In the wake of the Fair Work Commission's (FWC) decision to increase the minimum wage by 3%, industry bodies have warned that retailers should expect a challenging period ahead.

The pay increase will amount to an extra $21.60 (for full time employees) a week and will take the total take-home pay to $740.80 per week. This increase will flow through to approximately 2.2 million Australian workers who are paid at the National Minimum Wage or the minimum Modern Award rates.

National Retail Associaiton (NRA) CEO Dominique Lamb said that although the increase is higher than what the NRA advocated for, the association is glad the FWC rejected the Australian Council of Trade Unions' (ACTU) bid.

"The NRA remains concerned that the challenging period experienced by the sector is not over, which is why we advocated for a minimum wage increase of no more than 1.8%.

"We support a minimum wage that strikes the right balance between fairness and affordability, which is why we had cautioned the FWC against setting the new wage too high as it could cost jobs.

"Although we remain wary about the impact this rise may have on mum-and-dad small businesses, we most certainly welcome the fact that the FWC strongly rejected the job-destroying increase of 6% proposed by the ACTU.

"The economy does seem to have rebounded since the federal election with consumers clearly feeling a greater sense of certainty, however it is still too early to tell if this is just a temporary sugar-hit. It is for this reason that the Government should make tax cuts a priority on its agenda when parliament next sits," she said.

Small businesses generally tend to feel the pinch when decisions concerning wage increases are handed down, with many having to take a serious look at staffing and hours of operation. Workplace relations firm Employsure's founder and MD Ed Mallett, said that these decisions have a disproportionate impact on small businesses.

"Some of our small business clients are considering reducing costs, increasing prices, reducing staff or reducing operating hours…or a mixed approach to maintain current profitability.

"[These decisions have] a disproportionate impact on small business, because they have fewer variables that they can change to maintain profitability. Can they really just add the extra staff cost to the price of your coffee, for example? Would customers accept that?

"Most SMEs won’t be charging customers 3% extra from July 01, but will need to come up with an extra $21.60 per week per employee, and many simply need support," he said.

However Mallett said that if businesses already pay above the minimum wage and/or award rates, this increase may not affect them.

"If businesses already pay above Award rates, they may not be required to increase their employees’ wages, provided the rates they pay are above the increased minimum Award rates and they are not required to increase employees’ wages under their contracts of employment or applicable enterprise agreement," he said.

The FWC handed down its decision on May 30.

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