Matt KendallBPO providers and call centers in the Canadian province of Ontario are running scared following a local government bill for a minimum wage increase.
“In-house contact centers are concerned that they have to look at other ways to make employees more productive and create more value,” said Mike Aoki, President of Reflective Keynotes, an Ontario-based consultancy firm focused on call centers.
After being announced in May, 2017, the first minimum wage increase was implemented quickly, rising by 20 cents to CAD$11.60 on October 1.
The complete bill, if enacted, will eventually see the minimum wage increase to $14 per hour by January 2018, rising again to $15 in January 2019 – a 32% jump in less than two years.
Alberta has also imposed a wage increase of $0.60, to $13.60 from $12.20, which started in early October, and is similarly boosting the minimum wage to $15, but as early as next year, reports say.
“The biggest concern I’m hearing is that the phase in is too rapid, and represents a dramatic jump in terms of overhead,” said Aoki. “Agents are one of the biggest operational expenses in BPO, so, while I have not heard anything about layoffs yet, if the bill is passed then overhead will definitely go up.”
Strategic Overhaul
As a result of the minimum wage increase, companies are looking for ways to increase the amount of upselling and cross selling that agents do, as they aim to offset the higher costs with increased revenue.
Alongside that, some call centers are looking at relocating to other Canadian provinces or decreasing their headcount and redirecting calls.
“Companies won’t want to lose customer experience, as it trumps everything else, so they will more likely lower the amount of agents in Ontario and redirect calls to Quebec or East Coast Canada,” said Sangeeta Bhatnagar, Chair at the Greater Toronto Area Contact Center Association (GTACC).
Additionally, the salary adjustments are expected to affect the decisions of external companies that were previously considering the province of Ontario for their operations.
“The minimum wage increase makes [Ontario] less competitive, and profit margins will go down, so, with these different stressors, why would a multinational company want to setup operations here?” said Bhatnagar.
Upselling and Internal Training
Despite that fact that the Ontario government’s bill is currently going through the law-making process, it has caused a knee-jerk reaction among companies with internal call centers to “panic push” toward upselling, according to Aoki, even from organizations that don’t commonly take this approach.
“New upselling training programs are being introduced within consumer product type companies and B2C companies, and there is much more demand for this,” he said. “I’m witnessing a change in culture to blend service with sales, which could push agents toward losing sight of whether the customer wants that upsell, ultimately turning the client off.”
To overcome this danger, Aoki says, companies should be training agents how to recognize when the customer needs a specific service, instead of just hard selling and scaring the customer away.
Regional Competition and Price Hikes
According to Aoki, Ontario has a lot of third party outsourcers that operate in a price competitive business, so the minimum wage increase impacts business much harder when competing against nearshore and offshore. This could also lead to an increase in prices for their customers.
“I am hearing a lot that increasing operational efficiency and trimming costs elsewhere is how companies are compensating for the increase,” said Aoki. “Even so, technology could be a mitigating aspect when it comes to increasing efficiency, particularly with webchat services or live chat, where agents can handle two or three chats at once.”
Generally, companies offering higher value services, such as in finance and technology support, are already paying above minimum wage, but this increase also impacts their approach to business.
“Companies that are already paying $16-17 an hour are getting better talent, so once their lower-end competitors are at $15, they will also have to push up their salaries so that the difference is still $5-6 more,” said Bhatnagar.
While the minimum wage increase is great news for agents on a personal level, some of the strategies that employers are considering is likely to shift industry perception, which needs to be avoided in order to keep the talent pool engaged.
How is the minimum wage increase in Ontario and Alberta affecting your business? Let us know in the comments below.
In 2007, due primarily to a strong Canadian economy, the Canadian dollar and US dollar were at par on September 20th. The Canadian dollar remained strong for months leading into this time and remained strong for a very long period of time post Sept. 20 (arguably until 2014). The reason I mention this is because during this time period there were many of the same concerns for our industry. Significant cuts to staffing; efficiencies reviewed; new technology implemented; a push to advanced support such as “e-services” and of course offshoring and nearshoring. During this time, I recall a race to leverage the best location at the best price in the wake of FX issues with outstanding long term contracts with our American clients. We recovered. One of Canada’s best assets is our people and our ability to provide superior customer service; proactive solutions and innovative ways of getting business done. There will no doubt be an impact, however, I believe this impact will be based on what is valued by the Supplier-Partner-Provider. There will be some exit strategies. In the end, I am optimistic that there will also be some very creative solutioning resulting in long term change and a return to business as usual.
Another approach to maintaining margin is to pass the increase onto to their client’s. Clients’ are experiencing the same wage creep and should understand value to price.