By Jon Sutton (pictured), Chief Govt Officer at ScotPac Enterprise Finance
Wages progress of 4.2% in 2023 was the biggest annual improve in Australia in 15 years. It is usually the primary factor that retains SME homeowners awake at night time. However there are answers SMEs can undertake when confronted with document wage hikes, together with working capital options for companies of all sizes.
In late-2023, greater than 60% of respondents to ScotPac’s SME Development Index Report listed wages progress as their main price concern. Unsurprisingly, the determine was highest in NSW (67%) the place price of dwelling pressures are felt extra acutely within the nation’s most costly housing market.
Steep rise in wage and award charges
From 1 July 2023, wage pressures for employers multiplied because the Truthful Work Fee elevated nationwide minimal wage charges by 8.65% to $23.23 per hour. Award charges additionally jumped by 5.75%. That equated to larger charges of pay for round three million Australian employees, a lot of whom are employed in SMEs, and contributed to our largest wages progress figures in 15 years.
Whereas the Fee’s ruling was celebrated by unions and worker advocates as a sound response to rising inflation, it posed a giant problem for SMEs already coping with elevated prices on a variety of fronts. Insights supplied to ScotPac by SME homeowners and operators demonstrated the wage hikes have had a big affect on their angle and intentions in the case of employment. Most notably:
- 69% deliberate to cut back their consumption of recent workers
- 64% deliberate to cut back worker numbers and / or hours
- 33% stated wage will increase had been negatively impacting their progress prospects
- 17% stated they’d improve reliance on contractors somewhat than workers.
On the excessive finish, 4% of SME homeowners stated wage pressures had ‘pushed them over the sting’, to the purpose of contemplating closure.
Nationwide employment image
Some SMEs have managed to take care of worker ranges by absorbing rising prices or charging extra for items and companies. Nevertheless, nationwide employment numbers are clearly beginning to soften according to the sentiment above. Australia’s unemployment fee ticked above 4 per cent in January 2024 for the primary time in two years. Whereas that determine stays low in historic phrases, a deeper dive into the info raises some pink flags.
The variety of unemployed folks in January rose by 22,300 to greater than 600,000, a 15% improve 12 months on 12 months. The underemployment fee – those that are employed however want to work extra – edged as much as 6.6% of our complete workforce. And the overall variety of hours labored by folks in our labour market in January was down by 50 million hours from December.
Sustainable payroll methods
Ensuring ample funds can be found to pay wages and different payroll commitments might be time-consuming and worrying for SME homeowners, notably with new award frameworks to implement. Slicing worker numbers or hours may seem like a simple repair, however it will not be the very best resolution for your online business. Fortuitously, even in a local weather of document wage rises, there are methods accessible to SMEs who need to keep and even develop their worker base. So earlier than making main adjustments to staffing constructions, listed here are 5 choices for SMEs to think about.
- Increase working capital
Regardless of a threefold rise in non-bank enterprise lending prior to now 5 years, many SME homeowners stay unaware of the vary of finance choices accessible to help them. ScotPac has been customising enterprise finance options to assist SMEs optimise their cashflow and meet payroll necessities for greater than 35 years. Bill finance, for instance, is a robust working capital instrument that may successfully synchronise bill fee occasions with worker fee obligations. SME ought to ask their dealer for extra info on payroll help choices.
- Embracing Know-how and Automation
Automation and know-how options – together with AI know-how – might be highly effective instruments for SMEs trying to handle rising wage prices. Implementing technology-driven processes can streamline operations, cut back guide labor necessities, and improve general effectivity. Whereas the preliminary funding could look daunting in some circumstances, the long-term advantages by way of price financial savings and elevated productiveness can far outweigh the upfront prices.
- Versatile Work Preparations
Staff more and more worth office flexibility. Providing a trade-off of distant work choices or versatile schedules could be a strategic means for SMEs to draw and retain expertise with out growing wages. This method could not solely fulfill worker expectations, however it additionally creates alternatives for SMEs to faucet right into a broader, borderless expertise pool.
- Bonuses and incentives
Steep will increase in base salaries will not be sustainable for lots of SMEs. Nonetheless, some workers could also be open to various compensation methods that reward outcomes. Efficiency-based bonuses, profit-sharing packages, and different incentives which might be tied to particular person or staff achievements can appeal to prime expertise who’re ready to again their capacity. So long as workers really feel supported, this method aligns their pursuits with the corporate’s success, making a win-win state of affairs.
- Worker Engagement
Clear and proactive communication with workers is important in occasions of change. They will’t be anticipated to grasp the rationale for adjustments within the identify of monetary administration in the event that they haven’t any context. Strive speaking together with your workers concerning the challenges you might be juggling as a small to medium enterprise proprietor. This can assist to foster a way of collective accountability and improve worker loyalty.
Abstract
Australian SMEs are well-known for his or her resilience. Nevertheless, when they’re known as on to shoulder the burden of document wage will increase, homeowners will understandably evaluation their staffing construction. By taking a holistic method that considers workforce, know-how and finance wants and choices, SMEs have the very best probability of adapting and thriving in occasions of quickly rising wages. ScotPac’s skilled lending specialists have been offering SMEs with payroll options since 1988. Speak to us immediately about how we are able to help your online business.
