Minimum wage set to increase

From 1 July, Australia’s lowest-paid workers will receive a 3.5 per cent pay boost, after the Fair Work Commission (FWC) handed down its 2024–25 Annual Wage Review.

That means the National Minimum Wage will jump to $24.95 an hour, or $948 for a full-time 38-hour week – an increase of 85 cents an hour or $32.10 per week.

The Albanese Government welcomed the increase, calling it a real win for workers. But small business advocates and payroll experts say the system is out of step with the pace of the real economy – and risks piling pressure on already stretched employers.

A win for workers, say ministers

Employment Minister Amanda Rishworth said the decision would benefit up to 2.9 million workers.
“Our Government believes that workers should get ahead with an economically sustainable real wage increase,” she said.
“A real wage increase provides further relief to our lowest paid workers who continue to face cost-of-living pressures.”

Treasurer Jim Chalmers echoed the sentiment, saying the pay bump was “very welcome news for millions of workers” and proof that the economy is heading in the right direction.
“Under Labor, real wages are up, inflation is down, unemployment is low, incomes are growing and we’ve had two interest rate cuts in three months,” he said.

But small businesses say they’re footing the bill

While workers may be cheering, Council of Small Business Organisations Australia (COSBOA) CEO Luke Achterstraat didn’t mince words, warning the 3.5 per cent increase will hit small business owners hard.
“Today’s decision… will have ramifications for our small business engine room, many of whom are struggling to make a profit on already razor-thin margins,” Achterstraat said.

He pointed out that every dollar added to the award wage also triggers increases in other costs, such as payroll tax, workers’ compensation, and superannuation.
“There is a limit to how much small businesses can pass on these costs, meaning owners likely bear the brunt,” he said.

COSBOA is calling for more focus on productivity-based wage growth, and says our current IR system is “a drag on productivity”.

‘Wages aren’t waiting’ – Payroll data paints a faster picture

Ben Thompson, CEO of Employment Hero, says small businesses are already paying higher wages just to hang on to talent – and official wage-setting processes are trailing behind the reality.
“Our real-time payroll data drawn from over 2 million verified payslips and shows median wages jumped 5.9 per cent last month alone, with teenage pay skyrocketing by 13.4 per cent,” said Thompson.

“Fair Work is setting wages based on outdated conditions, while small businesses are already absorbing pay hikes just to compete for talent. It’s no wonder SMEs feel abandoned, they’re flying blind, forced to navigate inflation with a broken compass.”

Financial counsellors say boost will help workers doing it tough

Peter Gartlan, co-CEO of Financial Counselling Australia, welcomed the increase, saying many of the country’s lowest-paid workers are struggling to meet basic expenses.
“This increase to the minimum wage is an important step in helping those who are struggling financially to make ends meet,” he said.

He noted that the National Debt Helpline has received more than 71,000 enquiries so far in 2024 – the highest since 2019.

What does this mean for your business?

If you’re a small business owner, this wage bump means now’s the time to crunch those numbers and check your payroll. With award wages rising 3.5 per cent, your employment costs are set to increase, and it’s not just wages. Superannuation is also rising from 1 July, along with potential hikes to payroll tax and workers’ comp costs. If you haven’t already, now’s a good time to chat to your bookkeeper or accountant to prepare. Analyse your rosters, review pricing, and look for other ways to absorb the increased labour costs without taking a hit to your bottom line.

And while it might feel like just one more thing in the cost-of-living squeeze, it’s also a chance to look at the big picture: how your team’s pay and productivity are tracking, and what you can do to retain great talent in a competitive market.

This post first appeared on Business Builders. You can read it here.