Increase Your Labour Cost, Increase Your Profit
By Candice Lepage
Recently the Government of Ontario announced upcoming changes to the workplace legislation. Beginning January 1st of 2018 the minimum wage every employer must pay their staff is $14.00 per hour, $12.20 per hour for servers at licensed restaurants and $13.15 for part time employees under 18 years of age
This is a significant increase from our current $11.40 per hour. And it is only the first increase - as on January 1 of 2019 it will increase again with the general minimum wage increasing to $15 per hour. An increase of $2.60 per employee, per hour, is certainly something to be concerned about. It will make a significant impact on any businesses costs.
But let’s talk about the impact it will have on your business’s profit:
Reduce turnover - Part of the reason minimum wage paying jobs have such high turnover is because it is difficult for an adult to maintain all of their responsibilities at Ontario’s minimum wage. Living Wage is calculated based on the average costs in the community in which you live. Most communities have a Living Wage calculated to be no less than $15/hour (Guelph’s is actually $16.50/hour).
A person who cannot meet all of their financial responsibilities at the current minimum wage is either constantly on the lookout for a better paying job, so has no incentive to stay after you’ve spent money training them, or is making a second wage at another part time job, or through a “side hustle”. At any point, that second job may begin to provide more wage to your employee and they will focus more energy or all of their energy into that job, leaving you short staff and in need of hiring and training again.
Reduce training cost - Training costs a business money. You are paying two people to do the job of one. You have one capable employee only doing half a job, and one new employee learning to do a full job. Some industries, particularly ones which pay minimum wage or close to it are industries with very high turnover, so they are constantly training new staff. Any benefit found by paying an employee $2 or $3 less per hour is lost by paying a second person to help train that employee.
Increase productivity - when an employee is not tired from working two jobs, or worried about their bills at home, they are more capable of giving you their best effort. Most people really do like their job, their co-workers, their bosses and want to see their companies do well. When they have more space to take personal responsibility in their job they will.
By increasing your payroll costs, you will be reducing your training cost, and seeing more output from your employees. This has been shown to be true over and over again.
Don’t believe us? Here are a couple of interviews with other businesses which have started paying their staff more money.
Cake and Loaf Bakery in Hamilton - Can Small Businesses Afford To Pay Employees a Living Wage? This Bakery Owner Thinks So from The Globe and Mail
Enviro-Stewards in Elmira - A Living Wage Benefits Both the Employee and the Employer from The Globe and Mail
Economists will also tell you, there is one more benefit to your business by an increased minimum wage - People with disposable incomes spend money. When a person’s paycheque goes almost exclusively to housing, food and utilities, clothing and transportation, there is very little to spread around. But when a person can easily cover their base costs, they are more likely to go out for a nice dinner, splurge a little on their wardrobe, spend more on household recreation like investing in a pool. When your community isn’t pinching their pennies, they are more likely to shop at your business.
And just to keep the benefits going - when your employees are treating themselves at home, they are happier, more relaxed and more ready to work for you when they come into work!
Yes, a quick increase to Ontario’s minimum wage is a significant cost to your business, but it is a short term cost, which over time will become an increase in your profit. Like any investment in your business, you need to know how much it will cost, plan out your payments over time and remember the benefit your investment will bring you long term.