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Minimum wage set to increase by 3.75 percent but small businesses hit out

Wage Increase

The Fair Work Commission (FWC) has announced a 3.75 percent increase to the National Minimum Wage and minimum award wage, with around 2.6 million Australians in line for a pay rise.

From 1st July, the new minimum wage will be $24.10 per hour, which is up from $23.23 per hour currently. This equates to an increase of $33.06 per week, based on a 38-hour working week.

“In determining this level of increase, a primary consideration has been the cost of living pressures that modern award reliant employees, particularly those who live in low income households, continue to experience,” said FWC President Adam Hatcher.

“This is not withstanding that inflation is considerably lower than it was at the time of last year’s review.”

Hatcher said the increase to wages would have a “limited” effect on the broader economy, while noting the difference between the Australian workforce as a whole and those that rely on modern award minimum wage rates.

“They mostly work part-time hours, are predominantly women, and almost half are casual employees. They are also much more likely to be low paid,” he said.

However, Australian small businesses have raised concerns due to the ongoing challenges of the current economic climate. 

Luke Achterstraat, chief executive of the Council of Small Business Organisations Australia told Sky News Australia that the decision will ramp up the pressure.

“This has to be the toughest operating environment for small businesses in living memory,” he said.

“They are just being smashed by high costs across the board and it’s going to be very difficult for them to absorb these costs, so they will need to try to pass those on.

“Small businesses are often between a rock and a hard place. There’s only so much people are willing to pay for a cup of coffee,” he added.

“So that means small businesses are potentially looking at scaling back some of those growth plans they might have had.

“43 per cent of small businesses in Australia are not currently breaking even, and small business owners are paying themselves less than the average salary – so they’re under huge pressure at the moment.”

Reflecting these concerns, Business NSW regional director Kellon Beard said many small businesses were shocked by the decision.

“Obviously the wage increase is needed for the lower end but it also has an impact on small business, which is probably going to have to pass it on with the other increasing costs they face,” he said.

“It’s a complex problem, particularly for small businesses because of additional costs they are facing with electricity and insurance as well as people not spending much money because they don’t have it.”

What does this mean for procurement? The rise in minimum wage will spike suppliers’ wage costs, which could lead to higher price validation.

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