As a result of bill 148, key changes to the Ontario Labour Code that have potential to affect small businesses, went into effect on Jan. 1st 2018. You can get more details on these changes from our previous blog post from November 2017.There have been sharply opposing views, particularly to the minimum wage increase, with some business owners saying that the increase in costs are forcing them to make “difficult choices”, including reducing hours, eliminating worker benefits or cutting jobs and that it leaves them little choice but to raise prices to the consumer. Some businesses are even considering whether they can afford to keep their doors open.The government, worker advocate groups and unions on the other hand, say that the legislation will protect vulnerable employees, boost spending power for those who earn minimum wage, and that business owners are too focused on how the new legislation hurts them, and not enough on the benefits. Many economists support the government move, pointing to studies that show that hiking the minimum wage boosts economic activity and increases people’s purchasing power. The general thought among this camp is that “when people have some additional income/money, they go and spend it in their communities, boosting businesses and the economy". Some employers also support the changes with opinions like: "If our staff are part of the working poor, how can we expect them to be fully engaged?, especially if they’re thinking about how they're going to pay bills and put food on the table….". It seems the general feeling, is that the changes will cost businesses in the short-term and require some adjusting, but there are greater long-term benefits overall.For small business owners, some key thoughts and strategies for consideration are:
- A knee jerk reaction to the increased minimum wage, by cutting benefits, hours or perks, may result in employees gravitating to forming unions, which has been made significantly easier by the very same changes to legislation under bill 148. Card-based certification is now also extended to temporary workers, making it easier for them to unionize as well.
- The province announced in its fall economic update on November 14th 2017, that it will cut the corporate tax rate for small businesses from 4.5 per cent to 3.5 per cent effective Jan. 1, 2018, the same day the province will increase its minimum wage from $11.60 to $14.
- The government also announced that it will spend $124 million over three years to help companies with fewer than 100 employees who hire youths aged 15 to 29. The government will pay incentives of $1,000 for each worker hired and another $1,000 for each worker retained for at least six months by a small business. See if your business qualifies for this.
- Communicate changes clearly. Compensation sends a value message to employees, so it goes without saying that any changes to compensation can affect employee morale and thus, needs to be communicated clearly and early on, include consistent messaging, personal interaction and the opportunity for employees to ask questions. This should happen before rumours can skew expectations and impact morale.
- Employees who are engaged in their jobs and feel empowered by their responsibilities will be more willing and able to help your small business embrace any challenges ahead. They’re also likely to stay in their jobs longer, thus reducing overall costs associated with turnover and hiring new staff. Some employees may be motivated by friendly internal competitions between departments to see who can improve productivity the most.
- Determine and evaluate the true scope of the impact, keeping in mind that the minimum wage is scheduled to change again, to $15 per hour on Jan 1st 2019, so whatever changes you decide to make should take this into consideration. Depending on your business, if you only have a few employees earning less than $15 per hour, it may not be a huge burden to simply increase those salaries. But if you have many employees and your salaries are spread from minimum wage upwards, you need to consider the overall compensation compression issue created by the wage increase, and a holistic review of the company's compensation policy may be necessary – particularly if the bulk of your employees are paid hourly, or earning an annual salary of around $30K to $40K.
- Remember that a solid compensation plan ensures that employees are paid fairly, based on the role's market value and its worth to the organization. Conduct a compensation audit. Surprisingly many owners are not actually aware of the specifics of individual jobs or contract entitlements, and it's important to make sure you have all the facts before making the necessary changes. Now is the time to review all positions and contracts to determine pay scale, current vacation allowances and job responsibilities.
- It is also a good idea to dust off that old business plan and update it, or put one together if you’ve never done so before. Find out what the financial realities of a rising minimum wage mean to your small business and review overall spending. Are there any inefficiencies or “overhead” items in your monthly spending that can be eliminated or reduced? Can you cut inventory costs or lower warehousing costs? etc.
- Consider how much you can offset the impact by increasing your prices, while being careful not to diminish demand and lose customers.
- Can you invest in technologies leading to more automation of processes or monitor hours more closely and cut waste from your salary expenditure? Is it possible to have staff play multiple roles, as this is also a great reason to invest in technology. Automation is a fast-growing industry overall, and can certainly be one way to distribute tasks, lower workload and create a more efficient environment and workforce.
- Review your staffing levels. Is it possible to put a cap on total hours for each pay period, or trim certain shifts in length? Can staff can more efficient and effective, thus reducing unnecessary labor hours. Can you reduce operating hours during slow periods?
- Look for ways to increase productivity. Ensure and be doubly sure that employees are making the most of their time. Review your processes, looking for ways to streamline operations and remove inefficiencies from their workflow. Create daily schedules of responsibilities so your team is kept busy, rather than them waiting around to receive direction.
- Aim to increase sales and revenue and boost your sales figures. Whether its via professional help to develop a marketing strategy, or brainstorming together with your staff, there’s never a bad time to work on growing sales.
- Be willing to embrace any idea that might generate more business and thus more revenue.
Engage and empower your employees by being upfront with your staff about the financial pressures you’ll face as a result of overall wage increases, and ask for their input in ways they can contribute more in return for the improved compensation. Some may surprise you with skills and abilities they haven’t shown before.