Ed Mallett

Yesterday’s release of figures from the Fair Work Ombudsman and Fair Work Commission are a sign that Australia’s small businesses are caught in a web of complexity, according to Australia’s largest workplace relations company, Employsure.

The annual reports from both the Fair Work Ombudsman and Fair Work Commission, released yesterday, show that fundamental obligations such as wage rates, pay slips and record keeping are still a common problem for business owners.

Key figures from the Fair Work Ombudsman Annual Report include:

• More than $40 million recovered for 18,000 underpaid employees
• More than $4.4 million secured in court-ordered penalties
• $479,900 in on-the-spot fines issued for pay slip and record-keeping breaches
• More than 2800 workplace audits conducted

Meanwhile, figures from the Fair Work Commission Annual Report include:

• 13,928 Unfair Dismissal Claims lodged
• 10,974 decisions and orders published
• 11,702 hearings and conferences

Managing Director of Employsure Ed Mallett said the figures paint a picture of a sector struggling to meet its obligations.

“It would be wrong to assume that all of these businesses are rogue operators. Also caught up in these figures will be small business owners who are trying their best in a very difficult system,” he said.

“Employsure Advisers take thousands of calls each year from small business owners needing help. Wage rates and entitlements are always high on the list of issues they’re struggling with.

“Of course we want a system that eradicates systemic workplace relations breaches. But we also need a system that adequately supports small business owners and limits unnecessary complexity.

“We hope that the Government’s Workplace Relations System Review will address some of the issues that are making it near-impossible for the small business community to successfully navigate Australia’s workplace relations system.

“In particular we’d like to see reforms that limit vexatious unfair dismissal claims, while reducing the amount of red tape that prohibits small business growth.”

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From the first full pay period commencing on or after 1 July 2018:

• all Modern Award rates will increase by 3.5 per cent (with weekly wages rounded to the nearest $0.10)
• the National Minimum Wage will increase by 3.5 per cent to $18.93 per hour (and $719.20 per week for a full-time employee), an increase of $0.64 per hour for the hourly rate

The Commission’s decision only confirms the basic increase in minimum rates while confirmation of the specific rates (including new allowance rates) for each individual Award have not yet been released. These will be released before 1 July 2018.

If it’s not broken…

Josh Vikis, Senior Employment Relations Adviser of Employsure – a workplace specialist firm representing over 17,000 SMEs says the increase is high comparative to other OECD countries: “Australia has high wages and high living standards. Our minimum wage is one of the highest in the world.”

Raising the minimum wage actually makes it harder to employ people according to Vikis, adding, “We have significant consultations with small businesses and the overwhelming view is that this increase will affect their bottom line significantly. Since small businesses employ majority of the Australian workforce and generate a fifth of our GDP, it is vital that they are provided with sufficient support to remain profitable whilst spurring growth.”

While the Commission took into consideration the ‘27 years of strong economic growth’, Vikis questions “why such a high increase, when we are doing so well?”

Changing business practices

SMEs may initially face an overall increase in the cost of doing business due to higher wage costs and competition for manpower from the larger firms. “As I see it, SMEs will need to consider reducing costs, increasing prices, reducing staff or reducing operating hours…or a mixed approach to maintain current profitability,” he said, pointing out that today’s decision “mostly impacts the little guys, because larger businesses can afford to pay above Award rates.”

The weekly wage bill for Australian businesses could increase up to $55 million and “most SMEs won’t be charging customers 3.5 percent extra from July 1, but will need to come up with an extra $24.30 per week per employee, paid at the expense of their bottom line.”

“To afford the increases to minimum wage, many small businesses have to adjust their business models. Some businesses simply need to reduce their profit targets and take their extra payroll costs from their profits. Businesses that already operate on tight profit margins need to find money in other places.”

Eliminating jobs

In some cases, small businesses may deal with the shift by eliminating employees, says Vikis, “We hear many small business employers already reducing the number of employees to keep up the rising costs of business. What’s worse, some decide to work even harder and put in even more time themselves.”

Sit tight, you don’t need to act yet

If you pay your staff at Award level, the increase to minimum rates take effect from the first full pay period commencing on or after 1 July 2018.

Vikis advises, “If you already pay above Award rates, you may not be required to increase your employees’ wages, provided the rates you pay are above the increased minimum Award rates (and you are not required to increase employees’ wages under their contracts of employment or applicable enterprise agreement),” he said.

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