You may have noticed news reports on Premier Wynne’s changes to labour laws in recent weeks, including a new minimum wage and added benefits for workers. This affects all businesses – but many small business owners are wondering how it will affect them.
How big is the wage hike?
On May 30, 2017, legislation was passed to raise Ontario’s minimum wage to $15/hour from the current $11.40/hour.
When will the wage increase take effect?
The increase will have little impact in 2017 as the minimum wage will rise only 20 cents to $11.60/hour in October. The biggest increase takes place on January 1, 2018 when it will jump to $14/hour. The final increase to $15/hour will happen in 2019.
What are other jurisdictions doing?
Alberta has already taken steps to reach $15/hour, but has done so with a more gradual increase. The minimum wage will be going from $12.20/hour to $13.60/hour this year and is set to reach $15/hour on October 1, 2018. It is hard to quantify the impact on small businesses thus far, but by the time Ontario has caught up to Alberta, data will be available to gauge the impact a wage increase will have on Ontario’s small businesses.
Why is it being put into effect?
The legislation is being introduced in an attempt to move towards a living wage, and increase benefits such as minimum vacation entitlement and protection for workers. These protections include things like new scheduling policies to ensure shift workers are compensated if their shift is cancelled on short notice. These changes are aimed at creating fairer workplaces and providing better pay for minimum wage workers. Studies have shown that higher wages for low income workers has the added benefit of increasing their disposable income and funneling more money back into the economy.
How will this affect your business?
Varying opinions exist on the matter; some people believe the wage increase may hurt small businesses due to increased labour costs, particularly those in the retail or restaurant industries. Julie Kwiecinski, Director of Provincial Affairs for the Canadian Federation of Independent Business stated in an interview with the Toronto Star that: “As a small business, our members don’t have the financial leeway or wiggle room to deal with any added direct input costs.” This belief stems from the fact that increased labour costs could result in smaller profit margins. Businesses have two main options. The first, is to pass on these added costs to their customers by raising prices. The second, is to manage costs by reducing the number of staff, the number of shifts, or increasing productivity.
Helmi Ansari, CEO of Grosche International is ahead of the game. Ansari, who owns a small tea & coffee export company based out of Guelph and Cambridge has only 12 employees but is already paying his staff more than $16/h. Ansari made the decision to raise their wages and explains that: “If we had our staff being part of the working poor, how could we expect them to have full engagement in the business?”
Interestingly enough, there is research that supports Mr. Ansari’s reasoning. A study by the Peterson Institute for International Economics shows that paying higher wages generates savings for businesses. While the study was conducted in the United States, it is reasonable to assume that the results would be similar – if not the same – here in Canada. Improving the quality of life for workers results in happier employees and increased productivity, lower employee turnover, and in turn lower recruitment and training costs, all of which can positively influence profitability.
The Bottom Line
As a small business owner, you are used to facing challenges and finding new ways to survive and thrive. This is just one more factor Ontario businesses will need to adapt to and one their competitors will face, creating an even playing field. Communicating and involving your employees to develop a plan will help you manage the wage increase and ensure continued success.