Inflation, Minimum Wage and Strategic HR

We recently discussed inflation in our blog, noting leading economists were predicting an underlying inflation rate of 4.25% for the past year – a figure much higher than what Australia (and the world) has gotten used to. Shockingly, the underlying rate came out at 5.1% – so what does this actually mean for your business and the broader economic conditions?

As with all economics, there is likely not a black and white answer and its effects on economic conditions, so this remains to be seen. What we do know however is:

• Inflation will place upwards pressures on minimum/Award wages.  
• Inflation will give unions/employee associations ammunition to persuade the FWC (Fair Work Commission) to pass a wage increase at least matching inflation.
• This is occurring in addition to a legislated 0.5% increase to Superannuation Contributions from employers effective 01 July 2022.
• A tight recruitment market is driving up employees’ expectations and leaving old attitudes/methods of increasing pay behind (whether this is sustainable is yet to be seen).

Whilst some businesses will be able to absorb the cost of higher wages (larger businesses generally are better equipped to manage this impact), there is no doubt that small businesses in various industries will struggle. Not only this, the impact on cash flow, payroll tax and revenue (through increased/decreased sales or increased cost of supplies) will be extensive. In essence, it will apply a lot of pressure on an economy that is showing signs of uncertainty. As a result, wattsnext is here to provide some helpful tips/guidance on ways SMEs can better control wage costs whilst increasing productivity.  

So, what can SMEs do to manage wage pressures and promote productivity?

Correctly utilising a HR function can be instrumental in increasing awareness of wage costs and developing plans to better prepare for future uncertainty. To best support SMEs, wattsnext will be doing a regular blog update until the Minimum Wage increase is announced in late June 2022. Key topics for this mini-series will be as follows:

• 01 June 2022 – Strategic Workforce Planning & Culture
• 08 June 2022 – Culture, Retention and Return on Investment
• 15 June 2022 – People Managers, Technology and Upskilling 
• 29 June 2022 – Minimum Entitlements, Wages and Risks

If any of our clients or SMEs out there would love some specific insight or advice on these areas, reach out to the team at wattsnext otherwise – stay tuned!