The Council of Small Businesses of Australia (COSBOA) has noted that the recent minimum wage increase could adversely affect small business owners.

“Many people who need extra dollars will now be able to afford more of the basics of life,” said Peter Strong, executive director of COSBOA.

“[But] many people who need extra dollars – the owners of small businesses under stress – will have less money and will be less able to afford the basics of life and also less able to employ other people.”

Patricia Ryan, practice manager at EI Legal, said that businesses would not be able to use the excuse of not having revised base rates for non-compliance with the increase.

“Any breach may result in substantial penalties up to $33,000 fine per breach – a very costly mistake for businesses. It’s worth investing in professional advice and help to make sure you get it right,” she said.

The statement follows the recent announcement by Fair Work Australia (FWA) of an increase to the Federal Minimum Wage of $19.40 per week (or 51 cents per hour), which comes into effect on 1 July, 2011. The default casual loading for award and agreement-free employees has also been increased from 21% to 22%, while the standard casual modern award loading remains unchanged at 25%.

COSBOA further noted that 39% of small business owners earn less than $600 per week, and should accordingly be classified as low income and be given support, rather than being asked to pay more money.

Strong added that while it may be impossible for a government to give small businesses a pay rise, they could still be ceded more generous tax cuts, allowing them to more easily accommodate financial developments like forced pay rises.

“The nature of our economy means that some businesses – the big ones – will handle this pay rise with ease while many of the small will bleed and even become non viable as a business, but we also cannot expect people to continue to work on low wages,” he said.

“The government will have to reflect this disparity in capacity through tax breaks, big tax breaks at that. They might also want to consider the very radical idea of reducing red tape and making life easier that way. For instance, don’t make small business people be the paymaster for paid parental leave. That’d help free up time to concentrate on getting more money in to pay the higher wages.”

In a statement released following the wage increase announcement, FWA noted that it had considered the hardship imposed on small businesses in Queensland following the natural disasters there prior to announcing the rise, noting that “a deferral of the rise in minimum wages would make some contribution towards easing the burden on those businesses.”

“There are, however, a number of matters which weigh against the proposals which have been advanced. Of these, by far the most significant is the lack of any obvious mechanism to properly identify the employers affected and to whom the deferral should apply. There is an unacceptable risk of significant unfairness to employers and employees if the deferral mechanism does not effectively target the group in need,” read the statement.

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