Australian business costs soar compared to US and Canada: Survey

Australian businesses are paying more than many of their counterparts in the developed world when it comes to everyday costs, paying on average 17.5% in business costs on top of an employee’s gross wage.

The survey comes as businesses are becoming increasingly concerned about the cost of doing business, especially in industries such as manufacturing which are exposed to the high Australian dollar.

But Paul Drum, policy head at CPA Australia, says lowering costs simply isn’t going to be a silver bullet. Instead, he argues, productivity must increase.

“This question is really about the value you get out of your costs of production rather than looking at wages specifically.”

A survey published last week by accounting group UHY Haines Norton, found Australian businesses are paying more than their counterparts when it comes to business costs. Overall, businesses pay an average of 17.5% on top of an employee’s gross wage.

This compares to just 8.24% and 6.99% in the United States and Canada, respectively.

However, this is just below the global average of 19.44%. Brazil ranks the highest at 57.56%, followed by Italy, France, Austria and the Czech Republic.

Of the 25 countries surveyed, Denmark held the lowest position at just 2.78%.

Several business groups regularly complain about the cost of doing business, with employers expected to pay 9% superannuation on top of any salary.

Paul Drum, head of policy of CPA Australia, told SmartCompany the survey reflects a worry many small business owners have, but points out the debate shouldn’t just be about labor costs.

“There seems to be a propensity for everyone to jump to the cost of labour in these discussions, but it’s not only that which is contributing to the higher costs,” he says.

“Certainly that’s a challenge, but there are plenty of other factors contributing to the major challenge of competing with other regions like Asia.”

In a statement, UHY Australia and New Zealand chairman David Tomasi says while Australia is below the global average, there are some ramifications of higher costs for certain industries, such as energy and resources.

“As we compete for our share in the resources hungry Asian market, the energy and resources sectors in the US and Canada have a clear advantage over us in the area of employment costs,” he said.

He said relieving wage costs for employers in the energy and resources sectors would mitigate an external pressure on their business and help maintain the strength of Australia’s economy.

Small businesses have complained the cost of doing business continues to rise, especially due to factors such as high penalty rates. In particular, the hospitality industry has pointed to the number of restaurants which close on Sundays as evidence wages are getting out of hand.

Last year, the Business Council of Australia released a report which found resources projects were 40% more expensive to deliver in Australia than in the United States.

Drum says the issue isn’t decreasing production costs. Instead, he argues, businesses must figure out how they can improve productivity based on the wages they are already paying.

“Some of it is about innovation, or just doing things better. The cost of doing business is becoming a major competitive issue.”