Award rate hike increases pressure on small-business owners

Small business payment times

Yesterday’s ruling by the Fair Work Commission to legislate a 3.75 per cent increase to the award rates of over 100 industries will put more pressure on small-business business owners, according to The Council of Small Business Organisations Australia (COSBOA) who pointed out that the country’s 2.5 million small businesses are already weathering the “prefect storm” of rising interest rates, inflation and cost-of-living alongside falling productivity, making it ever harder for them to offer “rewarding and well-remunerated jobs” to Australians.

“The levy has broken for many small businesses with rising energy, rent, insurance and borrowing costs,” COSBOA CEO, Luke Achterstraat, said. “This increase of 3.75 per cent to wage costs when annual productivity is at 1.2 per cent does not add up or bode well for jobs.

“The figure comes on top of the 5.75 per cent legislated last year – which was the highest in a decade – plus an impending increase in the superannuation guarantee, and an increase in the Temporary Skilled Migration Income Threshold (TSMIT) of almost 40 per cent from just over 12 months ago,” he added.

Achterstraat highlighted the fact that employment costs also included superannuation, workers compensation and payroll tax.

“A $50 increase in wages means a $59 increase in total costs for small businesses,” Achterstraat said. “Owners will be forced to pass on these costs which means higher prices and inflation. And, where they are unable to do so, they face the insidious decision of reassessing staff levels and possible job losses.

“Particularly in labour-intensive industries like hospitality, retail and services, labour costs can represent almost half of the overall operating costs,” Achterstraat added. “Small-business owners are struggling, with 43 per cent currently not breaking even. Owners are paying themselves less than the average salary and working longer than the median to keep the lights on.

“ASIC’s Insolvency Statistics published last week show the horrid figure of business insolvencies in NSW now up 61 per cent from this time last year,” Achterstraat added. “We urgently need better policies that promote productivity and innovation to ensure strong wage growth is sustainable. Failure to do so will only push more small businesses to the wall.”