Labour Government has put in place the promised minimum wage increase.
The revised minimum wage is $17.70 per hour – a further increase of $1.20 per hour following the April 2018 increase.
This is an increase for employers of just under $50 per week per full-time minimum wage employee, with a promised next tier increase to $20 per hour in 2021, inevitably triggering further wage increases as the gap closes between minimum wage and higher wages.
This is a significant HR challenge for employers in a sluggish post-recession economy.
So what is the true impact of this on employers?
The cost of wages is one of the most significant regular employer outgoings, and while we advocate that the cost of paying people to create value in your business is a resource cost more than an operational outgoing, it is nonetheless an unavoidable and increasingly significant regular outgoing.
In order to not reduce bottom-line business result, focus must be placed on employee productivity, while operational efficiency measures become increasingly important.
This aspect of HR Management requires expert strategic input.
Employers have only one real option when meeting an increased cost of this nature –reengineer key business strategies, including consideration of workforce management strategies and lean strategies.
In service industries such as hospitality – where there is no direct productivity measure per employee, the most likely outcome is a reduced headcount and thus potentially a reduced level of service or introduction of customer self-service (as seen increasingly in supermarket chains) or an increasing presence of AI services – as seen in airports over the last few years – thus re-engineering the consumer’s experience and expectation, and of course, driving a potential increase in unemployment.
Where minimum wage earners are one to one with customers and head counts cannot be decreased, the inevitable outcome is inflation. Prices will increase and the spiral of inflation will accelerate, but with a reduced overall workforce.
Either way, the separation of brands based on low contact and high-value service level will increase.
The longer term ramifications for employers of continuing wage increases for minimum wage earners will inevitably be one of the most challenging strategic management initiatives – and one of the most impactful on the future economy. Business owners need to consider their future strategy and implement it over the coming years.
The ConsultingHQ team is often involved in strategic HR initiatives such as these and are very happy to consult with business owners in considering future options in workforce management and strategic business management for long term growth and profitability. Please contact us if you would like to discuss this further.