We sometimes forget this. The only reason I have a team of people is because I think I will make money out of the team. We also have a team because we think they will do the job we want them to do. Yes over the years your team will become your friends and I actually have a lot of time for my team. I will do almost anything in my power to help them. But the reason I hired them was so that I make money out of them. And you may say that you are different, but you are not.
Let’s go back to the day you wanted to set up in business. You would have written down or had many thoughts go through your head about the pros and cons of getting into business. I will almost guarantee you that in the list of pros it did not say ‘employ people’ or ‘employ people, pay them lots of money and hope they become my friend’.
You employ your admin team or person so that they free up time so your sales team or you can sell your products or services. You employ your sales team so they make money for you.
But here’s the thing. When our team or the person is not performing was well as we expect we just accept it and turn a blind eye. By doing this we are throwing away thousands of dollars.
This blog will be in two parts. The first one is about how to keep your employee costs under control and the second blog will be on how to create a team which fires on all cylinders.
Everyone knows that Australia has one the highest wage rates in the world. And it’s complex. There is superannuation on top, over 2,000 awards and then we have what I call the theft tax. Payroll tax, which as far as I can see, is designed to punish business for actually employing people and keeping them off welfare. How that works for the country is beyond me. Then you have the people whose job it is to regulate the compliance and the rules. I am convinced they wake up each morning and take great joy knowing they will make the lives of others extremely distressing and stressful. Let’s remember you need to read all the pages of a modern award, which, let’s be honest is not fun. Sometimes I am convinced it is written in Latin. But get it a bit wrong and all of a sudden you have to sell your house and hope you get a good price for your spotty teenage children.
When I have to work on anything relating to employee compliance, such as payroll tax or read 90 pages of modern award I sometimes just want to go berserk. At best I want to migrate back to the UK.
So let’s start will employee costs. What are your options?
- Outsource or Offshore
You have one of two thoughts now. The first thought is this makes sense. The second is that I am proposing the work of the devil. I am suggesting we take jobs away from Australia and if we continue all our children will be without jobs and the country will become so poor that we will have to sell all our assets. And our children.
But here’s the thing. Your job as a business owner is to make money and enjoy your life. If you don’t then you are not doing yourself justice.
It is the job of our government to create an environment which makes it easier for business to employee people. At this moment in time they are failing. Spectacularly.
If you do not make your business efficient by keeping your costs low your competitors will and this means before you know it your business is gone. And that means you will not have a business and you have to sell all your assets. And trust me when you have no money and appeal to your government for welfare and plead you were being patriotic they will react as if they have no idea what the word means.
Outsourcing comes with its own issues, but it removes almost all compliance issues in one go and has the potential to reduce your wage bill by at least 50%. My entire administration function is offshore and I am very happy that I do not ever have to read other award relating to clerical staff, pay superannuation or worry about following HR legal procedures which only a legal person in a suit can decipher.
Some jobs you cannot outsource. If you run a plumbing business, it’s not much use having a qualified plumber in Uzbekistan when Mrs. Williams in Sydney has a small issue with her leaking tap. The same is true for the retail trade. However, every business has a back end and if you organise it right most of this can be done offshore.
- Review your rostering
There are savings to be made by looking at when your team actually works. Rostering high cost employees at times where no or low penalties apply and vice versa can make a significant difference.
Read a modern award and there are sometimes a few gems for you. For example, on Saturdays casual employees are paid the same rate as permanent employees in the hair and beauty industry, which actually means you should really employ casuals on Saturday.
Most awards and agreements include overtime penalties rates that apply after 38 hours a week or after a certain number of hours in a day. Keep an eye on them and they could save you thousands of dollars.
- Engage more staff to perform less hours
This means more administration and having to attend boring interviews, but has the potential to lower your overall wage bill. If it works for you, use it, but sometimes it won’t. It works very well in the retail trade, but it’s not so good if you need a PA. Working with three PA don’t work unless you are the Prime Minister.
- Review penalty rates
A review of penalty rates may show that some employees are excluded from the penalty or that casuals are not entitled to overtime payments. Use it wisely and there are saving to be had here.
- Pay Salaries above Award Rates
If your salaried employees are paid well in excess of an award rate you may be able to get them to work more hours. Remember, they cannot be worse off, but if worked out correctly, you could save some money here.
- Look at your Mix
Having the right mix of employees from their age to type (permanent or casual) will help reduce costs. Casual employees offer you flexibility, but at a higher hourly rate. Traineeship and apprentices can keep costs low, especially if you can get a grant for them.
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