Fears for SME as minimum wage rises

The Fair Work Commission (FWC) has conducted its 2023 Annual Wage Review, finding the National Minimum Wage should rise from $21.38 an hour to $22.58 an hour for full-time workers, or $812.60 a week to $859.32 a week, based on a 38-hour work week, a rise of 5.75 percent.

The rates will come into effect in the first pay period after 1 July, 2023.

“The current combination of economic circumstances, namely low unemployment, falling real wages and high inflation, is very unusual and presents a particular challenge in this year’s review,” FWC stated in its announcement.”A further challenge is the expected sharp slowdown in economic growth over the next year. In our consideration, we have placed significant weight on the impact of the current rate of inflation on the ability of modern award-reliant employees, especially the low paid, to meet their basic financial needs. Inflation is reducing the real value of these employees’ incomes and causing households financial stress.”

The cost of living has risen significantly with the annual Consumer Price Index growth at 6.8 percent over the year to April with no signs of slowing

“We have also taken into account the recent robustness of the labour market, and the fact that increases to modern award minimum wage rates will provide a disproportionate benefit to female workers and thus may contribute to reducing the aggregate gender pay gap across the workforce,” the FWC wrote.

On the other side, industry groups have raised concerns for small business owners struggling as well with inflation rises.

The Australian Retailers Association (ARA) says today’s decision – in addition to the scheduled 0.5 percent increase in superannuation guarantee – will place significant pressure on struggling retailers, particularly small businesses.

“We’re experiencing a cost-of-living crisis – so it’s important that wages continue to grow; but we’re also continuing to experience a cost-of-doing-business crisis so it’s a very delicate balancing act to keep business operating sustainably,” said ARA CEO Paul Zahra. “Many retailers are under enormous financial pressure, with rising operating costs across the board. Supply chain costs have increased, utilities have increased, rent has increased, materials have increased and now labour will increase substantially.

“This is before factoring in that discretionary spending is softening – leaving many retailers concerned about operating costs.

“We fear the scale of this increase will tip some businesses over the edge – especially smaller retailers who are on very slim profit margins or in some cases in negative cashflow territory.”

The Council of Small Business Organisations earlier argued a 4 percent wage increase was more appropriate, given the struggles faced by local business operators.

The National Retail Association (NRA)  has taken a similar stance with Legal Director Lindsay Carroll saying the move is unattainable for most retailers.

“Frankly, we are disappointed that the Commission could be so out of touch with the realities of most Australian businesses,” Carroll said.

“This shows a very disappointing lack of understanding on the part of the Commission of the many challenges confronting business owners across the country.”

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