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Minimum Wage

Mitigating The Effects Of A National Minimum Wage Increase Using A TES

By Tania Govender, Sales Director at Worldwide Staffing

08 March 2022

The National Minimum Wage (NMW) is reviewed each year and increased to try and improve the standardisation of income-earning potential among workers. While this benefits millions of people, it can significantly impact business operations, given that labour costs are the highest overhead cost for most companies. To mitigate the effects of higher wages, businesses may opt to raise prices, which will hurt the general cost of living and could essentially negate any advantage gained by workers. A more effective and less disruptive approach to balance this juggling act is to either reduce operating hours or move from a permanent to a flexible staffing model. A Temporary Employment Services (TES) provider can be an invaluable partner in this exercise.

Flexibility is key

While increasing the NMW is aimed at improving standards of living, the reality is that it could also lead to an increase in the cost of living as well as job losses. Automation (where possible) is one way of mitigating this, but it can be an expensive exercise. Reducing operating hours and overtime can also assist in switching from permanent to temporary employment models. However, all these mitigations come with additional complexity. So how can partnering with a reputable TES provider help?

Using a TES provider can offer a wide range of long-term benefits to a business. Namely, TES provides labour only when needed, which means businesses do not have to spend money on fruitless hours when there is no work to be done - thereby reducing overhead costs without impacting productivity. Additionally, a TES provider can reduce overtime pay by covering additional hours during busy times with temporary labour. This can significantly reduce the financial burden of overtime pay on a business.

Furthermore, workers employed by the TES provider will have more opportunities to source additional temporary work to supplement their income. This benefits the workers while allowing them to increase their experience across different industries, thus, improving their overall chances of employment.

An additional benefit of partnering with a TES provider is that they can also save businesses time and money by handling the recruitment, screening, and vetting process, which can be a costly and time-consuming exercise for a company. TES providers also have access to a wider pool of staff, enabling a quick turnaround time to provide labour, and the necessary resources to recruit all categories of staff regardless of location or skill set.

Moreover, using TES can increase ROI by providing quality candidates that reduce downtime, increase productivity, and result in higher profits. TES providers can also manage and mitigate all risks associated with labour, ensuring full compliance, and preventing cost implications and reputational damage that could negatively impact the business. Additionally, a TES partner supplies businesses with HR, IR, and payroll functions, and handles their communication and dealings with the unions and community leaders, which would otherwise be at an additional cost to the business. The company can therefore rest assured knowing that these services are bundled into the labour partner’s offering.

In addition, a TES partner can offer temporary employee benefits, including medical health plans, employee assistance programs, funeral cover, short-term personal loans, leadership, internships, and training.

 

Every solution may not be without challenges

While implementing a TES solution in an organisation can provide several benefits, there may be some challenges that need to be considered. Firstly, there could be resistance from existing employees who might feel threatened by the introduction of temporary workers. This can lead to a decline in morale and productivity among employees. Additionally, the temporary workforce may require more training and supervision initially, which can be time-consuming and may affect the productivity of existing staff.

Another challenge is the risk of non-compliance with labour laws and regulations. Businesses looking to engage the services of a TES provider must ensure that the prospective provider is reputable and ethical, with strong industry expertise and knowledge. Failure to comply with labour laws and regulations can result in financial penalties, legal action, and reputational damage to the business.

Finally, businesses must ensure that they have a clear understanding of their staffing needs and that the TES provider can provide the required temporary labour. With proper planning and collaboration with a reputable and ethical TES provider, these challenges can be mitigated, and businesses can reap the benefits.

 

Finding the right TES partner

While a labour partner can be invaluable, it is essential to work with one that offers the right services. A reputable TES provider will take on the business and operational goals of their client, ensuring that staff placed on site have the same goals and objectives. In addition, a TES partner should mitigate any employee-related risks by monitoring all labour-related matters.

A labour partner should provide solutions and services that enable their clients to fully focus on their core function while taking care of any labour-related matters. The right TES partner will provide their clients with peace of mind, knowing that all staff matters are handled with full compliance in line with all labour laws and regulations.

 

Scope for growth

Despite the benefits of using TES providers as a solution for labour-related solutions, there has been a slow uptake of this service in organisations. One reason for this is the existence of disreputable TES providers that exploit workers, leading to reputational damage and breaking the trust relationship between workers and TES providers. These disreputable labour brokers have given the industry a negative narrative, making businesses and workers hesitant to engage with them.

Another reason for the slow uptake of TES is the misconception that permanent work is more secure than temporary work, which is not always the case. Permanent work is often seen as "guaranteed" work, while temporary work is seen as unreliable. However, when a company is downsizing, both temporary and permanent staff will be affected. Permanent staff are not protected from a company downsizing, as seen during the COVID-19 pandemic. Therefore, there is no real benefit of one over the other for workers.

Despite this slow uptake, the narrative is changing as TES providers become a solution for many businesses and workers during challenging economic times. Reputable TES providers are being recognised as a flexible and efficient way of providing staff to businesses, and as more businesses and workers recognise the benefits of using TES, the uptake is likely to increase in the coming years.

In summary, a reputable TES provider can ensure full compliance with labour laws and strictly adhere to them, always ensuring fair treatment of workers while taking care of clients’ staffing needs. They can rebuild trust between workers and the industry, leading to a more positive narrative and an increase in uptake.

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Opinion Piece: Mitigating the Effects of a National Minimum Wage Increase Using A TES