So, this week the Ontario government announced a change tominimum wage, with the hourly rate required for employees going from a minimum of $11.60 in October 2017, to $14.00 in January 2018, and then $15.00 in January 2019. Since that announcement, I have witnessed on Linkedin, Facebook and other social media platforms a tumult of opinions for and against this announcement.
I then thought about some of the collection environments I’ve
worked in or managed – and wages for staff have not always been ideal. One company I worked for had a call center
environment working small balance 3rd and 4th placement
files, and I had to fight to get my best employees a $13 per hour a wage. If I were still at that company, working for
those directors, they would likely be chewing the wallpaper and wondering how
they could possibly continue to operate under this announced cost of wages.
Collections can be a big business industry, representing
banks and national creditors, but it’s often a small business environment because
it’s often contingency-driven, which means wages and commission schemes are
often a fighting point between staff and company owners, because it’s a
balancing act (or battlefield) for a profitable company. And out of the hundreds of agencies,
paralegals and law firms in Canada, a great number of them are truly small
businesses, eking out an existence with 10 or less employees – meaning that
this announcement is going to possibly upset the balance of equity in agencies
living close to the edge of profitability.
Allegorically, what I’ve noticed over the years is that in
Ontario, collection agents for the most part in the Greater Toronto Area are
reasonably well paid – in the neighbourhood of $3000 a month (about $17 per
hour) base salary for little or no experience.
That being said, outside the GTA or agencies anywhere that work
primarily in first party collections pay far less – often minimum wage. Take a look today and see what you see here for offered wages ...
Imagine this – a small agency with ten employees, three of
which are non-collectors – those three could be managers, sales
representatives, IT staff, what have you.
This means if you have seven collectors, each of them collecting a
reasonable $7000 in contingency fees a month, it averages out to $4900 per
month on average per staff member. When you raise a collector’s wage from $2000 a
month (current minimum wage) to $2600 a month ($15 per hour), that’s an
increase of 30% -- now factor in source deductions and other hidden HR costs,
it’s probably closer to 40%. That means
a company making less than a 20% profit margin and expecting to pay their staff
the bare minimum is going to be deeply in the red within 18 months.
So what will happen? Collection commission programs will likely be slashed, smaller teams will be cut
back and expected to generate revenue to compensate for empty desks? Small or unprofitable collection companies are
going to just close up shop? I think all of these possibilities are likely to happen in some companies ... but on a wider scale, I think it’s going
to change how companies do business.
Oppresive Overheads
The real evil in overheads for collection departments and agencies, the real drain on profitability,
in my opinion, is having the 'haves' vs. the 'have-nots'. The highly paid VP of Sales or Operations
Manager working side by side with the minimum wage collector – the biggest cost
are those who do not actually generate direct revenue for the company. Second place for nefarious expenses would
likely be software licensing, and after that overly expensive office spaces and
inefficient mailing or telecommunication plans.
Every six figure management person needs about 20-40
collectors working at peak performance to cover their costs.
That manager won’t notice the minimum wage increase, but the collectors
who work with him will – it will mean while wages will be better for collectors, the
environment they work in will be more demanding and less forgiving for not
reaching collection targets, or commission schemes will be rolled back, or small
things like free coffee, parking vouchers, or health benefits will be cut
to save a few dollars.
The Secret To
Surviving With A Living Wage
My initial thought was this increase to minimum wage was a
good thing, for underpaid individuals, and the provincial economy, because the
cost of living has skyrocketed over the last several years – groceries, gas,
and housing prices have risen astronomically, and it’s only reasonable wages
should reflect that. I also think that a
collection agency is driven by the collectors, and they should be reimbursed
first and foremost.
So if you have collectors making below the projected level for
minimum wage, you have 18 months to raise the bar and get them there – better to
do it sooner, and show them you care about the team you have built, than drag
your feet and do it on the mandated government deadline.
If you have collectors above the minimum wage waterline,
make sure you increase their wages too, and keep equity in your company in your
range of salaries based on performance, duties, seniority, or whatever you value
in your team members – the last thing you want is to increase the bottom tier
salaries, but leave static salaries for those who have earned a higher wage in
the past, and are effectively reduced back to the new minimum wage in 2019.
Hire less managers, and put more authority, responsibility,
and oversight into the hands of your collectors – they are on the front lines,
doing the work, and deserve the autonomy and credit with clients and
co-workers.
Pay your staff as much as you can afford, in wages as well
as commissions, bonuses, medical benefits, pensions, and any other perks you can think
of. Make an environment that’s the best
possible so people don’t want to leave, they are passionate about the company, and
while they are working for you they give 110%.
Don’t just offer clients the lowest possible contingency
rate, because that’s not going to cover your overheads any more – built quality
clientele with fair rates that cover your cost per FTE. If their revenues don’t cover the manpower,
best to start talking to those clients now.
Build a company that is going to be profitable in the long
run, and can survive the pressure of paying your team members a living wage.
Conclusion
I suppose my point of this whole article is don’t build a
company on the backs of underpaid employees – I’ve fought for too many years
for fair representation for collectors in salaries, commission structures, and
working environments, and I consider this announcement by the Ontario a
government a win for the employees – hopefully, if the employers embrace it too.
We certainly live in interesting times – this announcement
is likely going to also have an affect on emergency leave (paid and unpaid),
contractor positions, notification of shift changes, vacation times, and more .. it will be
interesting to see what is finalized by the provincial government and rolled out to employers. It will also be interesting to see how this
produces a ripple effect, as it will change the working environment and
profitability of the clients we serve, affecting us further as a byproduct.
As always, feel free to post a comment or reach out to me personally
to have a conversation!
Thanks kindly,
Blair DeMarco-Wettlaufer
KINGSTON Data & Credit
Cambridge, Ontario
226-946-1730
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