MSMEs urged to pivot to cope with spiking costs spurred by increase in minimum wage

BUSINESSES ARE being forced to find creative ways to implement the minimum wage increase, which took effect a month ago.

Michael Leckie, president of the Small Business Association of Jamaica (SBAJ), told The Gleaner that just about 50 per cent of its 1,500 active members are paying their staff the current minimum wage of $13,000 weekly. Others, he said, have had to lay off workers or employ them, using staggered hours.

“What they are saying [is] they are still having challenges since COVID. A number of them have not recovered, and those that face that is mainly from the micro sector of the MSME (micro small and medium size),” he said.

The MSME sector is categorised based on yearly revenue. Micro businesses earn up to $15 million; small businesses up to $75 million; and businesses in the medium bracket, $425 million.

According to Leckie, micro businesses generally include corner-shops and wholesale retailers.

In March, Prime Minister Andrew Holness announced a 44 per cent increase in the minimum wage –the largest increase in 20 years. As of June 1, the national minimum wage moved from $9,000 per 40-hour work week to $13,000. Additionally, industrial security guards began earning $14,000 per 40-hour work week, up from $10,500.

However, concerns were raised about the impact this increase would have on small businesses, with Leckie telling The Gleaner that some businesses are now having to choose between staff and stock.

“Salary now becomes one of the bigger expenses that you have, so you have to decide now, I must have my stock in order to keep my business afloat, so the best for me to do is not to allow the salaries to bump up so much that I can’t restock my shelves,” he said in explaining that some business owners now have to do more labour in their establishments.

But Odaine Richards, owner of Kingston Cash and Carry Distributors, wants more publi- education campaigns around the minimum wage. According to Richards, he was already paying in excess of the minimum wage to his staff of six.

However, on the announcement of the increase, they expected him to pay more.

“They feel as if minimum wage is what I was paying them, but it was not the case, so I have to be explaining to them that the law says that it’s $13,000, and some were getting up to $15,000,” he said, adding that the confusion caused a decrease in employee morale.

Carlene* has been employed in a retail store in downtown Kingston for a year. She told The Gleaner that her employer currently pays her $12,000 for a six-day work week. Prior to this minimum wage increase, she said she was earning $7,000. She receives her wage cash in hand and said she has been told by her employer that the remainder is being used to pay her National Insurance Scheme contribution. However, she receives no documentation of this.

Under Section 5 of the Minimum Wage Act, an employer can be fined up to $100,000 for not paying the minimum wage.

Meanwhile, Elaine Duncan, president of the Jamaica Household Workers Association, told The Gleaner that she has not received any reports of employers not willing to pay the minimum wage. In fact, she said that in a lot of cases, employers are paying more than is required by law.

“The employers are [dealing] with the reality of the cost of living in Jamaica. Most of the time, people talk about the basket of goods, but remember that all these household workers, most of them are the main breadwinners in their families. They have children to send to school, and that involves the uniform, the books, the school’ fees, and the lunch money,” she said.

She said her organisation represents 7,200 of the more than 100,000 household workers across the island.

Larry Watson, president of the Jamaica Chamber of Commerce, said three of his organisation’s 250 members who have staff employed in the minimum wage category have been complying with the increase.

“Our members in the retail and wholesale business, they are reputable persons, so if there is a minimum wage, they, clearly, would pay the minimum wage,” he said.

In the meantime, Leckie is encouraging his members to diversify their businesses to maximise sales. He shared that the agricultural industry is a viable alternative to consider as it will also help to lessen Jamaica’s trade deficit.

“Do not get bogged down into what you’re always used to. Try and step out of your core business in order for you to actually get enough sales, and if one thing fails, you can fall back on the other,” he said.

sashana.small@gleanerjm.com

*Name changed