pay increase?
Pass The Increase On To Customers
Theoretically, if minimum wages are increasing by 2.5%, then if you were to increase your prices by 2.5% then things would even out. However, increasing your prices can lead to a range of other issues including losing your competitive edge against the competition, which could lead to customers going elsewhere. Though, if you have a good enough gauge on your competitors, and you will still be able to keep a competitive edge despite a price increase, then it is an option.
Outsourcing some areas of your business can be beneficial, depending on your industry and business. Outsourcing particular tasks can improve efficiency and business processes. If you are outsourcing a particular task to someone or a company who are experts in that field, it can hugely increase your profit, if they are cheaper than your previous strategy, or if it allows your current employees to increase efficiency by being able to focus on other more important tasks. Both of these outcomes have the potential to increase profit margins.
Short-Term Finance Options
If you are finding that a minimum wage increase is going to cause short-term issues for your business cash flow, then you can look into business finance options. The minimum wage increase can mean that your cash flow is more sacred than ever and if you are having issues with cash flow from unpaid invoices, this can directly impact your ability to pay your employees. This is why an Invoice Finance option can be a great short-term management plan for your business. When searching for the right lender to help your SME find the right invoice finance solution, look no further than Grow Finance. As a non-bank lender, they support small and medium-sized businesses and pride themselves in delivering tailored invoice finance solutions. Invoice Finance can help to smooth out that uneven cash flow and keep everything running, despite higher wages.
While not every business will face a struggle through the current economic climate, it is always good to be prepared for anything to happen. With the right business planning and correctly utilising short term business finance options, such as invoice financing you can embrace innovation and build your businesses path to success.