Labour is often the most significant cost to small businesses who employ staff and should be reviewed regularly.
With impending changes to minimum wage rates business owners should be reviewing and planning for their labour costs as a critical part of their regular business planning cycle.
It’s easy to see a minimum wage increase as just an extra cost on your business – but if you tap into the six insights below you can not only survive the wage increase, but thrive.
Rather than assuming the worst, what do the minimum wage increases actually mean for your business?
Forecast out to at least the next financial year, or ideally the next three years if possible, to factor in all minimum wage increases up until 2021.
This will give you a full view of what you’re working towards and a starting point for building a plan to absorb the rising costs.
Pro tip: start simply with an excel spreadsheet or template if you’re happy to do it yourself. Otherwise, your financial advisor or accountant can help you get started.
What work patterns does your business need to operate efficiently? How does this match your employee’s hours? Are there peaks where you could look to reschedule staff hours and troughs where you could look to close the doors to save on payroll costs?
Is there any unused productivity that you haven’t been tracking or periods of excess capacity where you could redeploy people to other or new revenue-generating activities?
Pro tip: any changes to employment terms need to be captured and signed by both you and your employee in written form. See MBIE’s online Employee Agreement Builder for more help.
Are you using software automation to free up time spent on dumb, manual or unproductive processes?
Today’s range of online software solutions keep costs low with monthly subscription fees and automate various administrative tasks like bank feed reconciliation, debtor management, business record keeping, employee time sheets, leave requests and payslips for example.
Use the time you save to focus on planning, monitoring and coaching your team. Plus, get the most out of your people by clearing the runway of administrative tasks and ensure everyone is focused on the right revenue generating activities.
Pro tip: try MYOB’s online accounting and payroll solutions
Take a good hard look at all significant costs over the last couple of years.
What expenses can you reduce or cut out altogether? When did you last review the list of suppliers? Can you renegotiate prices with ones that you use frequently?
Can you consolidate those that provide similar raw materials/services to create efficiencies and drive cost savings in terms of administration, freight etc?
Pro tip: This is the perfect conversation to pickup with your financial advisor, who will be able to look at trends in your business data to identify where you can make savings.
When did you last review the prices of your goods or services? Can you afford to increase any prices while remaining competitive? Do you know which product lines or services are more profitable, and why?
Is your team focused on selling or servicing these as a priority and can you throw any extra resource at it? Are there any new markets you can start selling these into?
Pro tip: spend some time getting familiar with the reports available in your accounting software. Speak to your financial advisor or accountant to explain what you’re trying to achieve.
Businesses manage change in different ways and you need to deal with this in a way that works for yours. As the boss, it can feel isolating going it alone, especially you feel like job cuts are your only option in the face of rising compliance costs, but it doesn’t have to be.
The key is understanding your business position from working the steps above.
Once you know this, you can decide to reach out to your financial advisor, business mentor or even rally the troops to explain the compliance changes and potential impact.
Being transparent about change can help to reduce the fear of the unknown and dispel gossip. It can even help gain buy-in if you choose to share possible scenario’s, or those with trade-offs, to pressure-test their practicality, feasibility or seek feedback.
Good people leaders make their employees feel safe through good and bad. And good people strategies not only weather compliance changes, but help reduce resistance to change by getting your teams behind the business approach.