When it comes to the issue of wages and salaries, new developments are always on the rise.
Given the influence of trade unions, economic cycles and the media, new wage developments are always being negotiated.
Even with the shift to a gig economy where some people now operate as freelancers or contractors, instead of full-time employees, there are always new developments for worker protection and how contracts ought to be outlined.
Changes in wage policies are not new but frequent changes can cause a high level of uncertainty for employers.
With change comes adjustment. For many companies, adjustments can come with an inconvenient cost.
What are considered multiple wage-and-hour developments?
Wage developments aim to protect employees and foster a more equitable distribution of income.
Some of these protections include:
- Caribbean governments introducing a new minimum wage rate
- Revising regulations on employee overtime wages and suitable compensation
- Redefining arrangements between contract employees and their employers in terms of employment duration, salary, working hours and company benefits.
- Renegotiating compensation benefits packages, maternity leave, bereavement, and severance pay packages.
How do multiple wage-and-hour developments affect employers?
Negotiations on salary arrangements are not necessarily seen as an inconvenience by employers.
However, when multiple wage developments occur consistently, this raises a concern for companies.
This is because a lot of companies follow a compensation model based on industry standards to determine how their staff should be paid.
If these models are perpetually changing, this can lead to unwanted consequences such as:
Higher labour costs
If the minimum wage goes up, this inevitably leads to higher expenses for companies nationwide.
Additional expenditure which reduces profits is not exactly good news for employers.
On one hand, it could be viewed that an increase in minimum wage would inevitably force them to consider the needs of their staff, before their self-interest.
Conversely, consistent increases in minimum wage levels can be burdensome for small and medium companies. If their expenses are already high, greater salary payments would not only erode their profit margins but also compromise cash flow.
Companies with cash flow issues may lay off workers or resort to raising the prices of goods to customers.
This will be their effort to offset the effects of a minimum wage increase, maintain profits and balance their books.
Changes to internal compliance policies
Multiple changes to minimum wage, employee contracts or benefits would mean companies have to spend considerable time reorganising their internal policies.
This will be necessary to remain compliant with the state’s labour regulations and avoid harsh penalties such as fines and lawsuits.
Nevertheless, consistently reworking pay structures and ensuring the company stays within its legal parameters can be a time-consuming exercise.
This exercise can subtract valuable employee time during company hours which could have been productively allocated elsewhere.
Affects budgets and strategic plans
Consistent increases in compensation, overtime pay or employee benefits would also affect budget planning.
Those companies who can barely afford additional expenses may look to cut corners to save costs. Very often, this might mean:
- Compromising the quality of their product to counteract higher salaries
- Laying off freelancers or entry-level staff
- Abandoning projects to reduce funds
- Cutting back on amenities such as employee training, social initiatives and charity
Legal complications
If multiple wage developments persist, companies would have to incorporate these latest developments to ensure their operations are legally sound.
The challenge for some companies, is that, staying updated with new wage developments requires substantial resources.
Failure to be updated on the latest salary regulations could spell costly lawsuits for a company.
In hindsight, lawsuits tend to do more than just drain a company’s finances.
Legal actions also can cause a company to be suspended from operations, lose customers and inevitably tarnish their brand reputation.
Change in hiring policies
Consistent wage developments may discourage companies from hiring full-time workers on a permanent basis.
As a result of multiple wage developments, hiring employees may not be perceived as an investment but an expense.
As such, a company may discard its initial hiring strategy and hire based on urgency. Existing staff may have to wear multiple hats and manage a heavier workload until their company decides they are in a better financial position to hire more workers.
Companies may also resort to hiring freelancers or part-time workers, as opposed to full-time staff to keep their hiring costs within budget.
Organisation efficiency
A company having to consistently review their hiring strategies, payroll policies, budgets and human resource systems would be an inefficient one.
If wages are always on the rise and state laws keep changing, companies will be spending a significant portion of their manpower, budget, time and other resources to remain compliant with government regulations and stay in operation.
Such a company will be too heavily focused to retaining compliance and avoiding fines and lawsuits.
Therefore, other functions within the company such as marketing, sales, logistics, operations and customer service may suffer and breakdown in the long-term.
This breakdown may take the form of customer dissatisfaction, loss of sales, slow output, missed deadlines, scathing social media reviews and poor brand reputation.
How can companies handle multiple developments in wage policies?
Staying vigilant is key for many companies in this circumstance. Vigilance will help employers stay updated as well as plan and take decisive action accordingly.
Some of these plans include:
- Having a strong legal counsel or team to provide sound advice and navigate the company through uncertainty.
- Invest in training to ensure key staff members stay updated on the latest regulations and policy trends. Employees who know the laws and their impact can help guide the company in its decision-making.
- Plan flexible budgets. Wages and salaries are classified as an expense for companies. During uncertain times, when salaries are likely to increase, companies need to be able to predict these trends and ensure they’ve budgeted for unexpected increases in expenses.
- Ensure that payroll practices are monitored and regularly audited to ensure employees are fairly compensated within the law to avoid lawsuits and other consequences.
