Offset the effects of the minimum wage increase through a reputable Business Process Outsourcing partner

By Tennille Bell, General Manager: Sales at Programmed Process Outsourcing (PPO)

In 2022, the National Minimum Wage (NMW) was adjusted from R21,69 to R23,19 for each ordinary hour worked with effect from 01 March 2022. This increase was welcomed by employees struggling under rising food and fuel costs, but businesses had to dig deep to make up the difference. The increase placed an unintended burden on businesses who have had to look for more inventive ways to cut costs without compromising quality or customer service. One of the most effective ways for businesses to gain control over costs to counter the NMW, while increasing efficiency and productivity, is to join forces with a Business Process Outsourcing (BPO) provider.

Balancing costs with jobs

South Africa has one of the highest unemployment rates in the world and businesses that are struggling now may not be able to retain their workforce each time the NMW is increased. Inflation will also rise and the risk of job losses in an economy with an already soaring unemployment rate will be high, as enterprises try to balance the books while increasing production. Having the right BPO partner can help achieve increased productivity to offset the increase in the national minimum wage. When the new NMW does come into effect, businesses will experience a steep increase in costs, and their profits will be severely impacted without an increase in productivity to cushion the blow. Simply pushing prices up is no way to maintain competitiveness in a tough market.

Cost control measures

So how can businesses take control over their costs without compromising quality, risking jobs, or hiking their prices excessively? The biggest expense in any business are costs related to human resources and distribution. While it might seem counterintuitive, the most effective way to reduce costs isn’t to spend less. The most effective way to reduce costs is to improve efficiencies – for example, decreasing waste can have a sizable impact on profitability. That is exactly what a BPO solution does for businesses – improve efficiency and productivity. This comes with additional benefits, such as translating fixed costs of labour into variable costs linked to output, and this is where the real value is unlocked. Taking into account the increase in minimum wage and the increase in fuel prices, if this is worked back to a unit cost, it’s likely to result in a 2 – 3% increase in unit cost. By pushing productivity up by 3 – 5% it becomes possible to absorb these costs and grow the business at the same time.

Increase productivity without increasing headcount

So how does a BPO help businesses raise productivity and cut costs? At its core, a BPO solution will improve efficiencies and output because it’s based on goal-driven results. BPO is about more than outsourcing labour. It’s about understanding how the business works and making process improvements. A BPO provider will bring in their specialists to conduct time-and-motion studies and carry out process re-engineering in order to increase output without increasing headcount. A BPO’s core business lies in efficiency and logistics. Their business remuneration model is incentivised, so the more workers produce, the more they get paid. This goes a long way toward boosting numbers and eliminating worker complacency. Each client is charged on a per unit ratio basis, which means they’re only paid for the quality outputs. Furthermore, a BPO provider is worth their salt when it comes to enabling flexibility and responsiveness within their clients’ businesses. By monitoring and tracking insights extracted from warehouse management systems and productivity data, a BPO provider can respond and proactively make plans to handle increases in demand.

Fine-tuning efficiency

For a business, choosing the right BPO provider can be the difference between surviving and thriving. However, to avoid making the wrong choice, enterprises must take care in searching for an established, reputable partner with a national footprint and extensive industry experience. Such a partner must also be financially sound, legally compliant and must value transparency and communication highly. These qualities are key for building and maintaining a mutually beneficial relationship that results in the necessary improved efficiencies and productivities.

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