Business Owners Under Pressure over 5.2% Wage Rise and 10.5% Super

by Vanessa Lovie 17th of June, 2022

Business Owners Under Pressure over 5.2% Wage Rise and 10.5% Super

It feels like business owners just went through a pandemic that forced many to close for months on end. Whilst support was available, it didn't always match the loss of income. The stress of Covid-19 restrictions was felt by many businesses who are still trying to recover and repay debts.

On July 1, 2022 businesses will be hit with two potential government-enforced increases with a 5.2% increase to the minimum wage and superannuation increasing to 10.5%. Both together, and with little warning for business owners to prepare.

In the height of Covid restrictions in 2020 the business for sale marketplace stalled as business owners were hesitant to sell their businesses as they might not obtain a fair price, there were buyers but not much stock. The last 2 years business brokers have been negotiating deals that ensure the buyer and seller are better protected during the process, in case another lockdown occured. There were some very effective strategies put in place. What will happen if the costs of small businesses continue to mount?

One of the key messages coming off the back of COVID-19 was the ‘need to pivot and innovate’. Whilst some businesses were able to do this, many traditional businesses were unable to, and are still feeling the pressure and trying to recover. More pressure has now been added by the Government.

Business owners were starting to see a turn in 2022, lockdowns had ended and the biggest struggle was getting employees, which has now become a matter of urgency.

“Staff shortages continue to be the number one issue faced by small businesses. It’s holding them back from operating at their full capacity and bringing in the revenue they need to grow and pay higher wages. We need to address this issue as a matter of urgency.” Alexi Boyd, COSBOA CEO

The Lack of Sympathy for Business Owners

The 5.2% minimum wage increase and a superannuation increase to 10.5% from 1 July 2022 are hitting business owners hard. They are questioning what they will do now, with another added pressure. One business owner shared his experience and received a lot of media attention and mixed responses.

“While we accept the increase in the minimum wage obviously for our team and others to keep up with the cost of living pressures, we as a business cannot afford it,” Phillip Salhab, who owns the Appetite Cafe in Five Dock told Sky News

The sentiment shared on social media has been somewhat confronting. It seems people have forgotten about small businesses and what it takes for them to be successful and keep our economy moving.

“A business owner's greatest assets are their workers. If you can’t pay them $1 per hour extra then perhaps rethink your business model. Workers have done it tough for a decade !!” facebook user

“If you can’t pay for the workers you need, then your business isn’t working. The only sympathy I have is the push back from customers when prices rise….” facebook user

“If you can't pay your employees a living wage, don't open a business. It's that simple.” facebook user

Australia used to celebrate the small business, we were a nation proud of its fruit shop owners, local corner stores, cafes, takeaways, couriers and so on. We grew up in families where we knew someone who owned a business and we were proud of that. What is happening?

The minimum wage has gone up $40 a week which sounds good for employees, but the business owner who has multiple staff, long hours, the expense added to his business could be enough to close it. The pressure will be to increase prices, which will either drive customers away or be impossible due to contracts. It's a melting pot and business owners will continue to struggle.

What's worse, business owners were given 2 weeks' notice, with rises starting 1 July 2022.

business isnt working wage increase

Costs are Increasing Everywhere

With many professional and industry experts sharing their concerns.

“The cost increase will be difficult to absorb for businesses that are already struggling to cope with big increases in material and energy costs, interest rate rises, supply chain disruptions and labour shortages.” Innes Willox, CEO of the Australian Industry Group spoke to SMH.

The pressure on business owners is getting intense, in the last two months we have seen

Increase cost of fuel
Increase costs of produce
Shortage of workers
Increased electricity costs
Increased cost of transport
Increased building materials
Delays on new vehicles

.. and now

Increased minimum wage
Increased superannuation

All of this is off the back of a pandemic that forced many businesses to close for months on end. Businesses need time to recover.

Australia’s minimum award wage compared to other countries has always been one of the highest wages in the world. This is something we should have celebrated and not used as a driver to continue to increase.

“Australia has been in the top three countries for the highest minimum wages globally since at least 1985, when the current OECD Australian data series commenced.” AI Group.

Sign up to Newsletter

Weekly updates on business sales and advice, delivered to your inbox.

What is happening to the Backbone of the Australian Economy?

Small business has long been known as the backbone of the Australian economy as was recently reiterated by Bruce Bilson’s presentation at SmallBiz Week:

“Small businesses truly are the backbone of the Australian economy, representing more than 95 per cent of all businesses, employing around 45 per cent of all Australians, and accounting for approximately 35 per cent of our economic output.”

With mounting pressures, increased costs, and harsh online critics, how will business owners continue to cope with these pressures? How will the business for sale market fair? What measures will need to be put in place to deal with these rising costs and the change in the profitability of companies? Will owners be able to sell a business with mounting costs? These are questions that will unfold in the coming months.

In these times, I ask people to remember the business owners who work 60 hours a week to keep their businesses running, who constantly work to pivot and move with the changing environments, who are being hit with 2 government-enforced increases on July 1, 2022. The pressure is mounting, and support is needed or we may see a lot of businesses just closing their doors.

Australia needs small businesses, 45% of our population are employed by small businesses. It is our history, and it is our future.

Need help? Beyond Blue has a new assistance program, specifically for business owners.

Tags: business owner small business