How Your Business Can Manage The Minimum Wage Increase

July 18th, 2021

What does the minimum wage increase mean for your business and how can you survive it?

From 1 July 2021, the minimum wage has increased by 2.5%, up to $20.33 per hour or $772.60 per week for full-time employees. While this is a welcomed pay rise for those on the minimum wage, many businesses that have struggled through Australia’s recession, the uncertainty surrounding COVID-19 lockdowns and everchanging restrictions, are wondering where the extra cash is going to come from. 

The Fair Work Ombudsman has said that the increase is "... modest, fair and non-disruptive." However, it is having a significant impact on some small businesses already struggling to stay afloat. The minimum wage increase comes straight from a business's profit margin.

When profit margins are already low, what can a small business do to survive the pay increase for their employees?

Pass price increase on to customers

Anyone earning the national minimum wage is now getting an extra 2.5% in their paycheque, so theoretically, if you were to increase your prices by 2.5%, your customers should still be able to afford your new price.

The issue with increasing your price is that you could lose your competitive edge against other businesses in your field. If your prices are suddenly higher than your competitors, your customers could go elsewhere; if your competitors didn't raise their price, their revenue might now increase because they'll gain your customers too.

Reduce Prices

The minimum wage increase could be an opportunity for you to reassess your pricing. Reducing your prices rather than passing on the price increase may seem counterintuitive. Still, a price reduction could significantly increase demand for your goods or service if you operate in a highly competitive industry. Of course, then you would need to find ways to achieve economies of scale — this is where your costs are reduced because they’re spread over an increase in output. 


depending on your employees’ roles, you could outsource tasks. Outsourcing is cost-effective and can be beneficial for a few reasons depending on the industry.

While your employees' might be great at what they do, outsourcing particular tasks can significantly improve efficiency and business processes by easily accessing experts who specialise in the job you're paying them to complete. In addition to their professional expertise, when outsourcing, you don't need to worry about payroll, superannuation and tax — you simply pay the invoice when it's issued to you.

Imagine you're a small business. Your core team is amazing, but there's one thing they just can't supply or provide in the same way other companies can. By outsourcing that particular task with a company who are experts in said field, you could either potentially massively increase your profit if the outsource company were cheaper than your employees, or increase efficiency by having your employees focus on tasks that they excel in; both of these outcomes have the potential to increase your profit margin.

Invest in software and equipment to make processes more efficient

Automation and machines don't exist to put real people out of work, they exist to make operations smoother, faster and more accurate so humans can use their power in more effective ways. Investing in leading-edge technology and machinery can significantly increase your output which ultimately increases your profit margin.

While high-end machinery that completes many of the tasks your employees do could save you millions, you don't need to think (or spend) too big to get a great return on your investment. Something as simple as purchasing a forklift could reduce the people-power necessary for certain tasks. While you might've needed five people to complete a job without a forklift, purchasing machinery could mean the same task can be achieved with just one person — giving the other four people the opportunity to complete other tasks.


Ideas for software and equipment to increase efficiency and output include:

  • Customer relationship management software. Keep your customer details and notes in an easy to access database. Some software can even automate your customer engagement process, so if they need to be contacted to make an appointment, your software can manage this process for you.

  • The right tools for the job. You may need to be creative with this one depending on your industry. If there is a physically repetitive task that your staff undertake on a daily basis, chances are there is a tool that can make their task quicker and easier.

Reduce staff members

While cutting staff is never something a business wants to do, sometimes it just has to be done. Consider you're a business owner with 20 employees, each earning $19.83 an hour. That's over $783,000 a year in full-time wages. With the wage increase, those 20 employees will now cost you over $803,000 a year. That's an extra $20,000 a year — without taking into account the increase in the employer superannuation guarantee! By reducing your staff by just one, you'd reduce your yearly wage expense down to $763,000, which is $20,000 less than it was before the pay rise.

We understand that it's hard to make a business decision to lay employees off once they've become a part of your business's family. Hopefully, you've found our other tips helpful so you can increase your profit margin while still keeping all of your employees!

Business cash flow solution

If you find the minimum wage increase is causing issues for your cash flow and working capital, a line of credit backed by your customers’ outstanding invoices can help. While this isn't a long-term solution for the impact the pay increase may have on your profit margin, it allows you to have cash available for when staff wages are due, or you need to order more stock and equipment.

Unpaid invoices can cause significant cash flow issues. Invoice finance helps to smooth out uneven cash flow.

While a 2.5% pay increase may not sound like much, for businesses that are already struggling through our current economic climate, this pay rise could be the final straw. With careful business planning and utilising various forms of business finance, we’re confident that you and your business can embrace innovation and forge your way to success. 

If you'd like to learn more about invoice finance or equipment finance with Earlypay, please call our friendly team on 1300 760 205 or contact your broker or BDM.


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If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].