As a result of new policies introduced by the Fair Work Commission (FWC), Australian minimum wage workers are now entitled to an 8.65% wage increase, while award workers’ wages have increased by 5.75%. The increase, ‘the biggest in history’ according to Treasurer Jim Chalmers, will impact almost three million workers. For millions of workers dealing with cost-of-living pressures, this is a welcome move.

For retailers, though, it does prompt a series of questions and considerations – particularly as they’re also coping with the same economic pressures as their workers. But how exactly are retailers impacted? How can business owners manage staff costs, and how can they plan ahead?

How are retail businesses impacted?

The retail industry relies heavily on award workers, and the mandatory wage rise will have a disproportionate impact on the sector. Alongside hospitality, it’ll be one the most impacted sectors by the changes. While there are over 120 industry awards in Australia, the most common award – the General Retail Industry Award – applies to the retail industry. As a result, retail businesses will see employee wage bills rise considerably.

The wage increase is a positive step for employees, however, many retailers are understandably worried it will add further financial pressures to their businesses at a time fraught with financial strain and uncertainty. On top of softening discretionary retail spending, supply chain costs, delivery fees, utilities, rent, stock and materials have increased, and now labour is too.

Many industry commentators fear the combination of these pressures will lead to job losses later in the year. As peak retail season approaches however – with Afterpay Day next month, followed by Black Friday, Christmas and Boxing Day sales – retailers will have many opportunities to help boost their coffers.

How can businesses manage staff costs?

Many business owners will be looking for ways to optimise their staffing costs to reduce the financial impact of the new wage increase. While cutting staff hours may seem like the obvious solution, this may have a detrimental impact on your business; instead, there are other ways to optimise costs while still keeping your team employed.

First, businesses should understand the award that applies to their employees. For retailers, this is likely the General Retail Industry Award. By understanding this, owners can keep an eye out for instances that trigger higher payments, and take steps to ensure they don’t happen, i.e. overtime, no meal breaks, weekend early/late work penalties.

Software is another tool to take advantage of. Take, for example, a POS platform like Lightspeed, which is far more than just a point of sale solution. Lightspeed enables  retailers to analyse their revenue and understand the peaks and troughs of selling periods to optimise their roster for every sitting or shopping day. For example, a retailer can likely operate on skeleton staff on a Tuesday, but would need more employees rostered on a Saturday, or during peak season. Small changes like these often have a big impact on the bottom line and can save you thousands per year.

How can businesses plan ahead?

It’s essential for businesses to plan ahead and analyse actuals. By costing out rosters, retailers get an understanding of how much spend is going into each shift, and can see how different hiring models will impact these costs. Compare this with an income estimate to get a wage cost percentage. This estimation is based on predicted sales, average transaction value and average weekly income per low/mid/high period. A wage percentage is calculated by dividing wages by income. For example, $300 in wages for $1,000 of income is a 30% wage cost. Anything from 25%-50% is industry standard.

Analysing your actual results is equally important, and helps determine how you performed. Retailers should look at variances between the roster and actual work (timesheets) and ask themselves: Was there any unauthorised or unnecessary overtime? Did employees work later than planned? If yes, was it because there was a genuine business need? What could have been improved? The answers to these questions will help businesses learn how to better manage their costs.

The increase to minimum wage will have prompted many questions and considerations for business owners. However, by first taking the time to understand the policies and their impact, then using software and strategy to optimise staff, manage costs, and plan ahead, retailers will be better placed to navigate the changes.

*This is for informational purposes only and does not constitute legal, financial or tax advice. You should consult with and rely on your own legal, financial or tax advisors.

Andrew Fraser is managing director for Asia Pacific at Lightspeed.