What to consider before the New Financial Year
As we approach the new financial year, many small and medium-sized business owners are reviewing budgets with a sense of concern. The Fair Work Commission’s decision to increase the National Minimum Wage and minimum award wages by 4.75% will undoubtedly place additional pressure on payroll costs at a time when many businesses are already dealing with rising operating expenses, the flow on of increased fuel costs and ongoing economic uncertainty.
While the immediate reaction may be to look for ways to reduce labour costs, it’s worth pausing, stepping back and taking a strategic approach to the year ahead. The new financial year presents an opportunity to review how your workforce is structured, managed, and utilised to ensure every labour dollar is delivering value.
Here are some practical areas worthy of consideration:
Review workforce productivity before jumping to reduce headcount
When labour costs increase, instinctively we consider reducing employee numbers. However, before making any decisions about staffing levels, it’s important to assess productivity.
Ask yourself:
- Are employees spending time on low-value tasks?
- Are there bottlenecks in workflows that reduce efficiency?
- Is work being duplicated across departments?
- Are managers spending excessive time on administrative tasks?
Sometimes small operational improvements resulting in increased productivity can offset wage increases without reducing staff numbers. Streamlining processes, improving systems, or introducing automation can often deliver greater savings than workforce reductions.
Assess whether rosters still make sense
I see many businesses continuing to operate with rosters that were created years ago and have simply evolved over time.
The new financial year is an ideal opportunity to review:
- Business operating hours
- Peak trading periods
- Quiet periods
- Staffing levels by shift
- Overtime patterns
- Weekend and public holiday coverage
A roster that aligned with business demand two years ago may no longer be fit for purpose today.
Data-driven rostering can significantly reduce unnecessary labour costs while maintaining service levels.
Examine overtime and penalty rate usage
One of the biggest hidden labour costs in many businesses is excessive overtime.
While occasional overtime is often unavoidable, regular overtime can indicate:
- Poor workforce planning
- Understaffing in key areas
- Inefficient processes
- Lack of employee capability in certain functions
Reviewing your payroll reports and identifying where overtime and penalty rates are regularly occurring will provide insight and key data. In some cases, restructuring shifts or cross-training employees can reduce reliance on expensive overtime hours.
Cross train employees to improve flexibility
Businesses with highly flexible teams are often better equipped to manage wage increases.
Cross-training employees enables a business to better:
- Cover leave internally
- Reduce reliance on casual labour
- Improve customer service during busy periods
- Better manage unexpected absences
The ability to redeploy staff across multiple functions can significantly improve workforce efficiency without increasing headcount.
Focus on performance management
When labour costs increase, every team member’s contribution becomes even more important.
Unfortunately, many businesses tolerate underperformance for far too long.
Business owners should ask:
- Are performance expectations clearly communicated?
- Are managers addressing performance concerns promptly?
- Do employees understand what success looks like in their role?
A proactive approach to performance management often delivers significant productivity improvements without requiring additional investment.
Build a workforce plan for the next 12 months
Rather than reacting to rising labour costs, use the new financial year as an opportunity to create a workforce plan.
Consider:
- Growth projections
- Expected turnover
- Recruitment needs
- Succession planning
- Skills gaps
- Training priorities
A workforce plan helps ensure labour costs are aligned with business objectives rather than becoming a surprise.
Final thoughts
The 4.75% minimum wage increase will undoubtedly create challenges for many small and medium businesses.
The businesses that navigate these changes most successfully will be those that take a strategic approach to workforce management. By reviewing productivity, rostering, performance, compliance, and workforce planning, business owners can position themselves for a stronger and more sustainable financial year ahead.
The new financial year is not just a time to review your numbers, it’s a time to ensure your people strategy supports your business goals.
