Bullfrog Insurance | 5 ways to prepare for Ontario’s minimum wage increase
Under Bill 47, the minimum wage will no longer increase to $15/hour on January 1, 2019. Instead, the minimum wage will be held at $14/hour until 2020, at which point it will rise on an ongoing basis with inflation.
The revised legislation is in response to pushback from business owners who argued many of the changes were too costly, forcing them to raise prices and terminate staff. The new legislation stands to remove “the worst burdens that prevent Ontario businesses from creating jobs while expanding opportunities for workers.”
Earlier in 2018, minimum wage had already seen a 20 percent increase in Ontario, from $11.60 to $14 per hour. And this change isn’t confined to Ontario, either. Alberta’s minimum wage is proposed to hit $15/hour in 2021, Ontario will follow suit with another hike by October 2020, and B.C. is currently working out its timeframe to do the same.
However, with this news coming to light, business owners have time and — a real opportunity — to prepare and embrace the sweeping labour reform changes happening across Canada.
While some business owners may respond by cutting back hours, breaks or benefits; there’s also an opportunity to approach the wage increase more strategically and for the greater good of all.
Include processes and procedures around compensation
From a business perspective, paying your people more can result in a higher-engaged employee who’s able to focus more on doing their job and less on their inability to pay basic living bills.
On the other hand, it can negatively affect the morale and motivation of seasoned employees who were already making more than minimum wage before the legislation took effect. This would mean that those employees don’t benefit from the same pay increase.
Something for you to keep in mind as a business owner is how you’ll plan to address both of these potential employee situations.
Start formulating and working with your team to develop processes and procedures for incorporating scorecards into performance reviews, outlines to make salary increase requests, and regular manager meetings to update staff on progress and business objective success throughout the year.
Processes and procedures help to ensure fairness and accuracy with your teams.
Creating consistent communication surrounding your company’s competitive offerings informs employees early on from the onboarding process and forward. Clearly outlining potential employee questions and the business rationale surrounding wages or salaries will help minimize confusion for everyone involved.
Build loyalty with your workforce
Industries that pay their workers minimum wage will naturally be the most impacted.
This includes: restaurants, retail stores and hospitality chains for example. However, all businesses by and large will be indirectly or directly affected by a shift in minimum wage.
Small business owners will need to focus on retention, so they don’t lose too much money in recruiting, staffing, training and education costs.
The plus side? Business owners can often see a lower turnover rate from employees who are offered higher wages — which is one area of savings from a recruiting perspective.
Leverage a greater managerial impact
Further to seeing an impact on employee productivity, small business owners can find themselves exerting greater managerial involvement as a result of the increased labour costs.
Placing a newfound focus on productivity-enhancing activities for your staff, reorganizing work, setting higher performance standards and increasing work intensity are all managerial efforts that could emerge in response to higher payroll costs.
Small business owners and managers who approach the wage increase strategically and proactively will be more inclined to benefit positively from the change.
Evolve your business model
As a result of being able to afford higher wages paid out to employees, some businesses may need to adjust their business models, reduce profit targets or accommodate for higher payroll costs from revenue or other income streams within the business.
Businesses beginning to outsource work with technology will also likely be a future trend that emerges as a result of higher labour costs. We’re already seeing this trend pop-up in grocery stores and other retailers through self-serve checkout lines.
Additionally, consumers can also feel the hit if businesses need to increase their costs of products and services. Small businesses that are already operating close to their profit margins will need to get creative on where and how to offset the higher payroll costs.
Restructure within the organization
Naturally, small businesses may need to restructure their organization.
One area of opportunity includes building labour costs into your long-term business plan overall. Traditional ways to cut headcount don’t always end up saving you money and on a larger scale; can compromise the long-term health of your business by undermining capabilities and morale
Restructuring the organization can be a good thing by streamlining roles and responsibilities and creating a more effective workplace.
It’s important to keep in mind that any move to improve workplace standards is positive for the Canadian economy as a whole. There are smart ways to approach the minimum wage increase that can mean good for your business and your employees.
“It’s going to be good for employers; it’s going to be good for employees,” Tory House Leader Todd Smith said.
Providing your staff with living wages can most definitely lead to the development of a more engaged, more loyal and more effective workforce. After all, higher wages across Canada will mean people have more money to spend. Higher spending power in Canada is great for the economy, businesses and its people.
Regardless of what the change in legislation brings, there’s no denying the labour reform will raise industry standards for all workers, not just those making minimum wage.