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What the 3% increase to minimum wage means for Australian business owners

3% Award wage increase

Workers and business owners alike held their breath during the last week of May as they waited for news on the Fair Work Commission’s (FWC) annual wage review.

With the Australian Council of Trade Unions (ACTU) calling for a 6% rise and the Australian Chamber of Commerce and Industry (ACCI) arguing to keep the increase at around 1.8%, the FWC handing down a moderate 3% increase seems to indicate that they have tried to balance the interests of workers with those who own and run businesses.

Slowed economic times a factor in the decision

There’s no denying that many Australian businesses are experiencing slower growth and rising costs – particularly in terms of energy bills.

While even a 3% increase (especially one that represents the third set well above inflation rates) will have an impact on some vulnerable small businesses, the FWC has been under pressure to weigh up business interests with those of the wider economy.

During a parliamentary committee back in February of this year, Reserve Bank governor, Phillip Lowe warned that leaving workers with less available cash to spend could put the brakes on consumer spending.

In handing down the decision, FWC president, Iain Ross, stated that he believed the increase would “not lead to any adverse inflationary outcome and nor will it have any measurable negative impact on employment.”


 ‘Must know’ stats and facts about the wage increase

  • A 3% increase will take the national minimum wage up to $740.80 per week (or $19.49 per hour). This is, incidentally, the highest minimum hourly rate in the world
  • This amounts to an increase of around $21.60 per week (for a full-time worker)
  • It applies to workers whose pay is set by the national minimum wage or a modern award (or, in some cases, a registered agreement). You can find a list of the affected awards on the Fair Work Ombudsman website or use the FWC’s Find My Award tool
  • The increase will take effect on or after July 1, 2019


Are there any actions you need to take right now?

The Fair Work Commission has advised that updating the pay tools with the new rates will take around 3-4 weeks. You won’t have to make any changes until they send out notification via email that the new tools are ready.


How business owners might manage the impacts

How much you are impacted by the decision will depend on what industry award your staff are employed under. If you already pay above award rates, then you may not have to make any pay increases (provided that the rate you pay is above the new award minimum).

If you do have to absorb a wage increase, these extra costs can only really be managed by:

  • reducing costs in other areas of the business
  • reducing staff hours
  • reducing operating hours
  • increasing prices
  • streamlining your products or services to only the most profitable offerings
  • adjusting profit targets

or, of course, a mix of ‘all of the above’. You may wish to consider seeking professional advice about how you can optimise your budget to prepare for wage (and any other cost) increases in your business.


And exhale…

If you have been holding breath for this FWC wage increase decision, then at least the wait is over. Now, you can start preparing your business for the coming 2019-2020 financial year. The fact is, business costs are always rising and are all too often beyond your control. What you can do is be proactive in making any necessary adjustments to your expenses and refocusing your efforts on serving your customers – because there’s truly no better strategy for growing your business.

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