Over the previous several years, the minimum wage rate in the Philippines has seen substantial variations. In 2023, it reached a record high of PHP 610.00 a day.
Increasing the minimum wage would mean businesses will have happier workers, leading to productivity. However, this also implies that business owners will have to face the increase in operational costs and make some serious adjustments to keep their businesses afloat.
In this article, we will discuss the new Philippine minimum wage, its pros and cons for company owners, and ways to deal with the rise.
What Is The New Minimum Wage In The Philippines?
Different industries in the Philippines have different minimum pay rates and vary by region. These differences are due to several factors, such as the cost of living, poverty threshold, prevailing wage rate, and the capacity of the industry to pay its employees.
Currently, the minimum wage in the National Capital Region is PHP 610 per day, while the rate in provinces is around PHP 350.
New Minimum Wage Positive Impacts on Businesses
Here are some ways the new minimum wage positively affects businesses:
Increase Retention
A minimum wage hike leads to salary increases for employees, which profoundly affects retention within a company. Employees receiving higher wages are more likely to stay with the company for an extended period. This reduction in turnover is beneficial for businesses as it reduces the costs and time associated with hiring and training new employees.
Improve Workplace Productivity
When employees can leave their financial worries behind and focus on their work without concerns about meeting daily needs, it fosters a more productive and committed workforce. Adequate compensation motivates employees and instills a sense of moral obligation, inspiring them to go above and beyond in their job performance consistently.
Attract New Talents
A minimum wage hike can increase job applicants’ interest when a firm pays its employees fairly. Potential candidates are motivated to contribute their talents and knowledge to the organization because they perceive the company values its personnel through fair compensation.
Enhance Reputation
According to public perception, a well-regarded business meets its commitments to its employees. Employees who feel their wages are underpaid can report the matter to the Department of Labor and Employment (DOLE). In addition to paying back the wages that were withheld, the employer might also be fined, imprisoned, or both. Because of this, investors may pull their money out of the company and stop doing business with it altogether.
Business Challenges with the Minimum Wage Shift
Although the shift in minimum wage can positively impact the business, it is not without a challenge. Here are some challenges that businesses may encounter:
Difficulty in Scaling
With the ongoing inflation, which peaked at 8.7% in January 2023, and the minimum wage going up, small firms may have difficulty growing. Small enterprises often have to cut back on employees or change their schedules if they want to stay in business.
Higher Product Cost
A company’s running expenses will rise in response to a minimum wage hike, which might mean you pass the cost on to customers through increased prices. However, this could reduce affordability and potential backlash, affecting the company’s reputation and customer loyalty.
Budget Adjustment
Business owners may need to reevaluate their spending habits and make cuts to compensate for higher staff salaries. This is to ensure employers don’t overspend on investments that don’t make large profits. Negotiating with suppliers will also be essential to make sure that business owners get the best deals at the most reasonable price.
More Outsourcing
Companies may lean toward outsourcing to keep overhead expenses moderate for effective operations if the cost of doing so is lower than the cost of recruiting new staff. Consequently, the business owner may cut costs by taking on a temporary worker and paying them simply for the task they accomplish rather than for the perks that permanent workers receive.
Adapting Your Business Strategies to Minimum Wage Changes
The increase in minimum wage is unavoidable. But there are certain ways you could manage it and keep your business afloat. Here are some tips you may follow:
Increase Prices
In response to rising labor expenses, business owners can raise consumer prices. If you look at your competition and see that they are all raising prices, it might be a good indicator that customers are willing to pay more for your product or service. If your company provides a service, you might want to inform your customers that you will be raising pricing.
Invest in Technology
By using technology, business owners may increase efficiency. Employees can devote more time to actually getting things done and less to menial administrative duties, leading to increased productivity. The backlogs can be cleared faster, human mistakes can be avoided, and the company’s financial position can be monitored in real time.
Collaborate with Freelancers
Opting for an independent contractor over a full-time employee might offer cost savings in certain scenarios. For instance, hiring a graphic or web designer on a project basis could be more economical compared to hiring a permanent employee with additional benefits.
Be Strict with Clock-ins and Outs
Implementing strict policies for tracking employee time can help control labor costs. By accurately recording hours worked, businesses can ensure they pay for time spent on tasks. This can also help identify inefficiencies and areas for improvement in workflow management.
FAQs
What will happen if the employer doesn’t follow the DOLE minimum wage in the Philippines?
Employers who don’t follow the DOLE minimum wage in the Philippines could be fined between PHP 25,000 and PHP 100,000 or imprisoned for 2 to 4 years, as per Republic Act No. 8188. They may also be required to pay double the unpaid benefits to their employees.
Why should the minimum wage be raised in the Philippines?
Many people believe minimum wage workers’ quality of life would be enhanced if they had a larger income to cover rising living costs. This main argument supports raising the minimum wage, especially considering the persisting inflation.
Enhance Your Business’s Financial Management with Babylon2k
The implications of the new minimum wage in 2024 can significantly affect businesses. To ensure your company survives and thrives in this changing economic environment, partner with Babylon2k today by messaging our AI chatbot. You can also reach us at [email protected] or through Viber/WhatsApp at +63-927-945-3382.
Our mission is clear – we are here to help your business save time, cut costs, and mitigate financial risks.
With our expertise in financial consultancy, we can offer tailored solutions to help you navigate these challenges and achieve sustainable growth.
