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Minimum Wage Increase: How Can I Reduce Costs?

Published February 12, 2020 (last updated December 2, 2020) -
Employer Calculating And Reducing Business Cost

New Zealand’s adult minimum wage will rise by $1.20, effective from 1 April 2020 taking the new hourly rate to $18.90. At the same time, the starting-out and training minimum wages will rise to $15.12 per hour, or 80% of the adult minimum wage.

Earlier last year, the government confirmed that they will continue with their plan to reach a $20 per hour minimum wage by 2021 – something that may change depending on the result of the election.

With these changes, many businesses may find they are in a position where they need to reconsider their finances. The direct impact of needing to increase rates for employees who receive base minimum wage payments is no doubt likely to cause a nationwide affect as it forces businesses to be compliant with a new set of pay rules.

The minimum wage increase will have an administrative and financial impact on the bottom line, as it does every year. However, businesses shouldn’t see the change as the time to consider reducing staff numbers or increase product costs.

While mandated wage increases are a challenge for any business to implement – with every challenge there’s an opportunity to improve financial health. Being creative with cost savings and identifying new efficiencies can help your business manage the annual minimum wage increases.

Let’s look at some simple strategies to help reduce costs in the face of growing wages:

1. Comply

By law businesses must comply with the new national minimum wage rates. The cost of non-compliance can be more severe than the cost of implementing the minimum wage increase, with the potential for underpayment claims, penalties for non-compliance and reputational threat arising from breaches being publicised.

Recently there have been high profile cases of companies who have faced a massive cost as a result of not complying. As they say, prevention is the best cure. Making sure you’re compliant from the outset could save you a hefty bill later on. The importance of compliance can’t be overstated.

2. Time Is Money

To help to ease the financial burden that a minimum wage increase can bring, consider the other obligations related to workplace entitlements.

For instance, you may reduce overtime rates payable by ensuring you maximise the efficiency of any rostering where you aren’t required to provide overtime.

Some practicable options are to reduce after hours team meetings, opening and closing the business yourself, or considering how to order work tasks to increase efficiency during normal working hours.

3. Energy Saving

Energy and electricity cost New Zealand businesses $800 million a year. According to NABERSNZ, an independent tool that rates energy efficiency of office buildings, average building energy efficiency could be improved by 20-25%.

Consider an energy efficiency tool, otherwise corners are easy to cut when it comes to heating and cooling a workplace. There are obvious tricks, like increasing airflow into your office or place of work instead of turning on a fan or the air-conditioning.

Installing double-pane windows or ensuring resealing around doors, windows and air vents may be costly, however if you do choose to install these, the energy efficiency brought to your workplace will save you in the long-run.

Turning off machinery and equipment when not in use and ensuring light switches are turned off when exiting an unoccupied room, are further cost saving measures.

High energy prices have been on the national agenda for some time and the burden they present to small business owners is very real. It is also worth keeping an eye out for new programs and initiatives that will help you ease the pressure of energy prices.

4. Free Software & Digitisation Of Work

There’s a lot of free software and apps that businesses can use to improve their efficiency. Google Docs is a popular example of free office software.

Free software has a clear benefit but introducing software as a tool for all staff to use can also vastly increase collaboration, automisation of work and streamline communication channels.

Strategising and organising software used can also further help increase productivity. If a small business takes time to train staff on how to use relevant software programs this can create buy-in and confidence in the utilisation of such technology.

5. Upskill and Train Staff

Money isn’t the only means of compensating, recognising and rewarding staff. Employers can incentivise and demonstrate the value in their employees through further training, career development opportunities or even flexible work arrangements.

The development of an employee’s skills and knowledge, through improved training and attention to career development will not only enhance their own future career growth but it will also contribute to the growth of your business. Enabling an employee to further explore an aspect of their employment that they are passionate about enhances productivity and motivation to learn and develop useful skills. The skills an individual develops at any given position of employment are invaluable and enhances job satisfaction, leading to greater staff retention. Giving staff opportunities to develop their abilities can be an investment in your workforce and your business, without necessarily having to spend more money.

If you need help understanding the changes to the adult, starting-out and training minimum wages, feel free to contact Employsure.

About Employsure

Employsure is one of New Zealand’s largest workplace relations advisers to small and medium businesses, with over 5,500 clients. We take the complexity out of workplace legislation to help small business employers protect their business and their people.

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